O 1

2 3 4 5 6 7

8 United States District Court 9 Central District of California 10

11 JONATHAN NGUYEN, Case № 2:24-cv-02818-ODW (JPRx)

12 Plaintiff,

ORDER GRANTING DEFENDANT

13 v.

ONE FINANCE INC.’S MOTION TO

14 COINBASE INC. et al., DISMISS OR, IN THE 15 Defendants. ALTERNATIVE, TO COMPEL

ARBITRATION [24]

16 17 18 I. INTRODUCTION 19 Plaintiff Jonathan Nguyen brings this action alleging violation of the Electronic 20 Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693 et seq., against Defendants Coinbase 21 Inc. (“Coinbase”) and One Finance Inc. (“One Finance”). (Compl., ECF No. 1.) One 22 Finance moves to dismiss Nguyen’s claim against it pursuant to Federal Rules of Civil 23 Procedure (“Rule” or “Rules”) 12(b)(1) and 12(b)(6). (Mot. Dismiss & Compel 24 (“Mot.” or “Motion”), ECF No. 24.) One Finance also moves, in the alternative, to 25 compel Nguyen to arbitrate his claim. (Id.) For the reasons discussed below, the 26 Court GRANTS One Finance’s Motion to dismiss Nguyen’s claim against it.1 27

