Littlejohn v. Phoenix Title Loans LLC

1 WO — 2 — — 3 — — 4 — — 5 — 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA — 8 — 9 Jennifer Littlejohn, No. CV-18-04250-PHX-SMB 10 Plaintiff, ORDER 11 v. 12 Phoenix Title Loans LLC, 13 Defendant. — 14 — 15 Pending before the Court is Defendant Phoenix Title Loans LLC’s Motion to 16 Dismiss. (Doc. 28, “Mot.”) Plaintiff Jennifer Littlejohn responded, (Doc. 35, “Resp.”), but 17 Defendant did not reply. Neither party requested oral argument and the Court elects to 18 resolve this Motion without it. See LRCiv 7.2(f). Defendant moves to dismiss for lack of 19 subject matter jurisdiction. (Mot. at 7 (“[Defendant] respectfully requests that Plaintiff’s 20 complaint . . . be dismissed pursuant to Article III of the United States Constitution.”.) 21 Having considered the pleadings and applicable law and accepting the allegations in the 22 complaint as true, the Court grants the Motion as explained below. 23 I. BACKGROUND 24 Plaintiff obtained an automobile title loan from Defendant for unidentified personal, 25 family or household purposes around April 24, 2018. (Doc. 1, “Compl.” ¶¶ 12-13, 16-17.) 26 Attached to her loan was a Truth in Lending Act disclosure statement (“disclosure 27 statement”). (Id. ¶¶ 20-22.) The disclosure statement listed the loan’s terms at 156% APR, 28 a $118.30 finance charge, a $700.00 total amount charged, and $791.00 in total payments. 1 (Id. ¶¶ 21-22, 25.) At issue here, the disclosure statement “failed to disclose the number, 2 amount, and due dates or period of payments scheduled to repay the total of payments.” 3 (Id. ¶¶ 26.) The disclosure statement also incorrectly identified the “‘total of payments’ as 4 $791.00, when the actual ‘total of payments’ is $818.30.” (Id. ¶¶ 30.) 5 Plaintiff now brings this lawsuit “seek[ing] to recover monetary damages [including 6 statutory and actual damages, attorneys’ fees, and pre- and post-judgment interest] for 7 Defendant’s violation of the TILA.” (Id. ¶¶ 2, 26(b)-(e), 30(b)-(e).) No actual damages or 8 source of damages is alleged other than procedural violations. The Complaint specifically 9 alleges Defendant violated the TILA’s statutory disclosure requirements as outlined in 15 10 U.S.C. §1638 (a)(5) & (6) for omitting a payment schedule and incorrectly identifying the 11 total payments. (Id. ¶¶ 23-30.) Defendant now moves to dismiss for lack of Article III 12 standing for failing to identify a concrete injury. (See Mot. at 1.) 13 II. LEGAL STANDARD 14 Under Federal Rule of Civil Procedure 12(b)(1), a party may move to dismiss for 15 lack of subject matter jurisdiction. See Carijano v. Occidental Petroleum Corp., 643 F.3d 16 1216, 1227 (9th Cir. 2011) (“Article III standing is a species of subject matter jurisdiction.” 17 Id.). Article III of the United States Constitution “endows the federal courts with the 18 ‘judicial Power of the United States.’” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016) 19 (citing U.S. Const. Art. III, § 1). “The judicial Power of the United States” only extends to 20 “Cases” and “Controversies.” U.S. Const. Art. III, §§ 1-2. Undoubtedly, “[n]o principal is 21 more fundamental to the judiciary’s proper role in our system of government than the 22 constitutional limitation of federal-court jurisdiction to actual cases or controversies.” 23 Raines v. Byrd, 521 U.S. 811 (1997). “Standing to sue is a doctrine rooted in the traditional 24 understanding of a case or controversy . . . [that] developed in our case law to ensure that 25 federal courts do not exceed their authority as it has been traditionally understood.” Spokeo, — 26 — 136 S.Ct. at 1547 (citing Raines, 521 U.S. at 820 ). Plaintiff bears the responsibility of 27 establishing standing, Lujan v. Defs. Of Wildlife, 504 U.S. 555 , 560–61 (1992), and must 28 do so for each claim brought as well as the type of relief sought. Summers v. Earth Island 1 Inst., 555 U.S. 488, 493 (2009); see also DaimlerChrysler Corp., 547 U.S. at 352. To do 2 this, “[P]laintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the 3 challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable 4 judicial decision. Id. “[A]t the pleading stage, the plaintiff must ‘clearly . . . allege facts 5 demonstrating’ each element.” Spokeo, 136 S.Ct. at 1547 . 