Court Opinion

ID: 4548441
Source: CourtListenerOpinion
Date Created: 2020-07-15 20:00:30.343729+00
Date Added: 2024-06-11T12:57:04.680915
License: Public Domain

NOT FOR PUBLICATION                          FILED
                     UNITED STATES COURT OF APPEALS                       JUL 15 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                            FOR THE NINTH CIRCUIT

LOAN PAYMENT ADMINISTRATION                       No.   19-15019
LLC, an Ohio Limited Liability Company;
et al.,                                           D.C. No. 5:14-cv-04420-LHK

                 Plaintiffs-Appellants,
                                                  MEMORANDUM*
 v.

JOHN F. HUBANKS, Deputy District
Attorney, Monterey County District
Attorney's Office, in his official capacity; et
al.,

                 Defendants-Appellees.

                    Appeal from the United States District Court
                      for the Northern District of California
                      Lucy H. Koh, District Judge, Presiding

                              Submitted May 12, 2020**
                              San Francisco, California

Before: THOMAS, Chief Judge, and FRIEDLAND and BENNETT, Circuit
Judges.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      Appellants Nationwide Biweekly Administration, Inc., Loan Payment

Administration LLC, and Daniel Lipsky (collectively, “Nationwide”) appeal the

district court’s order granting dismissal of their 42 U.S.C. § 1983 action against the

Marin County District Attorney’s Office, Monterey County District Attorney’s

Office, and individual district attorneys for the two California counties

(collectively, the “District Attorneys”). We have jurisdiction under 28 U.S.C.

§ 1291 and affirm.

      Nationwide operates a “biweekly interest savings” mortgage loan repayment

program and sends solicitation letters to potential customers: borrowers with

mortgage loans. These solicitation letters are individually addressed and include

publicly available information such as the borrower’s name and address, his or her

lender’s name, and other loan information. Mortgage borrowers, of course,

typically make one monthly payment. Those who sign up for Nationwide’s

program agree that Nationwide will, every two weeks, debit their accounts one-half

of their normal monthly mortgage payment. Nationwide then sends monthly

payments to the lender. Under the program, a borrower makes 26 biweekly

payments per year to Nationwide, instead of 12 monthly payments to the lender.

Because months are slightly longer than four weeks, borrowers pay about 8% more

a year than they would have under their lender’s schedule. The “extra” amount

sent to the lender goes to paying down the principal on the loan. Thus, assuming a

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borrower sticks with the plan, this results in the borrower paying off the mortgage

earlier and ultimately saving money on interest. For its services, Nationwide

charges each customer $3.50 once every two weeks and a one-time setup fee equal

to half of the customer’s monthly mortgage payment.1

      The California Business & Professions Code requires certain disclosures in

solicitation letters for financial services. For example, if the letter includes the

lender’s name or logo without the lender’s consent, it must “clearly and

conspicuously state[] that the person is not sponsored by or affiliated with the

lender and that the solicitation is not authorized by the lender, which shall be

identified by name.” Cal. Bus. & Prof. Code § 14701(a). The disclosure must be

“made in close proximity to, and in the same or larger font size as, the first and the

most prominent use or uses of the name, trade name, logo, or tagline in the

solicitation, including on an envelope or through an envelope window containing

the solicitation.” Id. Similarly, if the letter includes the consumer’s loan number

or loan amount, it must state that “the person is not sponsored by or affiliated with

the lender and that the solicitation is not authorized by the lender . . . [and] that the

consumer’s loan information was not provided to that person by that lender.” Id.

1
 Say a borrower has a $2000 monthly mortgage payment, and on the lender’s
schedule would thus pay $24,000 in a year. Under Nationwide’s biweekly plan, a
borrower would make twenty-six $1000 payments to Nationwide, for a total of
$26,000 in a year, or about 8% more. Nationwide would take $1000 upfront, and
an additional $91 per year.

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§ 14702. This disclosure has the same requirements for font size and close

proximity to the loan information. Id.