28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 II. BACKGROUND2 2 On November 15, 2023, Nguyen received a notification regarding a 3 $2,785.25 transfer from his Coinbase account (“Coinbase Account”) to a newly 4 opened One Finance account (“One Finance Account”). (Compl. ¶ 18.) Nguyen did 5 not authorize this transfer, and immediately contacted Coinbase and One Finance to 6 dispute it. (Id. ¶¶ 18–24.) 7 During Nguyen’s call with One Finance, a One Finance representative assured 8 Nguyen that the funds remained in the One Finance Account and that One Finance 9 would freeze the account pending investigation. (Id. ¶ 25.) Nguyen also confirmed to 10 the One Finance representative that he did not open the One Finance Account and that 11 the email used to open the One Finance Account did not belong to him. (Id. ¶ 26.) In 12 the following days, Nguyen submitted an identity theft affidavit to One Finance, and 13 One Finance confirmed that the funds remained in the One Finance Account. (Id. 14 ¶¶ 28–29.) On November 21, 2023, One Finance notified Nguyen of the account’s 15 closure and conclusion of its investigation. (Id. ¶ 30.) Despite One Finance’s prior 16 assurances, the funds that were transferred from the Coinbase Account to the One 17 Finance Account were subsequently transferred to a third account on November 16, 18 2023. (Id ¶ 31.) Nguyen made further disputes to One Finance, seeking recovery of 19 the transferred amount. (Id. ¶ 33.) On December 20, 2023, One Finance emailed 20 Nguyen its final resolution of his disputes, concluding that no error had occurred. (Id. 21 ¶ 36.) 22 Nguyen initiated this action, asserting one count against Coinbase and One 23 Finance for violating the EFTA. (Id. ¶¶ 50–52.) On June 3, 2024, the Court granted 24 Nguyen and Coinbase’s stipulation to compel arbitration. (Order Granting Joint Stip., 25 ECF No. 22.) The EFTA requires a financial institution to investigate “alleged 26 error[s],” such as “an unauthorized electronic transfer,” with respect to consumer 27 2 All factual references derive from Nguyen’s Complaint or attached exhibits, unless otherwise 28 noted. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (stating that well-pleaded factual allegations are accepted as true for purposes of a motion to dismiss). 1 documentation or a consumer’s account after a consumer notifies it of such error. 2 15 U.S.C. §§ 1693f(a), (f). In some cases, the EFTA requires a financial institution to 3 provide a consumer with a provisional credit of the amount the consumer alleges is in 4 error. Id. § 1693f(c). Further, the EFTA provides that a consumer can recover treble 5 damages if the financial institution, among other things, “knowingly and willfully 6 concluded that the consumer’s account was not in error when such conclusion could 7 not reasonably have been drawn from the evidence available to the financial 8 institution at the time of its investigation.” Id. §§ 1693f(e)(2). With respect to his 9 claims against One Finance, Nguyen alleges that it should have frozen the One 10 Finance Account during his initial dispute “and as promised by One Finance’s 11 representative” on November 15, 2023, failed to provisionally credit his account, and 12 “knowingly and willfully concluded that Plaintiff’s accounts were not in error.” 13 (Compl. ¶ 38–43.) One Finance moved to dismiss Nguyen’s claim against it, or in the 14 alternative, compel Nguyen to arbitrate his claim against it. (Mot.) The Motion to is 15 fully briefed. (Opp’n Mot. (“Opp’n”), ECF No. 26; Reply ISO Mot. (“Reply”), ECF 16 No. 27.) 17 III. LEGAL STANDARD 18 A. Motion to Dismiss 19 Pursuant to Rule 12(b)(1), a party may move to dismiss a case for lack of 20 subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). “A Rule 12(b)(1) jurisdictional 21 attack may be facial or factual.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 22 (9th Cir. 2004). “In a facial attack, the challenger asserts that the allegations 23 contained in a complaint are insufficient on their face to invoke federal jurisdiction.” 24 Id. “[I]n a factual attack, the challenger disputes the truth of the allegations that, by 25 themselves, would otherwise invoke federal jurisdiction.” Id. In resolving a factual 26 attack, “the district court may review evidence beyond the complaint without 27 converting the motion to dismiss into a motion for summary judgment.” Id. (citing 28 Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003)). The 1 court does not need to presume the truthfulness of the plaintiff’s allegations. Id. Once 2 a party has moved to dismiss for lack of subject matter jurisdiction under 3 Rule 12(b)(1), the opposing party bears the burden of establishing the court’s 4 jurisdiction. