We thought we’d flag two aspects of yesterday’s Ninth Circuit ruling in Beaver v. Tarsadia Hotels. We will refrain from providing any commentary on this case because GLG is one of the firms representing plaintiffs, but here are the basics.
The case concerns a suit by purchasers of non-residential condo units in the Hard Rock Hotel & Condo Project in San Diego. The plaintiffs claimed the developers failed to make certain disclosures in the course of sale transactions, as required by the Interstate Land Sales Full Disclosure Act (ILSA), 15 U.S.C. § 1701 et seq. The district court awarded partial summary judgment on the portion of plaintiffs’ California Unfair Competition Law claim premised on a violation of ILSA, and the Ninth Circuit affirmed.
In a unanimous decision written by Judge Milan Smith and joined by Judge Paul Watford and Judge Michelle Friedland, the Ninth Circuit held that the UCL’s four-year statute of limitations (and its accrual rule) applied, even though the UCL claim was premised on a violation of ILSA, which has a three-year statute of limitations and a different accrual rule. The court explained, “as a general matter, the UCL statute of limitations will apply to a UCL claim, even when that claim is based on an underlying law with its own separate statute of limitations.” Slip op. at 10-11 (citing Cortez v. Purolator Air Filtration Prods. Co., 999 P.2d 706, 716 (Cal. 2000)). “[T]his principle extends to UCL claims predicated on violations of federal law.” Id. at 11 n.3.
Next, the court held that ILSA’s three-year statute of limitations did not preempt plaintiffs’ UCL claim. Notably, the court rejected an overbroad reading of Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008), which at least eight district courts had adopted in order to justify preemption under similar circumstances:
Defendants rely on Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1007 n.3 (9th Cir. 2008) to argue that Plaintiffs cannot avoid the application of ILSA’s statute of limitations by invoking the UCL. Silvas involved a case of field preemption, in which the court held that the Home Owners’ Loan Act (HOLA), 12 U.S.C. §§ 1461–1470, “preempted the entire field of lending regulation” to the exclusion of any state regulation. Silvas, 514 F.3d at 1008. In footnote 3 of the opinion, the Silvas Court commented on an issue that it explicitly stated it was not reaching. Id. at 1006. The footnote reads: “[T]o take advantage of the longer statute of limitations under [the] UCL . . . . is an attempt to enforce a state regulation in an area expressly preempted by federal law.” Id. at 1007 n.3. This footnote, to the extent it is relevant at all in this case, appears to be limited to cases involving field preemption under HOLA. [fn. 5]
[fn. 5]: A number of district courts have adopted an unnecessarily broad reading of footnote 3 in Silvas by extending its reasoning outside of HOLA’s field preemption context. See, e.g., Jones v. Wells Fargo Bank, NA, No. 13-cv-903 NC, 2013 WL 2355447, at *4 (N.D. Cal. May 29, 2013) (holding that TILA claims that are time-barred cannot be recast as UCL claims subject to a longer limitations period); Rodriguez v. U.S. Bank Nat’l Ass’n, No. C 12-00989 WHA, 2012 WL 1996929, at *2 (N.D. Cal. June 4, 2012) (same); Newsom v. Countrywide Home Loans, Inc., 714 F. Supp. 2d 1000, 1014 (N.D. Cal. 2010) (same); Champlaie v. BAC Home Loans Serv., LP, 706 F. Supp. 2d 1029, 1045 (E.D. Cal. 2009) (same); Distor v. U.S. Bank NA, No. C 09-02086 SI, 2009 WL 3429700, at *8 (N.D. Cal. Oct. 22, 2009) (same); Santos v. Countrywide Home Loan, No. 1:09-cv-00912-AWI-SM, 2009 WL 2500710, at *7 (E.D. Cal. Aug. 14, 2009) (same); Adams v. SCME Mortg. Bankers Inc., No. CV F 09-0501 LJO SMS, 2009 WL 1451715, at *10 (E.D. Cal. May 22, 2009) (same); see also O’Donovan v. Cashcall, Inc., No. C 08-03174 MEJ, 2012 WL 2568174, at *3 (N.D. Cal. July 2, 2012) (UCL claim predicated on violation of the Electronic Funds Transfer Act was subject to federal statute of limitations). But see Sonoda v. Amerisave Mortg. Corp., No. C-11-1803 EMC, 2011 WL 2690451, at *8–9 (N.D. Cal. July 8, 2011) (holding that Silvas was properly limited to cases of HOLA preemption).
Slip op. at 16-17 & n.5.
The opinion can be found here. Law360’s coverage (subscription required) is here.