Opinion ID: 3054391
Heading Depth: 3
Heading Rank: 2

Heading: Hauk’s UCL and FAL State Law Claims

Text: [8] California’s UCL has a broad scope that allows for “violations of other laws to be treated as unfair competition that is independently actionable” while also “sweep[ing] within its scope acts and practices not specifically proscribed by any other law.” Kasky v. Nike, Inc., 45 P.3d 243, 249 (Cal. 2002). It “defines ‘unfair competition’ to mean and include ‘any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by” the FAL. Id. (quoting Cal. Bus. & Prof. Code § 17200). As relevant to this case, the FAL renders it unlaw836 HAUK v. JP MORGAN CHASE BANK ful for a defendant to “induce the public to enter into any obligation” based on a statement that is “untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code § 17500.4 [9] The California Supreme Court has explained, however, that conduct affirmatively authorized by another statute may provide a defendant with a safe harbor from UCL liability: “Although the unfair competition law’s scope is sweeping, it is not unlimited. . . . When specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair competition law to assault that harbor.” Cal-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 541 (Cal. 1999).5 The safe harbor “rule does not, however, prohibit an action under the unfair competition law merely because some other statute on the subject does not, itself, provide for the action or prohibit the challenged conduct. To forestall an action under the unfair competition law, another provision must actually ‘bar’ the action or clearly permit the conduct.” Id. [10] Chase’s compliance with TILA’s disclosure requirements provides a safe harbor with respect to Hauk’s UCL claims based only on the sufficiency of Chase’s disclosures. See Rubio v. Capital One Bank (USA), N.A., 572 F. Supp. 2d 1157, 1168 (C.D. Cal. 2008) (finding that a disclosure that complies with TILA comes within the UCL’s safe harbor). 4 On appeal, Chase argues for the first time that Hauk lacks statutory standing under section 17240 of the UCL and section 17535 of the FAL. “Absent exceptional circumstances, we generally will not consider arguments raised for the first time on appeal, although we have discretion to do so.” In re Am. W. Airlines, Inc., 217 F.3d 1161, 1165 (9th Cir. 2000) (citations omitted). There are no exceptional circumstances to warrant consideration of this argument. 5 Plaintiff incorrectly contends that Chase did not assert the safe harbor rule below. Although the district court did not discuss the safe harbor rule in its orders, Chase raised the argument in its memorandum in support of its motion for summary judgment. HAUK v. JP MORGAN CHASE BANK 837 TILA did not, however, authorize Chase to subsequently take an action at odds with the disclosures it made (i.e., impose a Non-Preferred APR based on a right it had already waived). Similarly, Chase cannot rely on the UCL’s safe harbor if it should have known about Hauk’s late payment before he accepted the BTO because TILA did not clearly permit disclosures based on inadequate information. Cf. 12 C.F.R. § 226.5(c) (“If any information necessary for accurate disclosure is unknown to the creditor, it shall make the disclosure based on the best information reasonably available and shall state clearly that the disclosure is an estimate.”). Therefore, if Chase knew or should have known about Hauk’s late payment to HCF before Hauk accepted the BTO, Chase cannot rely on TILA to bring its conduct within the UCL’s safe harbor.6 [11] The evidence Hauk submitted establishes a genuine issue of material fact with respect to whether Chase knew or should have known about Hauk’s late payment to HCF before Hauk accepted the BTO. Neither party was able to produce direct evidence from Chase’s or Experian’s computer systems that unequivocally establishes when Experian first noted Hauk’s late payment to HCF on his credit report. Hauk nonetheless produced sufficient circumstantial evidence to support the inference that Chase knew or should have known of his late payment before he accepted the BTO. First, Experian’s employee repeatedly testified that HCF reported Hauk’s late payment to Experian in August 2004.7 6 Chase’s knowledge for purposes of Hauk’s UCL and FAL claims must be assessed up until the date Hauk accepted the BTO because, according to Chase, its decision to apply a Non-Preferred APR at any point before that date would have automatically cancelled any pending offers, including the BTO. 7 During her deposition, the Experian employee confirmed at least eight times that Experian received notice of Hauk’s late payment to HCF in August. After a break, she appears to limit her testimony to explain that the credit reports reveal only the month in which HCF indicated it submitted the information to Experian (not necessarily the month Experian received the information from HCF). The employee’s testimony after the break neither negates her prior testimony nor renders that testimony inherently untrustworthy. 