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994); 5 Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010). 6 Additionally, a court may dismiss a complaint under Rule 12(b)(6) for lack of a 7 cognizable legal theory or insufficient facts pleaded to support an otherwise 8 cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 9 (9th Cir. 1988). To survive a dismissal motion, a complaint need only satisfy the 10 minimal notice pleading requirements of Rule 8(a)(2)—a short and plain statement of 11 the claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual 12 “allegations must be enough to raise a right to relief above the speculative level.” Bell 13 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, the complaint must 14 “contain sufficient factual matter, accepted as true, to state a claim to relief that is 15 plausible on its face.” Iqbal, 556 U.S. at 678 (internal quotation marks omitted). 16 The determination of whether a complaint satisfies the plausibility standard is a 17 “context-specific task that requires the reviewing court to draw on its judicial 18 experience and common sense.” Id. at 679. A court is generally limited to the 19 pleadings and must construe all “factual allegations set forth in the complaint . . . as 20 true and . . . in the light most favorable” to the plaintiff. Lee v. City of Los Angeles, 21 250 F.3d 668, 679 (9th Cir. 2001). However, a court need not blindly accept 22 conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. 23 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 24 B. Motion to Compel 25 Under the Federal Arbitration Act (“FAA”), arbitration agreements “shall be 26 valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity 27 for the revocation of any contract.” 9 U.S.C. § 2. When a valid arbitration agreement 28 exists, a party “may petition any United States district court . . . for an order 1 directing . . . arbitration [to] proceed in the manner provided for in [the arbitration] 2 agreement.” 9 U.S.C. § 4. 3 Generally, when a party moves to compel arbitration pursuant to an arbitration 4 agreement, the FAA limits the district courts inquiry to determining “two ‘gateway’ 5 issues.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). First, the court 6 must determine whether the litigating parties agreed to arbitration, and second, 7 whether the arbitration agreement covers the dispute. Id. “If the response is 8 affirmative on both counts, then the Act requires the court to enforce the arbitration 9 agreement in accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 10 207 F.3d 1126, 1130 (9th Cir. 2000). 11 IV. DISCUSSION 12 Without Article III standing, the Court lacks jurisdiction to hear this case or 13 compel the parties to arbitrate. Therefore, the Court first analyzes One Finance’s 14 contention that Nguyen lacks Article III standing. See Y.H. by & through Harris v. 15 Blizzard Ent., Inc., No. 22-56145, 2023 WL 7015280, at *2 (9th Cir. Oct. 25, 2023) 16 (vacating district court’s denial of motion to compel arbitration and remanding to 17 district court to first determine whether plaintiff has Article III standing). Finding 18 Nguyen sufficiently alleges Article III standing, the Court next turns to One Finance’s 19 motion to compel arbitration. See Miller v. Travel Guard Grp., Inc., No. 21-CV- 20 09751-VC, 2022 WL 2712507, at *1 (N.D. Cal. July 13, 2022) (explaining that a 21 motion to dismiss under Rule 12(b)(6), including whether plaintiffs have statutory 22 standing, is “not appropriate to resolve until the motion to compel is adjudicated”). 23 As the Court finds Nguyen is not required to arbitrate his claim, the Court addresses 24 One Finance’s remaining arguments that Nguyen fails to state a claim under 25 Rule 12(b)(6). See id. 26 A. Article III Standing 27 To establish Article III standing, a “plaintiff must have (1) suffered an injury in 28 fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that 1 is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 2 578 U.S. 330, 338 (2016). Even putting aside his claim for statutory damages, 3 (Compl., Prayer for Relief), Nguyen alleges he suffered an injury in fact through the 4 theft of $2,785.25 of his funds, (id. ¶¶ 18, 27, 33). One Finance argues that it did not 5 cause Nguyen’s