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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No. SACV 09-1097 DOC (ANx) Title: TRACIE THOMAS v. TACO BELL CORP., et al. DOCKET ENTRY
[I hereby certify that this document was served by first class mail or Government messenger service, postage prepaid, to all counsel (or parties) at their respective most recent address of record in this action on this date.] Date:____________ Deputy Clerk: ___________________________________

Date: March 19, 2010

PRESENT: THE HONORABLE DAVID O. CARTER, JUDGE Stephanie Mikhail Courtroom Clerk Not Present Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS: NONE PRESENT NONE PRESENT

PROCEEDING (IN CHAMBERS): GRANTING DEFENDANTS MOTION TO DISMISS; GRANTING PLAINTIFFS MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT; DENYING MOTION FOR STAY Before the Court is (1) Defendants Taco Bell Corp., Yum! Brands, and Taco Bell of America (collectively, Defendants) Motion to Dismiss Plaintiffs Second Amended Complaint (Motion to Dismiss); (2) Plaintiff Tracie Thomas (Plaintiff or Thomas) Motion for Leave to File a Third Amended Complaint (Motion for Leave); and (3) Plaintiffs Motion to Stay the Hearing on Defendants Motion to Dismiss the Second Amended Complaint (Motion to Stay). The Court finds these motions to be appropriate for decision without oral argument. FED. R. CIV. P. 78; Local Rule 7-15. After considering the moving, opposing, and reply papers thereon, and for the reasons set forth below, the Court hereby GRANTS Defendants Motion to Dismiss Plaintiffs Second Amended Complaint; GRANTS Plaintiffs Motion for Leave; and DENIES Plaintiffs Motion to Stay.

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I.

BACKGROUND

Plaintiff Thomas brings this action on behalf of herself and a class (the Class), which is defined as all persons in the United States and its Territories who received one or more unauthorized text message advertisements on behalf of Taco Bell. Plaintiff alleges that on October 11, 2005, she received a SMS text message call (text message) on her cellular phone. The from field of this transmission was identified as 47336, a format which is an abbreviated telephone number known as a SMS short code allegedly operated by Defendants agents. The body of the text message contained an advertisement encouraging the reader to visit Taco Bell and try its products. Over the next several months, Plaintiff alleges that she received additional spam text message advertisements from Taco Bell Corp. Plaintiff alleges that at no time did she consent to the receipt of such text message calls. Plaintiff alleges that over the course of an extended period beginning in at least 2005, Defendants directed the mass transmission of wireless spam text messages to the cellular phones of what it hoped were potential customers of its fast food products. Plaintiff claims that Defendants unsolicited text message calls to the wireless telephone numbers of the class were made using equipment that had the capacity to store or produce telephone numbers to be called using a random or sequential number generator. In addition, Plaintiff alleges that spam text messages injure recipients because cellular phone users must pay their respective wireless service providers either for each text message call they receive or for a text plan that includes a number of messages. Plaintiff alleges that Defendants aforementioned conduct constitutes violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227. Defendants have moved to dismiss the Second Amended Complaint (SAC) under Federal Rule of Civil Procedure 12(b)(2) on the basis that personal jurisdiction does not exist over Defendant Yum! Brands and under Rule 12(b)(6) that Plaintiff failed to state a claim. Defendants further encourage the Court to convert the motion to a summary judgment motion. Instead of simply opposing the motion to dismiss and seeking leave to amend should the court rule in favor of Defendants, Plaintiff filed a separate Motion for Leave to File a Third Amended Complaint (TAC), arguing that the TAC would cure all defects identified by Defendants in their Motion to Dismiss. Plaintiff also filed a Motion for Stay of the Motion to Dismiss hearing, requesting that a stay should issue so that Plaintiff could conduct limited discovery as to the issues raised in Defendants Motion to Dismiss.

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II.

