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BReRRRBBRBSRERDWTARBEBHRE S
STROOCK & STROOCK & LAVAN LLP
ARJUN P. RAO (State Bar No. 265347)
DAVID W. MOON (State Bar No. 197711) EF
BRYAN D. TRADER (State Bar No. 318133)
2029 Century Park East, 18" Floor San Francisco County Superior Court
Los Angeles, CA 90067-3086 0
Telephone: 310.556.5800 AUG 1 1 202
Facsimile: 310.556.5959 ;
Email: lacalendar@stroock.com GLERY Wy THE COURT
BY__ #2 CD3puty Clerk
Attorneys for Cross-Defendant
JPMORGAN CHASE BANK, N.A.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
MIDLAND FUNDING, LLC, Case No. CGC-11-511013
Plaintiff,
ORDER RE DEMURRER
OF CROSS-DEFENDANT JPMORGAN
CHASE BANK, N.A. TO CROSS-
COMPLAINT
vs.
VERONICA STORK (sued as VERONICA
PETERKIN),
Hearing Date, Time and Dept.:
Defendant.
Date: August 10, 2020
Time: 9:30 a.m.
Dept: 302
VERONICA STORK (sued as VERONICA.
PETERKIN),
Cross-Complainant,
Action Filed: March 27, 2020
Trial Date: None
vs.
MIDLAND FUNDING, LLC; MIDLAND
CREDIT MANAGEMENT, INC.; JP
MORGAN CHASE BANK; and ROES 1-100,
Cross-Defendants.
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[PR SED] ORDER RE DEMURRER OF CROSS-DEFENDANT JPMORGAN CHASE BANK, N.A.
TO CROSS-COMPLAINT
Case No. CGC-11-511013
LA 52330667STROOCK & STROOCK & LAVAN LLP
2029 CENTURY PARK EAST, 18TH FLOOR
LOS ANGELES, CA 90067-3086
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I suorosty ORDER
Cross-defendant JP Morgan Chase Bank, N.A.’s (“Chase”) demurrer to cross-complainant
Stork’s (aka Peterkin) cross-complaint is sustained and overruled in part.
The demurrer to the Rosenthal Act claim is sustained without leave to amend. The cause of
action is time-barred and the discovery rule does not apply to the claim. The Rosenthal Act
provides that “fa]ny action under this section may be brought...within one year from the date of the
occurrence of the violation.” (Civ. Code § 1788.30(f).) In interpreting a nearly identical provision
of the federal Fair Debt Collection Practices Act, the Supreme Court held that the statute of
limitations ran from the occurrence of the violation and the discovery rule did not apply. (See
Rotkiske v. Klemm, 140 $.Ct. 355 (2019).) That reasoning is equally applicable here. The claim is
time-barred because Chase’s wrongdoing occurred in 2010 and Stork filed this action in
2020. (Cross-Complaint, par. 17.)
Stork’s citation to Aryeh v. Canon Bus. Sols., Inc. (2013) 55 Cal.4th 1185, 1193 is
inapposite. There, the court explained that “{a] statute will be construed in light of common law
decisions, unless its language clearly and unequivocally discloses an intention to depart from, alter,
or abrogate the common-law rule concerning a particular subject matter.” (Id.) The Aryeh court
held that the discovery rule applied to the UCL’s statute of limitations because the UCL’s statute of
limitations expressly runs from the “accru[al]” of the claim. (Aryeh, 55 Cal. 4th at 1192 (quoting
B&P 17208).) The specific language in the Rosenthal Act that refers to occurrence rather than
accrual demonstrates the Legislature’s intention to depart from application of the discovery rule.
Second, the Rosenthal Act claim substantively fails. The Rosenthal Act defines the relevant
terms as follows:
The term “debt collection” means any act or practice in connection with the collection of
consumer debts.
The term “debt collector” means any person who, in the ordinary course of business,
regularly, on behalf of that person or others, engages in debt collection...
(Cal. Civ. Code § 1788.2(b) & (c).)
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[PROPOSED] ORDER RE DEMURRER OF CROSS-DEFENDANT JPMORGAN CHASE BANK, N.A.
TO CROSS-COMPLAINT
Case No. CGC-11-511013
LA 52330667STROOCK & STROOCK & LAVAN LLP
2029 CENTURY PARK EAST, 18TH FLOOR
N
LOS ANGELES, CA 90067-3086
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BRRRREBRRRESeFERREEARSERKS
In this case, Chase sold an asset. It was not engaging in “debt collection” activity. Given
this factual scenario, Chase’s federal authorities are persuasive even though the definitions of debt
collector under the Rosenthal Act and FDCPA are not identical. (See Neff v. Capital Acquisitions
& Mgmt. Co., 352 F.3d 1118 (7th Cir. 2003) [selling asset not debt collection].)
Neither the negligence nor defamation claims is time-barred. Stork pleads facts showing
application of the discovery rule. A party invoking the discovery rule “must specifically plead
facts to show (1) the time and manner of discovery and (2) the inability to have made earlier
discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and
conclusory allegations will not withstand demurrer.” (E-Fab, Inc. v. Accountants, Inc. Servs.
(2007) 153 Cal.App.4th 1308, 1319 (internal citations and quotations omitted).) Stork’s allegations
at par. 38 of the cross-complaint meet this requirement. (See also Shively v. Bozanich, 31 Cal.4th
1230, 1248 (2003) [the discovery rule applies “when the defamatory statement is hidden from view
as, for example, in a personnel file that generally cannot be inspected by the plaintiff.”].) Chase’s
request for judicial notice and attempt to turn this demurrer into a speaking motion is improper. A
factual issue remains regarding whether Stork can rely on the discovery rule.
