Filed: Jun. 10, 2020
Latest Update: Jun. 10, 2020
Summary: NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 10 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT NATIONAL FUNDING, INC., a California No. 19-55269 Corporation, D.C. No. Plaintiff-Appellant, 2:18-cv-06437-MWF-AS v. MEMORANDUM* COMMERCIAL CREDIT COUNSELING SERVICES, INC., DBA Corporate Turnaround, a New Jersey corporation, et al., Defendants-Appellees. Appeal from the United States District Court for the Central District of California Michael W. Fitzgerald, Di
Summary: NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 10 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT NATIONAL FUNDING, INC., a California No. 19-55269 Corporation, D.C. No. Plaintiff-Appellant, 2:18-cv-06437-MWF-AS v. MEMORANDUM* COMMERCIAL CREDIT COUNSELING SERVICES, INC., DBA Corporate Turnaround, a New Jersey corporation, et al., Defendants-Appellees. Appeal from the United States District Court for the Central District of California Michael W. Fitzgerald, Dis..
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NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUN 10 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NATIONAL FUNDING, INC., a California No. 19-55269
Corporation,
D.C. No.
Plaintiff-Appellant, 2:18-cv-06437-MWF-AS
v.
MEMORANDUM*
COMMERCIAL CREDIT COUNSELING
SERVICES, INC., DBA Corporate
Turnaround, a New Jersey corporation, et
al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Michael W. Fitzgerald, District Judge, Presiding
Submitted May 4, 2020**
Pasadena, California
Before: OWENS and BADE, Circuit Judges, and MOSKOWITZ,*** District
Judge.
*
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).
***
The Honorable Barry Ted Moskowitz, United States District Judge for
the Southern District of California, sitting by designation.
Plaintiff-Appellant National Funding, Inc. appeals the dismissal of its second
amended complaint with prejudice and without leave to amend for failure to state a
claim upon which relief can be granted against Defendants-Appellees Commercial
Credit Counseling Services, Inc. d/b/a Corporate Turnaround and Bruce Putterman.
As the parties are familiar with the facts, we do not recount them here.1 We have
jurisdiction under 28 U.S.C. § 1291, and we affirm in part, vacate in part, and
remand for further proceedings.
“We review dismissals under Rule 12(b)(6) de novo, accepting as true all
well-pleaded allegations of fact in the complaint and construing them in the light
most favorable to the plaintiff[].” Zimmerman v. City of Oakland, 255 F.3d 734,
737 (9th Cir. 2001). “We can affirm a 12(b)(6) dismissal ‘on any ground
supported by the record, even if the district court did not rely on the ground.’”
United States v. Corinthian Colls.,
655 F.3d 984, 992 (9th Cir. 2011) (quoting
Livid Holdings, Ltd. v. Salomon Smith Barney, Inc.,
416 F.3d 940, 950 (9th Cir.
2005)). Further, “[i]n a case requiring a federal court to apply California law, the
court ‘must apply the law as it believes the California Supreme Court would apply
it.’” Kairy v. SuperShuttle Int’l,
660 F.3d 1146, 1150 (9th Cir. 2011) (quoting
1
Defendants-Appellees ask us to take judicial notice of several documents on
appeal pursuant to the incorporation-by-reference doctrine and Federal Rule of
Evidence 201(b). Because we would reach the same conclusions regardless of
whether we considered such documents, the request for judicial notice on appeal is
denied as moot.
2
Gravquick A/S v. Trimble Navigation Int’l Ltd., 323 F.3d 1219, 1222 (9th Cir.
2003)). “In the absence of a controlling California Supreme Court decision, the
panel must predict how the California Supreme Court would decide the issue,
using intermediate appellate court decisions, statutes, and decisions from other
jurisdictions as interpretive aids.”
Id. (quoting Gravquick A/S, 323 F.3d at 1222).
“We review a denial of leave to amend a complaint for an abuse of
discretion.” Chappel v. Lab. Corp. of Am., 232 F.3d 719, 725 (9th Cir. 2000). “A
district court acts within its discretion to deny leave to amend when amendment
would be futile, when it would cause undue prejudice to the defendant, or when it
is sought in bad faith.”
Id. at 725-26. Nevertheless, dismissal without leave to
amend based upon futility “is not appropriate unless it is clear on de novo review
that the complaint could not be saved by amendment.” Eminence Capital, LLC v.
Aspeon, Inc.,
316 F.3d 1048, 1052 (9th Cir. 2003) (per curiam).
1. The district court did not err when it concluded that National Funding failed
to sufficiently plead a claim for intentional interference with contractual relations.