6 III. DISCUSSION 7 A. Injury-in-Fact 8 A plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever 9 a statute grants a person a statutory right and purports to authorize that person to sue to 10 vindicate that right.” Id. at 1549 .1 “In other words, even when a statute has allegedly been 11 violated, Article III requires such violation to have caused some real—as opposed to purely 12 legal—harm to the plaintiff.” Robins, 867 F.3d 1108, 1112 (9th Cir. 2017). Thus, in 13 evaluating harm, courts look to “(1) whether the statutory provisions at issue were 14 established to protect [plaintiff’s] concrete interests (as opposed to purely procedural 15 rights), and if so, (2) whether the specific procedural violations alleged in this case actually 16 harm, or present a material risk of harm to, such interests.” Id. at 1113 . 17 Sometimes, a defendant’s “alleged procedural violation [of a statute] can by itself 18 manifest concrete injury where Congress conferred the procedural right to protect a 19 plaintiff’s concrete interests and where the procedural violation presents ‘a risk of real 20 harm’ to the concrete interest.” Strubel v. Comenity Bank, 842 F.3d 181, 190 (2nd Cir. 21 2016) (citing Spokeo, 136 S.Ct. at 1549 ). As the Supreme Court put it: “[defendant’s] 22 violation of a procedural right granted by statute [to plaintiff] can be sufficient in some 23 circumstances to constitute injury in fact . . . [and] a plaintiff in such a case need not allege 24 any additional harm beyond the one Congress has identified.” Spokeo, 136 S.Ct. at 1549 — 25 — 1 As recognized by the Ninth Circuit in an unpublished opinion, this Court presumes that 26 Spokeo “calls into question whether a violation of the Truth in Lending Act’s [disclosure] requirement[s], without more, creates an injury that is sufficiently concrete to confer 27 standing.” McQuinn v. Bank of America, N.A., 656 Fed.Appx. 848, 849 (9th Cir. 2016) (citing Spokeo, 136 S.Ct. 1540 ). The McQuinn court did not address this question because 28 it found that the complaint alleged a concrete injury beyond defendant’s mere procedural violation. Id. 1 (emphasis in original). The Supreme Court specifically identified these circumstances. Id. 2 at 1549-50 (citing Fed. Election Comm’n v. Akins, 524 U.S. 11, 20-25 (involving voters’ 3 inability to access information that Congress made public); Pub. Citizen v. Dep’t of Justice, — 4 — 491 U.S. 440, 449 (1989) (involving inability of two advocacy groups to obtain information 5 subject to disclosure under Federal Advisory Committee Act). “But even where Congress 6 has accorded procedural rights to protect a concrete interest, a plaintiff may fail to 7 demonstrate concrete injury where violation of the procedure at issue presents no material 8 risk of harm to that underlying interest.” Strubel, 842 F.3d at 190 (citing Spokeo, 136 S.Ct. 9 at 1549). We begin with identifying the interests that the TILA’s procedural rights protect, 10 which is not disputed between the parties, before addressing whether a violation of those 11 procedural rights harmed or presented a material risk of harm Plaintiff.2 12 1. The TILA’s Protected Interests 13 Both parties agree that the TILA generally protects consumers’ informed use of 14 credit in an effort to strengthen the economy. (Mot. at 4 (“Congress enacted TILA . . . to 15 promote the informed use of credit through fair and transparent lending practices (citing — 16 — 15 U.S.C. § 1601 (a)); Resp. at 4 (“TILA was ‘designed to protect consumers from 17 inaccurate and unfair credit practices, and ‘to assure a meaningful disclosure of credit terms 18 so that the consumer will be able to compare more readily the various credit terms available 19 to him and avoid the uninformed use of credit’” (citing Fairley v. Turan-Foley Imports, 20 Inc., 65 F.3d 475, 479 (5th Cir. 1995) (quoting 15 U.S.C. § 1601 (a)). 