LEGAL STANDARD A. Motion to Dismiss Pursuant to Rule 12(b)(2)

A plaintiff has the burden of establishing that personal jurisdiction exists over a defendant. See, e.g., Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1128-29 (9th Cir. 2003) (citing John Doe I v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001)). The Court may rule on a defendants motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) without first holding an evidentiary hearing. In such a situation, a plaintiff has the burden of making a prima facie showing of jurisdictional facts to withstand the motion to dismiss. Id. at 1129. When the plaintiffs version of the facts is not directly controverted, it is taken as true for the purposes of a Rule 12(b)(2) motion. Id. (quoting AT&T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996)). Conflicts between the facts in the parties affidavits are resolved in the plaintiffs favor. Id. Where there is no federal statute controlling the Courts exercise of personal jurisdiction, federal courts must look to the forum states jurisdictional statute to determine whether it is proper to assert personal jurisdiction. E.g., id. The California long-arm statute provides that [a] court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States. Cal. Civ. Proc. Code 410.10. Thus, the Courts jurisdictional analysis under California law and federal due process is the same. Yahoo! Inc. v. La Ligue Control Le Racisme Et LAntisemitisme, 433 F.3d 1199, 1205 (9th Cir. 2006). The Due Process Clause requires that a court exercise personal jurisdiction over a defendant only if the defendant has certain minimum contacts with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Intl Shoe Co. v. Wash., 326 U.S. 310, 316, 66 S. Ct. 154 (1945) (internal quotation marks omitted). A court may exercise general jurisdiction over a defendant whose contacts with the forum are so continuous and systematic that personal jurisdiction is proper in any action. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477-78, 105 S. Ct. 2174 (1985). Absent general jurisdiction, a court may also exercise specific jurisdiction over a defendant where jurisdiction [is] based on the relationship between the defendants forum contacts and the plaintiffs claim. Yahoo!, 433 F.3d at 1205. In the Ninth Circuit, a three-part test determines whether specific jurisdiction exists: (1) the non-resident defendant must purposefully direct its activities at, or consummate some transaction with, the forum state or a resident thereof; or perform some act by which it purposefully avails itself of the privilege of conducting activities in the forum; (2) the plaintiffs claim must be one that arises out of or relates to the defendants forum-related activities; and (3) the exercise of jurisdiction must be reasonable. Id. at 1205-06. B. Motion to Dismiss Pursuant to Rule 12(b)(6) Initials of Deputy Clerk sdm Page 3 of 9

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Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiffs allegations fail to state a claim upon which relief can be granted. Once it has adequately stated a claim, a plaintiff may support the allegations in its complaint with any set of facts consistent with those allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 127 S. Ct. 1955 (2007). Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. Bell Atlantic, 127 S. Ct. at 1968 (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957)). However, the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashrcroft v. Iqbal, U.S. , 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). A formulaic recitation of the elements or naked assertions without factual enhancement are insufficient. Id. Under a 12(b)(6) motion analysis, the Court must accept as true all factual allegations in the complaint and must draw all reasonable inferences from those allegations, construing the complaint in the light most favorable to the plaintiff. Guerrero v. Gates, 442 F.3d 697, 703 (9th Cir. 2006); Balistreri, 901 F.2d at 699. Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir. 1996)); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In evaluating a 12(b)(6) motion, review is limited to the contents of the complaint. Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). However, exhibits attached to the complaint, as well as matters of public record, may be considered in determining whether dismissal was proper without converting the motion to one for summary judgment. See Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995); Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Further, the Court may consider documents on which the complaint necessarily relies if: (1) the complaint refers to the documents; (2) the document is central to the plaintiffs claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). The Court may treat such a document as part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6). Id. C. Motion for Leave to Amend Pursuant to Rule 15(a)

Generally, leave to amend a pleading shall be freely given when justice so requires. Fed. R. Civ. P. 15(a). Leave to amend lies within the sound discretion of the trial court, which must be guided by the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities. United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). Thus, Rule 15s policy of favoring amendments to pleadings should be applied with extreme liberality. Id. (citation omitted); see Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). However, the standard governing whether amendment should be permitted becomes progressively more difficult MINUTES FORM 11 DOC CIVIL - GEN Initials of Deputy Clerk sdm Page 4 of 9