In California, this claim “requires allegations of the following elements: ‘(1) a
valid contract between plaintiff and a third party; (2) defendant’s knowledge of this
contract; (3) defendant’s intentional acts designed to induce a breach or disruption
of the contractual relationship; (4) actual breach or disruption of the contractual
relationship; and (5) resulting damage.’” CRST Van Expedited, Inc. v. Werner
3
Enters., Inc., 479 F.3d 1099, 1105 (9th Cir. 2007) (quoting Quelimane Co. v.
Stewart Title Guar. Co.,
960 P.2d 513, 530 (Cal. 1998)). Although we disagree
with the district court’s assessment that National Funding failed to plead how the
Defendants-Appellees “would have known about the” subject loan agreements
because we conclude such knowledge is reasonably inferred from the nature of the
debt-renegotiation scheme alleged in the second amended complaint, we agree that
National Funding failed to sufficiently plead the validity of the loan agreements.
In California, “[w]here a contract is so uncertain and indefinite that the
intention of the parties in material particulars cannot be ascertained, the contract is
void and unenforceable.” Cal. Lettuce Growers, Inc. v. Union Sugar Co., 289 P.2d
785, 790 (Cal. 1955). “Typically, a contract involving a loan must include the
identity of the lender and borrower, the amount of the loan, and the terms for
repayment in order to be sufficiently definite.” Daniels v. Select Portfolio
Servicing, Inc.,
201 Cal. Rptr. 3d 390, 413 (Ct. App. 2016); see also Kruse v. Bank
of Am.,
248 Cal. Rptr. 217, 230 (Ct. App. 1988) (“essential terms” of a loan
agreement include “the amount of the loan, the rate of interest, the terms of
repayment, [and the] applicable loan fees and charges”). Because National
Funding failed to plead these essential terms of the relevant loan agreements with
sufficient definiteness, it failed to plead the first element of its intentional
interference claim. See PMC, Inc. v. Saban Entm’t, Inc.,
52 Cal. Rptr. 2d 877, 890
4
(Ct. App. 1996) (“[A] cause of action for intentional interference with contract
requires an underlying enforceable contract.”), disapproved of on other grounds by
Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937 (Cal. 2003).
2. The district court did not err when it concluded that National Funding failed
to sufficiently plead a claim for violation of California’s Unfair Competition Law
(UCL) based upon the Defendants-Appellees’ unlawful intentional interference
with the loan agreements. As recognized by the district court below and the parties
on appeal, this UCL claim is derivative of National Funding’s intentional
interference with contractual relations claim. See Wilson v. Hewlett-Packard Co.,
668 F.3d 1136, 1140 (9th Cir. 2012) (“The UCL ‘borrows violations of other laws
and treats them as unlawful practices that the unfair competition law makes
independently actionable.’” (quoting Cel–Tech Commc’ns, Inc. v. L.A. Cellular
Tel. Co.,
973 P.2d 527, 539 (Cal. 1999))). Because we conclude that National
Funding failed to sufficiently plead its predicate claim of intentional interference
with contractual relations, we likewise conclude that National Funding failed to
sufficiently plead this derivative UCL claim.
3. The district court did not err when it concluded that National Funding failed
to sufficiently plead a claim for violation of the UCL based upon Putterman’s
alleged practice of law in violation of California Business & Professions Code
§ 6125. In California, the “practice of law” includes “the doing or performing
5
services in a court of justice in any matter depending therein, throughout its
various stages,” as well as the provision of “legal advice and counsel and the
preparation of legal instruments and contracts by which legal rights are secured
although such matter may or may not be depending in a court.” Baron v. City of
Los Angeles, 469 P.2d 353, 357 (Cal. 1970) (internal quotation marks and citations
omitted). As recognized by the district court, National Funding failed to
sufficiently identify the substance of Putterman’s discussions with its borrowers to
make plausible its assertion that he provided legal advice to them. Even assuming
such discussions touched upon matters of legal import, National Funding failed to
allege facts demonstrating that the relevant issues were so “difficult or doubtful”
that they “reasonably demand[ed] the application of a trained legal mind.”
Id. at
358 (internal quotation marks and citations omitted). And while “engaging in
negotiations with opposing counsel concerning settlement” of a legal dispute can,
in some instances, “constitute[] the practice of law,” Morgan v. State Bar,
797 P.2d
1186, 1188 (Cal. 1990), National Funding’s allegations concerning its negotiations
with Putterman fail to demonstrate that “no discussion[s] . . . would be possible
without reference to legal issues and no persuasive argument could be made which
did not include a discussion of legal principles[,]” Zelkin v. Caruso Discount
Corp.,
9 Cal. Rptr. 220, 224 (Ct. App. 1960), or that these negotiations otherwise
required “the application of legal knowledge and technique[,]”
Baron, 469 P.2d at
6
358. Nor do National Funding’s allegations demonstrate that Putterman prepared
any legal instruments, or performed any actions with regard to any pending
litigation, in connection with such negotiations. See
Morgan, 797 P.2d at 1188
(“[W]e conclude that engaging in negotiations with opposing counsel concerning
settlement and agreeing that the case should be continued until a later date,
constitutes the practice of law.” (emphasis added));
Baron, 469 P.2d at 357. Here,
in regard to litigation, National Funding alleges that Putterman attempted to
negotiate a payment schedule for R. Makabali, MD Inc. (Makabali). But, by itself,
this is not the practice of law.