injury because his injury stems from the funds being stolen from the 6 Coinbase Account, not from One Finance’s actions, and Nguyen “cannot allege an 7 injury arising from the transfer of funds that were already lost to him.” (Mot. 6.) But 8 Nguyen alleges that he was in contact with One Finance prior to the outgoing transfer 9 of funds from the One Finance Account, (Compl. ¶¶ 18, 22–28, 31), and that One 10 Finance assured him it would freeze the One Finance Account prior to the outgoing 11 transfer, (id. ¶¶ 25, 40). Additionally, Nguyen alleges that One Finance failed to take 12 actions required by the EFTA with respect to his One Finance Account, not the 13 Coinbase Account. (Id. ¶¶ 41–42 (referring to the One Finance Account as 14 “Plaintiff’s account[]”) Nguyen thus identifies an injury that is traceable to One 15 Finance’s independent conduct to support Article III standing at this stage. 16 B. Motion to Compel 17 One Finance also argues that Nguyen’s claim must be arbitrated under the 18 doctrine of equitable estoppel because Nguyen asserts rights under the One Finance 19 Terms of Service and Deposit Agreement (the “Agreement”), even though Nguyen 20 never signed the agreement. (Mot. 15–20; Reply 9–10.) 21 Under the equitable estoppel doctrine, “a plaintiff may be bound to an 22 arbitration clause in a contract he did not sign if the claims asserted are ‘dependent 23 upon, or founded in and inextricably intertwined with, the underlying contractual 24 obligations of the agreement containing the arbitration clause.’” Stafford v. Rite Aid 25 Corp., 998 F.3d 862, 865 (9th Cir. 2021) (quoting Goldman v. KPMG, LLP, 173 Cal. 26 App. 4th 209, 218 (2009)). However, “merely making reference to an agreement with 27 an arbitration clause is not enough.” In re Henson, 869 F.3d 1052, 1060 (9th Cir. 28 2013) (quoting Goldman, 173 Cal. App. 4th at 218). “The touchstone for equitable 1 estoppel is whether a nonsignatory is relying on an agreement for one purpose while 2 disavowing the arbitration clause of the agreement.” Stafford, 998 F.3d at 866 3 (internal quotation marks omitted). 4 One Finance asserts that the Agreement “provides account holders with 5 protections under the EFTA” and Nguyen’s claim “is premised exclusively on a 6 violation of the EFTA and related duties that could arise only from a One Finance 7 agreement.” (Mot. 17–18.) One Finance adds that the EFTA requires a plaintiff 8 maintain an account with One Finance to state a claim against it, and that a consumer 9 cannot open an account with One Finance without an agreement that also contains an 10 arbitration clause. (Id.) Therefore, according to One Finance, “[i]t would be unfair 11 for Plaintiff to assert the benefits of account ownership without abiding by the 12 arbitration provisions to which all One Finance customers must agree.” (Reply 10.) 13 The Court finds that the doctrine of equitable estoppel does not apply to 14 Nguyen’s EFTA claim as pleaded. Contrary to One Finance’s assertion, the 15 Agreement does not “provide[] account holders with protections under the EFTA,” 16 (Mot. 17), and Nguyen does not assert a claim for breach of the Agreement, (see 17 Compl.). Rather, the EFTA itself provides consumers with independent protections, 18 and Nguyen explicitly brings one claim under the statute, not the Agreement. (See id. 19 ¶¶ 50–52.) Even if the EFTA requires a consumer account for a plaintiff to state a 20 claim, as One Finance argues, (Mot. 18), and even if Nguyen “assumed,” (Decl. 21 Jonathan Nguyen ISO Opp’n ¶ 8, ECF No. 26-1), or “claimed ownership” of, 22 (Opp’n 11), the One Finance Account prior to the alleged EFTA violation, it does not 23 follow that his claims are necessarily “dependent upon, or founded in and inextricably 24 intertwined with, the” One Finance Agreement. Stafford, 998 F.3d at 865; see Kramer 25 v. Toyota Motor Corp., 705 F.3d 1122, 1130–31 (9th Cir. 2013) (rejecting argument 26 that plaintiff’s claims were necessarily based on the underlying purchase contracts 27 because the lawsuit was predicated on the fact that a vehicle purchase occurred); 28 Murphy v. DirecTV, Inc., 724 F.3d 1218, 1231 (9th Cir. 2013) (rejecting application 1 of equitable estoppel doctrine where “Plaintiffs’ claims do not depend on the 2 Agreement’s terms”); Ellington v. Eclipse Recreational Vehicles, No. 21-55021, 3 2022 WL 72351, at *1 (9th Cir. Jan. 7, 2022) (Plaintiff’s “claims do not depend on the 4 purchase agreements. Instead, they rely only on the fact that he purchased the 5 trailer.”). Here, at most, Nguyen’s claim relies on the existence of a consumer 6 account, not the terms of the Agreement. Accordingly, the Court DENIES One 7 Finance’s request to compel arbitration. 