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to meet as litigation proceeds toward trial. Byrd v. Guess, 137 F.3d 1126, 1131 (9th Cir. 1998). The United States Supreme Court has identified four factors relevant to whether a motion for leave to amend should be denied: undue delay, bad faith or dilatory motive, futility of amendment, and prejudice to the opposing party. Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230 (1962). The Ninth Circuit holds that these factors are not of equal weight; specifically, delay alone no matter how lengthy is an insufficient ground for denial of leave to amend. Webb, 655 F.2d at 980; accord Bowles v. Reade, 198 F.3d 752, 758 (9th Cir. 1999). The most important factor is whether amendment would prejudice the opposing party. Howey v. United States, 481 F.2d 1187, 1190 (9th Cir. 1973). Futility of amendment can, by itself, justify denial of a motion for leave to amend. Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995). A proposed amended pleading is futile only if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense. Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). III. DISCUSSION

The Court first notes that Defendants request that, alternatively to treating the motion as a motion to dismiss, the Court should convert it to a summary judgment motion. It is within the discretion of the court whether to convert a motion to dismiss to a motion for summary judgment through the consideration of documents outside the pleadings. Bolton v. Raddison Hotels Intern., 2009 WL 2044800, at *4 n. 1 (S.D. Cal. July 9, 2009) (citing Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007)). As the parties have not yet had their scheduling conference, and have not conducted discovery, the Court declines to convert the motion to a motion for summary judgment. Additionally, Plaintiffs filed a Motion for Stay requesting that the Court delay hearing the Motion to Dismiss until also hearing the Motion for Leave. The Court did not find oral argument on this motion necessary, so that request is DENIED AS MOOT but notes that it is considering the motions concurrently. Plaintiffs motion for a stay in order to conduct limited discovery is also primarily premised on Defendants request that the motion to dismiss be converted into a motion for summary judgment, which the Court has denied in its discretion. Plaintiff has not provided the Court with any other meritorious justification for issuing a stay to conduct limited discovery, so the request for a stay is DENIED. The Court next turns to the merits of Defendants Motion to Dismiss the Second Amended Complaint and Plaintiffs Motion for Leave to File the Third Amended Complaint. As the motions are being ruled upon concurrently, the Court will look first to whether the bases for the Motion to Dismiss the Second Amended Complaint (SAC) are valid, and where relevant, whether the Proposed Third Amended Complaint (Proposed TAC) cures those defects. A. Dismissal Based on Personal Jurisdiction Initials of Deputy Clerk sdm Page 5 of 9

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Defendant Yum! Brands (Yum) is a North Carolina business with its principal place of business in Kentucky. SAC 8. Defendants have presented evidence through affidavits that Yum is not licensed to do business in California; has no agent for service of process in California; does not pay California taxes; does not own any real or personal property or operate any offices in California; does not maintain a bank account in California; and does not conduct business in California. Mot. to Dismiss, Decl. J. Daly, 5-10. In order to successfully oppose a motion for lack of personal jurisdiction and meet the burden which she carries, Plaintiff must present facts, by affidavit or otherwise, supporting personal jurisdiction. See Microsoft Corp. v. Very Competitive Computer Prods. Corp., 671 F. Supp. 1250, 1254 n.2 (9th Cir. 1987) (citing Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986)). Plaintiff has not done so here, and wholly failed to present any opposition to Yums motion. It appears that Plaintiff concedes that either Yum was an incorrectly named party or that personal jurisdiction does not exist over it because Yum is not named as a defendant in Plaintiffs Proposed Third Amended Complaint. See Proposed TAC 5-10. Defendants Motion to Dismiss Yum for lack of personal jurisdiction pursuant to Rule 12(b)(2) is GRANTED AS UNOPPOSED. B. Dismissal Based on Agency Allegations