Even assuming that National Funding’s allegations demonstrate Putterman
engaged in the practice of law, however, they nonetheless fail to plausibly
demonstrate that he did so “in California.” See Birbrower, Montalbano, Condon &
Frank v. Superior Court, 949 P.2d 1, 5-6 (Cal. 1998), as modified (Feb. 25, 1998)
(explaining that a violation of section 6125 requires that practice of law occur in
California). For example, National Funding does not allege whether any of
Putterman’s challenged conduct occurred while he was physically present in
California. Further, except for the two emails sent by Putterman to National
Funding regarding Makabali in April 2018, National Funding does not allege any
non-conclusory facts demonstrating the frequency with which Putterman’s
purported practice of law involved “virtual” entry into California. See
id. (“[W]e
7
. . . reject the notion that a person automatically practices law ‘in California’
whenever that person practices California law anywhere, or ‘virtually’ enters the
state by telephone, fax, e-mail, or satellite.”).
Moreover, other than as to Makabali, National Funding failed to allege the
relevant borrowers’ states of residence or the law governing their respective loan
agreements, and therefore it is unclear whether Putterman’s provision of advice or
his negotiations with National Funding concerned California borrowers or matters
of California law. See id. at 5 (“Mere fortuitous or attenuated contacts will not
sustain a finding that the unlicensed lawyer practiced law ‘in California.’ The
primary inquiry is whether the unlicensed lawyer engaged in sufficient activities in
the state, or created a continuing relationship with the California client that
included legal duties and obligations.”). Because National Funding failed to plead
Putterman’s predicate unauthorized practice of law in California, the district court
properly dismissed this UCL claim. See
Wilson, 668 F.3d at 1140.
4. The district court did not err when it denied National Funding leave to
amend its unlicensed practice of law UCL claim, but did err when it denied
National Funding leave to amend its intentional interference with contractual
relations claim and related UCL claim. In denying National Funding leave to
amend, the district court stated that its prior order dismissing the first amended
complaint with leave to amend “pointed out the deficiencies that have not been
8
corrected” in the second amended complaint and had “warned that any future
successful motion to dismiss would be granted without leave to amend.”
On the unlicensed practice of law UCL claim, we agree National Funding’s
second amended complaint failed to cure the deficiencies explicitly identified by
the district court in its prior order, namely the absence of facts demonstrating
Putterman’s interpretation of law or application of law to facts in either his
provision of advice to borrowers or negotiations with National Funding. Nor has
National Funding alleged, even in a conclusory fashion, that Putterman performed
any actions that would constitute the practice of law in any pending litigation or
prepared any legal instruments in connection with his dealings with National
Funding or its borrowers. Given that National Funding has failed to delineate any
additional facts it would add in support of this claim to cure these deficiencies if
given leave to amend, we conclude that National Funding cannot save this claim
by amendment and therefore the district court did not abuse its discretion in
denying leave to amend.
But with regard to National Funding’s intentional interference claims, the
second amended complaint corrected the only deficiencies explicitly identified by
the district court in its prior order, specifically National Funding’s failure to
“supply . . . the identity of any third party with whom it had contracted” and
provide a “factual basis for [the] conclusory assertion” that the loan agreements
9
would not have been breached but for the Defendants-Appellees’ interference.
And although we agree with the district court that National Funding’s allegations
on the material terms of the loan agreements are insufficient, the district court did
not make it clear in its prior order that it considered such allegations deficient and
the underlying record reflects that National Funding could easily plead such
information if given leave to amend. Because it is not clear that further
amendment of these claims would be futile, the district court abused its discretion
in denying leave to amend on the predicate intentional interference with
contractual relations claim and the derivative UCL intentional interference claim.
See Eminence Capital, LLC, 316 F.3d at 1052.
Based upon the foregoing, we vacate the district court’s dismissal with
prejudice and without leave to amend the second amended complaint’s intentional
interference with contractual relations claim and derivative UCL intentional
interference claim and remand this action to the district court for further
proceedings. Each party shall bear their own costs on appeal.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
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