A recent decision from the U.S. District Court for the Central District of California highlights the challenges plaintiffs face when alleging violations of consumer protection and privacy laws against financial institutions. The court dismissed claims brought by bank customers who alleged unauthorized withdrawals from their accounts, finding that the complaint lacked sufficient factual detail to support claims under the California Consumer Privacy Act (CCPA), the Electronic Funds Transfer Act (EFTA), and California’s Unfair Competition Law (UCL).
Background
Plaintiffs allege that over $44,000 was withdrawn from their savings accounts by unknown individuals without authorization. They claimed the bank failed to secure their personal information, did not promptly notify them of unauthorized access, and did not conduct a reasonable investigation into the disputed transactions. The lawsuit asserted violations of the CCPA, EFTA, and UCL.
California Consumer Privacy Act (CCPA) Claim
Plaintiffs’ pleading of the CCPA claim closely mirrors the language of the CCPA. (Compl. ¶¶ 18–27.) Cf. Cal. Civ. Code § 1798.150(a)(1). On its face the claim appears to be nothing more than “a formulaic recitation of the elements of a cause of action.” Iqbal, 556 U.S. at 678. The Complaint’s factual allegations contain some detail about the withdrawals from Plaintiffs’ accounts and that these were done by unauthorized, “unknown individuals,” but little else. (Compl. ¶¶ 7–11.) Its statement that “Defendant failed to properly maintain the personal information of Plaintiffs with regards to the account,” (id. ¶ 6), is “a legal conclusion couched as a factual allegation,” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555).
*3 Courts regularly require CCPA claimants to “allege sufficient facts to establish how or why … systems were inadequate or unreasonable or how or why [a business] knew or should have known its systems were inadequate or unreasonable.” Griffey v. Magellan Health Inc., 562 F. Supp. 3d 34, 57 (D. Ariz. 2021). “[C]onclusory allegations that simply restate the statutory requirements under the CCPA are insufficient to state a claim.” Chen v. JPMorgan Chase Bank, N.A., 745 F. Supp. 3d 1025, 1033–34 (C.D. Cal. 2024).
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“When faced with two possible explanations, only one of which can be true and only one of which results in liability, plaintiffs cannot offer allegations that are merely consistent with their favored explanation but are also consistent with the alternative explanation.” In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013) (internal quotation marks omitted). “Something more is needed, such as facts tending to exclude the possibility that the alternative explanation is true ….” Id.
The Court went on to distinguish Alexander v. Wells Fargo Bank, N.A., No. 23-CV-617-DMS-BLM, 2023 WL 5109532, at *2 (S.D. Cal. Aug. 9, 2023) and disagree with the reasoning in Ramos v. Wells Fargo Bank, N.A., No. 23-cv-0757-L-BGS, 2023 WL 5310540, at *2 (S.D. Cal. Aug. 17, 2023).
Electronic Funds Transfer Act (EFTA) Claim
Similarly, the court determined that the EFTA claim lacked factual support. While the plaintiffs alleged unauthorized withdrawals and asserted that the bank did not conduct a good faith investigation, they failed to describe the bank’s response or provide details that would support an inference of an inadequate or bad faith investigation. The court noted that simply reporting a fraudulent transaction is not enough; plaintiffs must allege facts showing how the bank’s investigation was deficient.
California Unfair Competition Law (UCL) Claim
The UCL claim was predicated on the alleged violations of the CCPA and EFTA. Because the court found those underlying claims insufficiently pleaded, the UCL claim also failed. The court reiterated that a UCL claim under the “unlawful” prong must be based on a viable violation of another law.