21 In Congress’s own words, it passed the TILA as a consumer protection act to “assure 22 a meaningful disclosure of credit terms so that the consumer will be able to compare more 23 readily the various credit terms available to him and avoid the uninformed use of credit, 24 and to protect the consumer against inaccurate and unfair credit billing and credit card — 25 — 2 In Danger v. Nextep Funding, LLC, 355 F.Supp.3d 796 (D. Minn. Jan. 23, 2019), the 26 court exhaustively evaluates Spokeo’s impact as it relates to TILA allegations and whether Article III injury is alleged. See id. at 804-809 (“Following the issuance of Spokeo, courts 27 have applied the ruling to TILA claims, with differing results, driven by differing facts. Some have found the alleged harms or risk of harms sufficient to constitute an injury-in28 fact, distinguishing them from the ‘no-harm procedural violations’ detailed in Spokeo.” Id. at 805 ). 1 practices.” 15 U.S.C. § 1601 (a). In a more general sense, the TILA was enacted to promote 2 “economic stabilization” through “the informed use of credit[,] . . . [which] results from an 3 awareness of the cost thereof by consumers.” Id. § 1601(a). Many of the TILA’s disclosure 4 requirements undoubtedly serve to promote such an interest. 5 Without much hesitation, the Court finds that within the statutes at issue here, 15 6 U.S.C. § 1638 (a)(5) & (6), are disclosure requirements crafted by Congress to protect 7 consumers’ informed use of credit. Section 1638(a)(5), titled “Required disclosures by 8 creditor,” requires that “the creditor disclose . . . [t]he sum of the amount financed and the 9 finance charge, which shall be termed the ‘total of payments.’” Section 1638(a)(6) further 10 requires that “the creditor disclose . . . “[t]he number, amount, and due dates or period of 11 payments scheduled to repay the total of payments.” These disclosures undoubtedly 12 establish parameters on creditors’ lending practices to protect consumers’ informed use of 13 credit, which as Congress intended, might theoretically stabilize the economy. See 15 14 U.S.C. § 1601 (a). 15 2. Whether Defendant’s Violations of the TILA Harmed or Created a 16 Material Risk of Harm to Plaintiff’s Informed Use of Credit 17 As a preliminary matter, the Court finds that the Complaint adequately alleges that 18 Defendant violated 15 U.S.C. § 1638 (a)(5) & (6). (See Compl. at 5-6 ¶¶ 16-30.) The 19 Complaint alleges that Defendant omitted the correct total of payments and a payment 20 schedule disclosure. (Id.) Under the Ninth Circuit’s liberal pleading standards, these 21 allegations adequately identify Defendant’s violation of two of the TILA’s disclosure 22 requirements. But, unlike as Plaintiff suggests, this is not enough in itself. (See Resp. at 523 8) (“Violation of the TILA’s disclosure requirements regarding consumers’ obligations 24 creates standing without the need to plead additional harm.” Id. at 5 (emphasis added)). As 25 Plaintiff alludes to in this very argument, there still must be some harm beyond “a bare 26 procedural violation, divorced from any concrete harm.” Spokeo, 136 S.Ct. at 1549 . If this 27 were not the case, even a non-party to this credit transaction could sue Defendant for its 28 disclosure violations under the TILA. This is clearly incorrect. 1 Thus, the question here is not only whether the Complaint alleges a procedural 2 violation, but “whether [Defendant’s] specific procedural violations alleged in this case 3 actually harm, or present a material risk of harm to, [Plaintiff’s] interests.” Spokeo, 867 4 F.3d at 1113. As noted previously, not every procedural violation automatically causes or 5 presents a material risk of harm. Id. Defendant argues the Complaint alleges two “bare 6 procedural TILA violations without facts demonstrating she was harmed,” (Mot. at 1), and 7 that regardless, it did not violate the TILA disclosure requirements at issue,3 (id. at 5), but 8 even if it did, that Plaintiff was not harmed because of it, (id. at 6). Plaintiff mostly argues 9 that the TILA’s disclosure requirements are important, (Resp. at 1-4, 9, 16), which the 10 Court agrees with, but also claims that Defendant’s “failure to provide accurate TILA 11 disclosures regarding consumers’ obligations creates standing all on its own,” (Resp. at 8). 12 Plaintiff further argues that she “suffered actual confusion regarding the terms of her loan,” 13 (Resp. at 10), but later acknowledges this is not alleged in the Complaint, (see Resp. at 15 14 n.2 (“If the Court fails to find standing based on Plaintiff’s complaint, Plaintiff would 15 request leave to amend her pleadings to allege . . . facts regarding Plaintiff’s confusion 16 about the terms of her loan and the actual terms of Plaintiff’s loan.”). Implicit in this request 17 is the notion that even Plaintiff recognizes that her Complaint rests on wobbly grounds for 18 only alleging that Defendant omitted the incorrect total of payments or a payment schedule. 