Medina v. Newfold Digital, Inc.

Background

The plaintiffs asserted claims against Newfold Digital, Inc. and Banco Santander, S.A., described in the order as service-provider defendants. The claims against Newfold included negligence and declaratory relief. The complaint alleged that Newfold’s subsidiaries, BlueHost and HostGator, provided services allegedly used by the Doe defendants. The plaintiffs also alleged that they wired money to a Banco Santander account in Mexico controlled by the alleged scammers.

Newfold motion

The court held that the complaint did not allege facts explaining how Newfold could be liable for the actions of BlueHost and HostGator. The court stated that the negligence claim would also fail under section 230 of the Communications Decency Act, 47 U.S.C. § 230(c)(1), because the claim treated Newfold as the publisher or speaker of the Doe defendants’ content. The alleged duty was based on Newfold’s failure to terminate the Doe defendants’ web-hosting and email services despite allegedly knowing, or negligently failing to discover, their scheme.

The court also found that the complaint did not adequately allege that Newfold owed Medina a duty or that Newfold knew about, or negligently failed to discover, the Doe defendants’ criminal conduct. The court declined to consider liability theories raised for the first time in Medina’s opposition brief because arguments in a brief cannot replace allegations in the complaint.

The court further found that the complaint did not explain the basis for the declaratory-judgment claim against Newfold. In particular, it did not allege that Newfold had access to or control over the accounts that Medina sought to freeze, or that Newfold benefited from the alleged monetary losses. The court also questioned why it should grant declaratory relief when the claim was entirely duplicative of the negligence claim.

Banco Santander motion

The court held that it lacked personal jurisdiction—the court’s authority over a defendant—over Banco Santander. The order states that Banco Santander is a Spanish corporation with its principal place of business in Spain. The court found that the complaint’s allegations did not implicate California because the alleged transfers went to a Banco Santander account in Mexico. A declaration submitted by the bank’s legal counsel stated that the bank had never engaged in banking activity in California and had closed its California representative office and canceled its California operational license before the alleged transfers.

The court rejected Medina’s argument that a nationwide service provision in the Racketeer Influenced and Corrupt Organizations statute gave the court jurisdiction. The court explained that this provision applies only when a defendant is alleged to be part of a multidefendant RICO conspiracy and at least one coconspirator is subject to jurisdiction in the district. The complaint did not allege that Banco Santander was part of the RICO conspiracy, and the court stated that merely naming the bank in a complaint containing a RICO conspiracy claim was insufficient.

Ruling

Judge Vince Chhabria granted both motions to dismiss with leave to amend. Medina had 21 days to amend the complaint as to each defendant. If Medina did not amend within that period, the claims against Newfold and the dismissal concerning Banco Santander would be with prejudice, as stated in the order. The court also denied both requests for judicial notice as moot.