838 HAUK v. JP MORGAN CHASE BANK Second, Hauk submitted a copy of his Experian credit report from March 2005, which included entries that two creditors had reported to Experian in that same month, suggesting that Experian immediately reported any information it received. Finally, it is undisputed that Chase reviewed Hauk’s credit report on August 16 and September 19, 2004. Taken together, this evidence supports the inference that Experian received notice of Hauk’s late payment to HCF in August and indicated it on his credit report that month, and thus Chase either discovered or should have discovered his late payment when it reviewed his credit report in August or September. Hauk also established that Chase’s computer system automatically creates a memo of a late payment only in the event that Chase elects to apply a Non-Preferred APR. Consequently, if Chase decided that a late payment “was not a material change in the credit profile” justifying imposition of a Non-Preferred APR, Hauk’s account would not reflect this decision. The lack of notation in Hauk’s file about his late payment until the end of October thereby gives rise to two possible inferences: 1) that Chase did not discover the late payment until noting it in his file in October; or 2) that Chase discovered the late payment in a prior month, but decided not to impose a Non-Preferred APR and thereby waived its right to do so. On a motion for summary judgment, this court cannot weigh the merit of these inferences, but must adopt the inference that is most favorable to the non-moving party—in this case, the latter inference. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whe[n] he is ruling on a motion for summary judgment . . . . The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.”) (citation omitted). Taking all inferences in favor of Hauk, a reasonable jury could find that Chase knew or should have known about HAUK v. JP MORGAN CHASE BANK 839 Hauk’s late payment to HCF before he accepted the BTO. See id. at 248 (“[A dispute is genuine] if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”). As Chase concedes, this factual dispute is material to Hauk’s UCL and FAL claims and enables Hauk to withstand summary judgment on those claims. See id. (a fact is material if it “might affect the outcome of the suit under the governing law”). Specifically, if Chase knew or should have known about Hauk’s late payment, but waited to apply a Non-Preferred APR until after he accepted the BTO, Chase’s conduct may give rise to a UCL claim. See State Farm Fire & Casualty Co. v. Superior Court, 53 Cal. Rptr. 2d 229, 235 (Cal. Dist. Ct. App. 1996) (“asserting a contractual right one does not have” may constitute an unfair business practice), abrogated on other grounds by Cal-Tech Commc’ns, Inc., 973 P.2d at 564. The conduct may also give rise to fraudulent UCL and FAL claims because a cardholder receiving the BTO could likely be deceived into believing that Chase would not later apply a Non-Preferred APR based on a late payment it had waived. See id. at 235 (“[T]he ‘fraud’ contemplated by section 17200’s third prong bears little resemblance to common law fraud or deception. The test is whether the public is likely to be deceived.”) (citations omitted); People v. Dollar Rent-A- Car Sys., Inc., 259 Cal. Rptr. 191, 197 (Cal. Dist. Ct. App. 1989) (“In order to recover under [the FAL], it is necessary to show only that members of the public are likely to be deceived.”); see also Lavie v. Procter & Gamble Co., 129 Cal. Rptr. 2d 486, 492-93 (Cal. Dist. Ct. App. 2003) (applying the “reasonable consumer” standard). [12] Accordingly, because a genuine issue of material fact remains with respect to Hauk’s state law UCL and FAL claims, we reverse the district court’s grant of summary judgment in favor of Chase on those claims. For the reasons stated above, however, we affirm the district court’s grant of summary judgment in favor of Chase on Hauk’s TILA claim. As 840 HAUK v. JP MORGAN CHASE BANK a federal claim no longer gives rise to subject matter jurisdiction, we recognize that the district court may decline to exercise supplemental jurisdiction under 28 U.S.C. § 1367(c)(3). AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. Each party shall bear its own costs.