      Nationwide sued the District Attorneys, alleging that enforcement of

§ 14701(a) and § 14702 violates its First Amendment right to free speech, as

applied to the states through the Fourteenth Amendment. Nationwide then filed a

motion for a preliminary injunction to prevent the District Attorneys from

enforcing the California statutes. The district court denied the preliminary

injunction and later dismissed the case pursuant to Younger v. Harris, 401 U.S. 37

(1971). In Nationwide Biweekly Administration, Inc. v. Owen, 873 F.3d 716 (9th

Cir. 2017), our court affirmed the district court’s denial of the preliminary

injunction on the basis that Nationwide was unlikely to succeed on the merits of its

First Amendment claim. Owen held that the proper standard of scrutiny was the

rational basis test set forth in Zauderer v. Office of Disciplinary Counsel of the

Supreme Court of Ohio, 471 U.S. 626, 651 (1985). Owen, 873 F.3d at 733. Our

court concluded that, under Zauderer, the disclosures required by the California

statutes were factual and uncontroversial, reasonably related to the substantial

governmental interest of preventing consumer deception, and not unduly

burdensome. Id. at 734–35. However, Owen reversed the district court’s Younger

abstention ruling and remanded for further proceedings. Id. at 727–30.

      Nationwide then filed an amended complaint, alleging that the California

                                          4
statutes force Nationwide to convey messages in violation of its First Amendment

rights. According to Nationwide, the disclosure requirements are unconstitutional

because they are unduly burdensome and not reasonably related to a substantial

government purpose. Nationwide sought injunctive and declaratory relief. The

District Attorneys moved to dismiss for failure to state a claim under Federal Rule

of Civil Procedure 12(b)(6). The district court granted the motion and dismissed

Nationwide’s complaint with prejudice—the subject of the instant appeal.

Reviewing de novo, we affirm the district court’s dismissal for failure to state a

claim. See Soltysik v. Padilla, 910 F.3d 438, 444 (9th Cir. 2018).

      As in Owen, we conclude that Zauderer supplies the appropriate standard of

scrutiny. Contrary to Nationwide’s argument, the Supreme Court’s recent decision

in National Institute of Family & Life Advocates v. Becerra, 138 S. Ct. 2361

(2018) (“NIFLA”), is not an “intervening controlling authority” that precludes the

application of Zauderer in this case. Nationwide contends that NIFLA limits the

application of the Zauderer test only to compelled disclosures that concern “the

terms under which . . . services will be available.” See NIFLA, 138 S. Ct. at 2372

(emphasis added) (quotation marks omitted). But we have already concluded that

the application of Zauderer is not so limited. See CTIA – The Wireless Ass’n v.

City of Berkeley, 928 F.3d 832, 848 (9th Cir. 2019). We have interpreted NIFLA

as holding that Zauderer applies so long as the compelled speech “relate[s] to the

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product or service that is provided by an entity subject to the requirement.” Id. at

845; see also id. (explaining that NIFLA “struck down the requirement that clinics

post information about services they did not provide” (emphasis added)). The

disclosures required by the California statutes—e.g., that Nationwide’s solicitation

letters were not sponsored by or authorized by the lender—certainly “relate to

[Nationwide’s] . . . service,” see id., and inform borrowers that their lenders are not

affiliated with that service.

      We are bound by the Owen panel’s conclusion that the California statutes

survive scrutiny under Zauderer. See Owen, 873 F.3d at 733–36; CTIA, 928 F.3d

at 845–49. Even if we were not bound by the Owen panel, however, we would

reach the same conclusion. The parties do not dispute that the required disclosures

are factual and uncontroversial. Further, the disclosures reasonably relate to

California’s substantial interest in preventing consumer deception because they

inform consumers that Nationwide’s offered services are not sponsored or

authorized by their lenders. We reject Nationwide’s argument that the “solicitation

not authorized by the lender” language is not reasonably related to California’s

interest merely because the legislative history does not state those exact words are

necessary to the statute’s purpose. Finally, the required disclosures are not unduly

burdensome. As the district court correctly found, Nationwide can comply with

the California statutes by making “relatively brief disclosures” in its solicitation

                                           6
letters. Cf. Am. Beverage Ass’n v. City & Cty. of San Francisco, 916 F.3d 749, 757

(9th Cir. 2019) (en banc). The disclosure requirements are not impermissibly

vague, and the court need not accept Nationwide’s conclusory assertion that the

disclosures drown out Nationwide’s own message. See Holden v. Hagopian, 978

F.2d 1116, 1121 (9th Cir. 1992).

          Because Nationwide’s request for declaratory relief is entirely derivative of

its First Amendment claim, we also affirm the district court’s denial of declaratory

relief.

          AFFIRMED.

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