8 C. Motion to Dismiss 9 Having established Nguyen is not required to arbitrate his claim, the Court turns 10 to One Finance’s motion to dismiss for failure to state a claim. (See Mot. 7–15.) 11 1. Statutory Standing 12 One Finance argues that Nguyen lacks statutory standing to assert an EFTA 13 claim against it because he has not alleged that he owned the One Finance Account 14 and because One Finance’s alleged violation of the EFTA (i.e., its failure to 15 reasonably investigate the improper transfer and provisionally credit the One Finance 16 Account) did not cause Nguyen’s injuries. (Mot. 7–9.) “Statutory standing requires a 17 plaintiff to ‘fall within the zone of interests protected by the law invoked.’” Chennette 18 v. Porch.com, Inc., 50 F.4th 1217, 1222 (9th Cir. 2022) (quoting Lexmark Int’l, Inc. v. 19 Statis Control Components, Inc., 572 U.S. 118, 129 (2014)). To determine whether a 20 plaintiff’s claim falls within the zone of interests, courts “use[] traditional tools of 21 statutory interpretation” to examine “whether a legislatively conferred cause of action 22 encompasses a particular plaintiff’s claim.” Id. (quoting Lexmark Int’l, 572 U.S. 23 at 129). 24 The parties dispute whether the EFTA requires a plaintiff to own the account 25 from which an unauthorized electronic transfer was made. (See Mot. 7–8; Opp’n 9– 26 12; Reply 6–7); see also 15 U.S.C. § 1693a(12) (defining “unauthorized electronic 27 transfer” as a transfer “from a consumer’s account initiated by a person other than the 28 consumer”). However, the Court need not decide this issue at this stage. Even if 1 Nguyen must have owned the One Finance Account to bring an EFTA claim, he 2 plausibly alleges that the account belonged to him. In the Complaint, Nguyen 3 describes the Coinbase Account and One Finance Account as “Plaintiff’s accounts.” 4 (Compl. ¶¶ 41–42.) Moreover, Nguyen alleges that One Finance assured him that it 5 would take actions with respect to the One Finance Account in response to his 6 requests, and that One Finance told him that it refunded a small sum of money from 7 the One Finance Account to the Coinbase Account. (Id. ¶¶ 24–25, 34.) These 8 allegations support an inference that Nguyen claims to have owned the One Finance 9 Account. (See Opp’n 11.) Additionally, for the reasons explained with respect to 10 Article III standing, Nguyen plausibly alleges that One Finance caused his injuries. 11 Therefore, Nguyen alleges facts in the Complaint that support statutory standing. 12 2. One Finance Account Purpose 13 One Finance separately moves to dismiss Nguyen’s EFTA claim because he 14 fails to allege that the One Finance Account is an “account” as defined by the EFTA. 15 (Mot. 13–15.) Nguyen alleges the transfer from the One Finance Account was an 16 “unauthorized electronic transfer[],” (Compl. ¶ 46), which the EFTA defines as “an 17 electronic fund transfer from a consumer’s account initiated by a person other than the 18 consumer without actual authority to initiate such transfer,” 15 U.S.C. § 1693a(12). 19 The EFTA defines an “account” to include “a demand deposit, savings deposit, 20 or other asset account . . . , as described in the regulations of the [Consumer Financial 21 Protection Bureau (“CFPB”)], established primarily for personal, family, or household 22 purposes.” Id. §§ 1693a(2), (6). CFPB regulations define “[a]ccount” to mean “a 23 demand deposit (checking), savings, or other consumer asset account . . . held directly 24 or indirectly by a financial institution and established primarily for personal, family, 25 or household purposes.” 12 C.F.R. § 205.2(b)(1). “The CFPB provides little color on 26 this definition in its Official Interpretations.” Nero v. Uphold HQ Inc., 688 F. Supp. 27 3d 134, 143 (S.D.N.Y. 2023). CFBP’s Official Interpretations state that a “consumer 28 asset account” includes “[c]lub accounts, such as vacation clubs” and “retail 1 repurchase agreement[s],” but excludes “[p]rofit-sharing and pension accounts 2 established under a trust agreement,” “[e]scrow accounts,” and “[a]ccounts for 3 accumulating funds to purchase U.S. savings bonds.” 12 C.F.R. pt. 1005, supp. I, 4 ¶ 2(b). CFPB’s Official Interpretations also contrast an account established “as a 5 business or commercial account or an account held by a business entity” as distinct 6 from one established “primarily for personal, family, or household purposes.” 