Sparkman v. Comerica Bank

Background

Paula Sparkman filed a proposed class action against Comerica Bank and Conduent Business Services, LLC. The claims concern Way2Go prepaid debit cards used to distribute child-support payments through California Child Support Services. Sparkman alleged that her card was stolen on November 29 or 30, 2022, and that 21 unauthorized charges totaling more than $1,000 were made between November 30 and December 1. She reported the theft, disputed the charges, and alleged that defendants denied reimbursement.

Sparkman also alleged that defendants charged her two $0.50 fees for calls to their automated telephone system in June 2023, even though the Terms of Use allowed three such calls per month without a fee and stated that transferring to a live customer-service agent carried no additional fee.

The first amended complaint asserted eight claims, including claims under the Electronic Funds Transfer Act, breach of contract, breach of the implied covenant of good faith and fair dealing, and California’s Unfair Competition Law. Defendants sought dismissal or striking of claims 2 through 5, claim 8, and portions of claims 6 and 7.

Scope of Amendment

Defendants argued that the telephone-fee claims and related allegations were outside the scope of the court’s earlier permission to amend. Judge Ryu denied the motion on that ground. She held that the earlier order allowed Sparkman to amend specified claims but did not prevent her from adding claims or theories, particularly because this was her first amendment and defendants did not explain how the new claims prejudiced them.

Subject-Matter Jurisdiction

Defendants argued that claims 4 and 8, which concern the fees for calls to the automated telephone system, did not fall within the court’s supplemental jurisdiction. Supplemental jurisdiction allows a federal court to hear related state-law claims when they share a sufficient factual connection with claims over which the court has original jurisdiction.

The court held that the federal Electronic Funds Transfer Act claims and the telephone-fee claims involved different alleged misconduct, different provisions of the Terms of Use, and different legal and factual issues. The court therefore concluded that it lacked supplemental jurisdiction over claims 4 and 8 and dismissed those claims without prejudice.

Defendants also argued that Sparkman lacked standing to bring claim 2, which alleges that the Terms of Use unlawfully waived rights under 15 U.S.C. § 1693g(b). Article III standing requires a plaintiff to allege a concrete injury connected to the defendant’s conduct. The court held that Sparkman adequately alleged such an injury because the challenged provision could reasonably be inferred to have been applied when defendants denied reimbursement for more than $1,000 in unauthorized charges. The motion to dismiss claim 2 for lack of standing was denied.

Failure to State a Claim

Claim 3 alleges breach of contract based on an informational sheet promising that Mastercard’s “Zero Liability Protection” would prevent cardholders from losing funds if their cards were lost or stolen. Defendants argued that this promise conflicted with the Terms of Use, which allowed them to refuse reimbursement when the facts did not reasonably support a claim of unauthorized use.

The court denied the motion to dismiss claim 3. It held that defendants’ argument depended on treating the informational sheet and Terms of Use as parts of the same transaction, but the first amended complaint did not include the informational sheet or explain how the two documents were presented to Sparkman and other cardholders. The court found that issue premature at the motion-to-dismiss stage.

Sparkman also sought restitution under claims 6 and 7. Restitution under California’s Unfair Competition Law generally requires showing that the plaintiff had an ownership interest in money or property and that the defendant acquired it. The court held that the complaint alleged that third parties stole the funds and that defendants failed to reimburse Sparkman from their own funds; it did not allege that defendants acquired the stolen money. The court therefore dismissed the restitution claims and, because Sparkman had already been given an opportunity to amend them, dismissed them with prejudice.

Disposition

Judge Donna Ryu held that the motion to dismiss was granted in part and denied in part. The motion to dismiss claim 2 was denied, and the motion to dismiss claim 3 was denied. Claims 4 and 8 were dismissed without prejudice for lack of subject-matter jurisdiction. Sparkman’s restitution claims connected to claims 6 and 7 were dismissed with prejudice. The defendants’ answer was due within 28 days of the order.