Plaintiffs claim that they can recover under the TCPA because Defendants sent unauthorized text message advertisements. Liability under the TCPA extends both to the entity sending the message and the entity on whose behalf the message was sent. Charvat v. EchoStar Satellite, LLC, 2009 WL 5062093, at *4 (S.D. Ohio Dec. 15, 2009); Kaufman v. ACS Systems, Inc., 110 Cal. App. 4th 886 (Cal. Ct. App. 2003) (quoting FFC opinion that stated that the entity or entities on whose behalf facsimiles are transmitted are ultimately liable for compliance with [the TCPA]). Defendants argue that the SAC fails because it alleges that the text messages were sent by Defendants agents, not the Defendants themselves, and Plaintiff fails to plead sufficient facts to plausibly establish that the Defendants should be liable for the actions of their agents. In paragraph 20 of the SAC, Plaintiff alleges that the transmission was sent by Defendants agents but does not allege who those agents are. SAC 20. Plaintiff also separately alleges: Plaintiff is informed and believes and based thereon alleges that all defendants, including the fictitious Doe defendants, were at all relevant times acting as actual agents, conspirators, ostensible agents, partners and/or joint venturers and employees of all other defendants, and that all acts alleged herein occurred within the course and scope of said agency, employment, partnership and joint venture, conspiracy or enterprise, and with the express and/or implied permission, knowledge, MINUTES FORM 11 DOC CIVIL - GEN Initials of Deputy Clerk sdm Page 6 of 9

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consent, authorization and ratification of their co-defendants. Id. 10. Defendants SAC states that Defendants agents sent the text message and that the text messages were sent with the express and/or implied permission, knowledge, consent, authorization and ratification of Defendants. SAC 10, 20. It does not allege any facts regarding who the agents are or their relationship to the various Defendants. These naked assertions are insufficient, devoid of factual enhancement under the Iqbal standard, 129 U.S. at 1949, and therefore Defendants Motion to Dismiss is GRANTED. In the Proposed TAC, Plaintiff drops Yum! Brands and Taco Bell of America as Defendants, keeping only Taco Bell Corp. as a defendant and adding The Chicago Area Taco Bell Restaurant Owners Advertising Association (the Chicago Association). Plaintiff identifies the Chicago Association as an agent over which Defendant Taco Bell Corp. maintains a continuous high level of supervision and control. Proposed TAC 7. Plaintiff alleges that Taco Bell Corp. paid for and directly approved the text message advertising and that Defendants, including Taco Bell Corp., paid Defendants agent Ipsh for the creation and transmission of the text message advertisements. Id. 15, 16, 19. Defendants argue that allowing this amendment would be futile, since the advertisements were solicited by the Chicago Association, which is a separate and independent non-profit corporation, so it can never be shown that the Chicago Association is Defendant Taco Bell Corp.s agent. In order to show futility, Defendants must demonstrate that no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense. Miller, 845 F.2d at 214. Regardless of Taco Bell Corp.s involvement in the Chicago Association, the Proposed TAC alleges that Taco Bell Corp., both in its individual capacity and as a member and Director of the Chicago Association was responsible for final approval of the text message advertising and paid for the advertising. Id. (emphasis added). In other words, they allege that the messages were sent on behalf of Taco Bell Corp. as well as on behalf of The Chicago Association. While Taco Bell Corp. disputes this characterization of the facts, and argues that the advertisements were sent solely on behalf of the Chicago Association, that is an issue more properly resolved at the summary judgment stage. The evidence presented by Taco Bell Corp. at this juncture does not demonstrate that no set of facts could be proven such that it could be shown that the text messages were sent on behalf of Taco Bell Corp. Therefore, viewing the allegations in the light most favorable to Plaintiff, the Court finds that Plaintiff has introduced a theory under which leave to amend is not futile. C. Dismissal Based on Class Definition