19 Here, the Court is not completely satisfied that Defendant’s failure to disclose a 20 payment schedule disclosure or incorrect listing of the total payments automatically 21 harmed or presented a material risk of harm to Plaintiff’s informed use of credit.4 See 22 3 In accepting the Complaint’s allegations as true, the Court presumes the disclosure requirements were adequately alleged to be violated at this stage, as stated above. 23 4 Plaintiff cites Second Circuit case law in claiming the opposite is true. See Strubel v. Comenity Bank, 842 F.3d 181 (2nd Cir. 2016). While the Second Circuit, in discussing the 24 TILA, has held that “a creditor’s alleged violation of each notice requirement [ones not at issue here], by itself, gives rise to a ‘risk of real harm’ to the consumer’s concrete interest 25 in the informed use of credit,’” id. at 190 , this Court respectfully disagrees to the extent that Strubel is construed to mean that “all disclosure violations under the TILA are per se 26 actionable without concrete harm, or the additional harm, to a plaintiff.” The Strubel court even acknowledges this in the footnote immediately after its finding: “We heed Spokeo’s 27 instruction to consider separately the risk of harm from each of the ‘particular procedural violations alleged in this case[.]’” Id. at n.9. Not only does Struble involve different 28 disclosure requirements under the TILA, but it is also not binding on this Court. The Strubel court speculated that the disclosure violations at issue there warranted finding a material 1 Spokeo, 136 S.Ct. at 1549 . To be sure, the Complaint only alleges Defendant’s disclosure 2 statement violated the TILA’s disclosure requirements. Nothing more. Specifically, it 3 alleges that “Defendant’s TILA disclosure statement did not include a payment schedule 4 disclosure” and that “Defendant violated the disclosure requirements of 15 U.S.C. § 5 1638(a)(6) and 12 C.F.R. § 1026.18 (g) when it failed to disclose the number, amount, and 6 due dates or period of payments scheduled to repay the total of payments, in the segregated 7 Truth in Lending disclosure statement it provided to Plaintiff.” (Compl. at 6 ¶¶ 25-26.) It 8 further alleges that “Defendant violated the Truth in Lending Act, 15 U.S.C. § 1638 (a)(5) 9 by disclosing the ‘total of payments’ as $791.00, when the actual ‘total of payments’ is 10 $818.30.” (Id. at 7 ¶ 30.) As stated above, the TILA’s disclosure requirements are clearly 11 intended to protect consumers’ informed use of credit. However, these alleged bare 12 procedural violations fail to distinguish Plaintiff from a passerby who overheard that 13 Defendant failed to include these disclosures and sued. 14 Yes, the Complaint alleges Defendant issued Plaintiff a loan, which makes the 15 Complaint’s allegations particularized to her. But it omits any concrete harm or material 16 risk of harm caused by Defendant’s failure to include a correct total of payments or 17 payment schedule. The Complaint does not allege that Plaintiff would have chosen another 18 creditor to borrow from, that she would not have accepted the loan’s conditions had the 19 payment schedule or “correct” total payments been included, or even that she was confused 20 about the loan and missed payments as a result. Without any allegations going to how 21 Defendant’s disclosure violations impacted her “informed use of credit,” the Complaint 22 fails to allege a concrete injury. While alleging an injury is certainly possible, and Plaintiff 23 even insinuates in her Complaint that she was confused by the disclosure violations, it is 24 not alleged. Without any sort of allegations of concrete harm or material risk of harm to — 25 — risk of harm because “[a] consumer who is not given notice of his obligations is likely not 26 to satisfy them.” Id. at 190-91 . Extrapolating this reasoning too far, however, as Plaintiff suggests, would lead courts to the very downfall that Spokeo cautioned against in 27 reasoning, as it relates to the FCRA, that “not all inaccuracies cause harm or present any material risk of harm” such as “an incorrect zip code.” Spokeo, 136 S.Ct. at 1550 . In other 28 words, the TILA’s disclosure violations, “divorced from any concrete harm” do not automatically call for a concrete injury in fact finding. See id. at 1549 . 