7 12 C.F.R. pt. 1005, supp. I, ¶¶ 30(g)(2)–(3). Outside of this, neither the statute nor 8 CFPB’s regulations provide guidance on what constitutes an account established 9 “primarily for personal, family, or household purposes.” 10 At the time Congress enacted the EFTA, in 1978, Black’s Law Dictionary 11 defined “establish” as, among other things, “[t]o settle or fix firmly; place on 12 permanent footing; found; create” or “[t]o bring into being; to build to constitute; to 13 create; to form; [and] to found.” Establish, Black’s Law Dictionary (Rev. 4th ed. 14 1968; see also Establish, Black’s Law Dictionary (Rev. 5th ed. 1979) (“To settle or 15 fix firmly; place on permanent footing; found; create” and “[t]o bring about or into 16 existence”). Therefore, Nguyen must allege that the person who used Nguyen’s email 17 and identity to open the One Finance Account, (Compl. ¶¶ 26–27), set up the account 18 “primarily for personal, family, or household purposes,” 15 U.S.C. § 1693a(6). 19 (Compare Opp’n 15 (describing Nguyen’s purpose for “claim[ing] ownership of the 20 One Finance Account”).) 21 Nguyen makes no such allegation in his Complaint. (See generally Compl.) 22 Instead, in his Opposition, he asserts that this “is a question of fact” not suitable for 23 resolution at the pleading stage. (Opp’n 14.) Nguyen is correct that the purpose for 24 establishing an account is a question of fact; however, under the Rule 12(b)(6) 25 standard, a plaintiff must allege facts that, when taken as true, state a claim upon 26 which relief can be granted. See Iqbal, 556 U.S. at 678. Therefore, Nguyen’s failure 27 to allege facts to support that account was established primarily for personal, family, 28 or household purposes, is fatal to his claim. 1 In his Opposition, Nguyen speculates that “it is unlikely the fraudster stole [his] 2 funds to benefit a legitimate business as opposed to for their own personal gain.” 3 (Opp’n 14.) This argument does not save Nguyen’s claim. First, he does not make 4 any such allegation in his Complaint. (See Compl. ¶¶ 26–27 (alleging that “the One 5 Finance Account was not opened by Plaintiff” and “the fraud may be traced to São 6 Paulo, Brazil”).) Second, even if Nguyen made this allegation, it would not constitute 7 an allegation that the fraudster established the account for “primarily for personal, 8 family, or household purposes.” 15 U.S.C. § 1693a(6). That a consumer sets up an 9 account for fraudulent or illegal purposes does not mean that the account is one for 10 “personal” use. See Adler v. Fed. Republic of Nigeria, 219 F.3d 869, 875 (9th Cir. 11 2000), as amended on denial of reh’g and reh’g en banc (Aug. 17, 2000) (“[T]hat the 12 contract was for an illegal purpose, and therefore was unenforceable, does nothing to 13 destroy its commercial nature.”); cf. Pittsburgh Press Co. v. Pittsburgh Comm’n on 14 Hum. Rels., 413 U.S. 376, 388, (1973) (describing “illegal commercial activity”). For 15 example, the fraudster could have established the One Finance Account as part of an 16 illegal business enterprise that sets up accounts using stolen identities. In that case, 17 the fraudster would not have a personal, family, or household purpose for setting up 18 the account, but he would have a commercial—albeit illegal—purpose. 19 Finally, Nguyen’s allegation that the “transaction[] concern[ed] an ‘account’” 20 as defined by 15 U.S.C. § 1693(a)(2), (Compl. ¶ 47), is merely a recitation of the legal 21 standard and does not “contain sufficient factual matter, accepted as true, to state a 22 claim to relief that is plausible on its face,” Iqbal, 556 U.S. at 678 (internal quotation 23 marks omitted). Accordingly, Nguyen fails to allege that the One Finance Account 24 was established for a “personal, family, or household purpose,” as required to state a 25 claim under the EFTA. See 15 U.S.C. § 1693a(6). As a result, the Court declines to 26 address One Finance’s other arguments for dismissal. 27 28 1 Vv. CONCLUSION 2 For the forgoing reasons, the Court GRANTS One Finance’s Motion to 3 || Dismiss. (ECF No. 24.) Accordingly, the Court dismisses One Finance from this 4|| action. The Court also denies One Finance’s requested alternative relief to compel 5 || arbitration. 6 7 IT IS SO ORDERED. 8 9 November 20, 2024 10 SB

OTIS D? GHT, II

3 UNITED STATES DISTRICT JUDGE

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28