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definition is not limited to any specific time period. They further argue that a four year statute of limitations applies under the TCPA, so at the very least, Defendants liability is limited to events no more than four years prior to the filing of the complaint. A four-year statute of limitations, the catch-all federal statute of limitations, applies to the TCPA. 28 U.S.C. 1658; Szynter v. Malone, 155 Cal. App. 4th 1152, 1163-64 (Cal. Ct. App. 2007). No specific dates are alleged that extend beyond the four-year period, with the date of the text messages at issue being on or about October 11, 2005 and several months thereafter. SAC 19, 21. However, the SAC does allege that the text messages were sent [o]ver the course of an extended period beginning in at least 2005. Id. 18. To the extent these allegations imply that the conduct preceded September 15, 2005, four years prior to the filing of the complaint, they are STRICKEN. See Shabaz v. Polo Ralph Lauren Co., 586 F. Supp. 2d 1205, 1211 (C.D. Cal. 2008) (striking class allegations of conduct three years from the date of complaint occurring outside of the one-year statute of limitations). In any event, the Proposed TAC limits the class period to persons who received unauthorized text messages since September 15, 2005, which adheres to the four-year statute of limitations period. D. Motion for Leave to Amend

Plaintiffs Motion for Leave to Amend, as well as the Motion for Stay, failed to comply with Local Rule 6-1 governing the timing of motions filed in relation to the scheduling of the hearing date. Plaintiff is ordered to comply with Local Rule 6-1 in the future. Plaintiffs filing of the Motion for Leave was intended as an end run around traditional Rule 12(b)(6) motion practice. When Defendants failed to stipulate to her Proposed TAC, Plaintiff should have vigorously opposed the motion and argued to the Court why they should be given leave to amend, which could have included argument about what additional allegations could have been pleaded. Instead, Plaintiff filed the Motion for Leave, which needlessly increased the parties costs by requiring another set of briefing. As set forth above, leave to amend is granted freely, and the Court looks to whether there is undue delay, bad faith or dilatory motive, futility of amendment, and prejudice to the opposing party when considering whether amendment is warranted. Foman, 371 U.S. at 182. The Proposed TAC is not futile because it introduces a theory through which Taco Bell Corp. may be held directly liable for the text message advertisements because the advertisements were sent on its behalf.1 There was also no undue delay, as the parties have not yet held their scheduling conference or even commenced Defendants also argue that the Proposed TAC is futile because claims against the Chicago Association are barred because the statute of limitations expired and because it is a non-profit corporation. However, because the Court finds that leave to amend is not futile on other bases, the Court declines to address this argument. MINUTES FORM 11 DOC CIVIL - GEN Initials of Deputy Clerk sdm Page 8 of 9
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discovery. The Court is also unpersuaded that bad faith or prejudice warrant denial of the motion. Defendant argues that Plaintiff has acted in bad faith by not adding ESW Partners, the advertising agency they believe was commissioned to send the text message, and ipsh!, the entity that actually sent the text message. However, Plaintiffs may choose who they sue, and their strategic choice not to sue those entities is not sufficient to demonstrate bad faith. As for prejudice, while the Court agrees that it would have indeed been more efficient for Plaintiff to have simply opposed Defendants Motion to Dismiss instead of requiring the use of additional resources by filing a separate Motion for Leave, the Court would have granted Plaintiff leave to amend in any event and Defendants would still be in the position of having to defend against the Third Amended Complaint. It would actually create more work for Defendants if the Court declined to consider the TAC now and simply gave Plaintiff leave to amend because Defendants would likely be inclined to bring a further motion to dismiss without any guidance from the Court. IV. DISPOSITION

For the foregoing reasons, Defendants Motion to Dismiss Plaintiffs Second Amended Complaint is GRANTED; Plaintiffs Motion for Leave is GRANTED; and Plaintiffs Motion to Stay is DENIED. The Clerk shall serve this minute order on all parties to the action.

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