1 Plaintiff’s informed use of credit by Defendant’s disclosure violations, Plaintiff’s 2 Complaint falls short of alleging a concrete injury and the Court lacks subject matter 3 jurisdiction to hear the case. 4 IV. LEAVE TO AMEND 5 “Dismissal is a harsh penalty and is to be imposed only in extreme circumstances.” 6 Henderson v. Duncan, 779 F.2d 1421, 1423 (9th Cir. 1986) (citing Raiford v. Pounds, 640 7 F.2d 944, 945 (9th Cir. 1981). In accordance with well-settled law in the Ninth Circuit, the 8 Court will grant Plaintiff leave to amend her complaint because “it is not ‘absolutely clear’ 9 that [Plaintiff] could not cure [the complaint’s] deficiencies by amendment.” See Jackson 10 v. Barnes, 749 F.3d 755, 767 (9th Cir. 2014) (citations omitted); Fed. R. Civ. P. 15(a)(2) 11 (“leave to amend should be “freely” given “when justice so requires[]”). 12 Accordingly, within thirty (30) days from the date of entry of this Order, Plaintiff 13 may submit an amended complaint addressing the deficiencies identified above. Plaintiff 14 must clearly designate on the face of the document that it is the “First Amended 15 Complaint.” If Plaintiff decides to file an amended complaint, she is reminded that an 16 amended complaint supersedes the original complaint, see Lacey v. Maricopa Cty., 693 17 F.3d 896 (9th Cir. 2012), and it must be complete in itself and “must not incorporate by 18 reference any part of the preceding pleading, including exhibits,” L.R.Civ 15.1. 19 V. CONCLUSION 20 The Court finds the Complaint alleges no concrete harm, or material risk of harm, 21 caused by Defendant’s violation of the TILA’s disclosure requirements at issue here. 22 Rather, the Complaint merely alleges that Defendant violated the TILA’s disclosure 23 requirements in issuing its loan to her.5 The Court finds no binding authority to find a per 24 se concrete injury for such allegations, and Plaintiff fails to cite any published, binding 25 precedent to show otherwise.6 With this in mind, Plaintiff may amend her complaint within 26 5 The Court notes that Plaintiff’s alleged harm caused by Defendant’s failure to include the total payments or payment schedule might be that Plaintiff failed to consider alternative 27 sources of credit as discussed above. The options are endless, but the Court cannot import its own allegations into the Complaint. There is also no reasonable inference that confusion 28 is an automatic result from a creditor’s failure to include these disclosures. 6 To the contrary, the Court notes numerous post-Spokeo decisions finding complaints 1 || thirty (30) days from the date of entry of this Order. 2 Accordingly, 3 IT IS ORDERED that Defendant’s Motion to Dismiss, (Doc. 28), is GRANTED. 4 IT IS FURTHER ORDERED that Plaintiff may file a First Amended Complaint 5 || within thirty (30) days of this Order. If Plaintiff fails to file an amended complaint within || thirty (30) days of this Order, the Clerk is directed to terminate this action. 7 Dated this 14th day of January, 2020. — 8 — 9 <> — 0 — 11 Aionorable Susan M. Brnovich United States District Judge — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — failing to allege a concrete injury apart from a defendant’s mere violation of the TILA’s 25 disclosure requirements. See Jamison v. Bank of Am. N.A., 194 F.Supp.3d 1022, 1028 (E.D. Cal. 2016) (finding no standing for plaintiff's TILA claim because allegations failed 26] to allege consequences of defendant’s alleged TILA violations); Kelen v. Nordstrom, Inc., 259 F.Supp.3d 75, 81 (S.D.N.Y. 2016) (reasoning that complaint “does not claim that 27 [plant changed her behavior in any way based on [defendant s| allegedly insufficient isclosures”); Bultemeyer v. CenturyLink, Inc., No. CV-14-02530-PHX-SPL, 2017 WL 634516 , at *4 (finding no standing where plaintiff “allege[d] a bare procedural violation without identifying any concrete harm” as it relates to the Fair Credit Reporting Act). -9-