The demurrer to the negligence cause of action is overruled. Chase argues that “as a
general rule, a financial institution owes no duty of care to a borrower when the institution’s
involvement in the loan transaction does not exceed the scope of its conventional role as a mere
lender of money.” (Nymark v. Heart Fed. Sav. & Loan Ass’n (1991) 231 Cal. App. 3d 1089,
1096.) Chase’s reliance on Nymark is misplaced. There, the court held that a lender owed no duty
of care to a borrower in preparing an appraisal of the security because the purpose of the appraisal
was to protect the lender. Here, the facts are different even if the sale of a stale debt could be
described as acting in a conventional lender role.
Chase owed a duty to Stork based on the factors in Biakanja v. Irving, 49 Cal. 2d 647, 650
(1958) [the duty determination “involves the balancing of various factors, among which are [1] the
extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to
him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection
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[PROPOSED] ORDER RE DEMURRER OF CROSS-DEFENDANT JPMORGAN CHASE BANK, N.A.
TO CROSS-COMPLAINT
Case No. CGC-11-511013
LA 52330667STROOCK & STROOCK & LAVAN LLP
2029 CENTURY PARK EAST, 18TH FLOOR
LOS ANGELES, CA 90067-3086
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between the defendant’s conduct and the injury suffered, [5] the moral blame attached to the
defendant’s conduct, and [6] the policy of preventing future harm.” In this case, those factors
weigh in favor of Stork. It was intended that the sale of the stale or false debt would affect Stork, it
was highly foreseeable that she would suffer harm, it is certain that Stork is suffering harm based
on Midland’s lawsuit, there is a close connection between Chase’s conduct and the harm, and the
policy of preventing future harm favors Stork as banks should be diligent in managing their
records.
The demurrer to the defamation cause of action is sustained with leave to amend to plead
facts that Chase’s statements were uttered with malice within the meaning of Civil Code §
47(c)(1). The cross-complaint facially discloses application of the common interest
privilege. Stork’s argument that the privilege does not apply to this type of commercial conduct
lacks merit. (See Hawran v. Hixson (2012) 209 Cal.App.4th 256, 287 [privilege applies “where the
parties to the communication share a contractual, business[,] or similar relationship or [where] the
defendant is protecting his [or her] own pecuniary interest.” (Hawran v. Hixson (2012) 209
Cal.App.4th 256, 287; Cuenca v. Safeway San Francisco Employees Fed. Credit Union (1986) 180
Cal.App.3d 985, 995 [“Communications made in a commercial setting relating to the conduct of an
employee have been held to fall squarely within the qualified privilege for communications to
interested persons.”].)
The demurrer to the cause of action for unfair business practices (“UCL”) is sustained
without leave to amend. Under the UCL, Stork’s remedies are “generally limited to injunctive
relief and restitution.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144
(internal quotations and citation omitted); see also Corbett v. Super. Ct. (2002) 101 Cal.App.4th
649, 664 (“[T]he express language and history of section 17203 limited the relief available to
restitution and injunctions.”) The cross-complaint does not seek an injunction and such relief is
unavailable because the harm is not ongoing. (See Madrid v. Perot Sys. Corp. (2005) 130 Cal.App.
4th 440, 463 [“Injunctive relief has no application to wrongs which have been completed, absent a
showing that past violations will probably recur.” (internal quotations and citation
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[PROPOSED] ORDER RE DEMURRER OF CROSS-DEFENDANT JPMORGAN CHASE BANK, N.A.
TO CROSS-COMPLAINT
Case No. CGC-11-511013
LA 52330667STROOCK & STROOCK & LAVAN LLP
2029 CENTURY PARK EAST, 18TH FLOOR
LOS ANGELES, CA 90067-3086
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omitted).].) While the cross-complaint prays for restitution, Stork does not plead any facts showing
how that remedy is available in this case. Stork is really seeking damages on this claim, which is
improper, as there is nothing for Chase to restore to Stork.
Stork’s citation to Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 336 does not change
the analysis. That case merely holds that ineligibility for restitution (remedy) under the UCL is not
a basis for denying UCL standing. “[TJhe economic injury that an unfair business practice
occasions may often involve a loss by the plaintiff without any corresponding gain by the
defendant . . . Such injuries . . . would permit a plaintiff to seek an injunction against the offending
business practice even in the absence of any basis for restitution.” (Id.) In this case, Stork’s claim
fails because no UCL remedy is available. (See Madrid v. Perot Sys. Corp. (2005) 130
Cal.App.4th 440, 467 [“Since plaintiff failed to present a viable claim for restitution or injunctive
relief (the only remedies available) and failed to propose any amendment that would cure the
defect, plaintiff's complaint failed to state a viable UCL claim, and the trial court properly sustained
the demurrers without leave to amend.”].)
IT IS SO ORDERED.
ous: Hi, (0, 2970 han l=
“Hon. Ethan P. Schulman
Judge of the San Francisco Superior Court
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[PR SED] ORDER RE DEMURRER OF CROSS-DEFENDANT JPMORGAN CHASE BANK, N.A.
TO CROSS-COMPLAINT
Case No. CGC-11-511013
LA 52330667