B328293
06-17-2024
LINDA KWASHA, Plaintiff and Appellant, v. JPMORGAN CHASE BANK, N.A. et al., Defendants and Respondents
Law Office of Burton V. McCullough and Burton V. McCullough for Plaintiff and Appellant. Greenberg Traurig, Jordan D. Grotzinger, Karin L. Bohmholdt and Hannah B. Shanks-Parkin for Defendants and Respondents.
MOOR, Acting, P. J.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. 22STCV22993 Barbara M. Scheper, Judge. Affirmed.
Law Office of Burton V. McCullough and Burton V. McCullough for Plaintiff and Appellant.
Greenberg Traurig, Jordan D. Grotzinger, Karin L. Bohmholdt and Hannah B. Shanks-Parkin for Defendants and Respondents.
MOOR, Acting, P. J.
INTRODUCTION
Plaintiff and appellant Linda Kwasha appeals from a judgment of dismissal entered after the court sustained without leave to amend demurrers filed by defendants and respondents JPMorgan Chase Bank, N.A. (Chase) and Chase employee Michelle Rivas. Kwasha brought a defamation claim against Chase and Rivas, based on a 2021 oral statement by Rivas, and a negligence claim against Chase, based on the negligent acts of Washington Mutual (WaMu) occurring prior to Chase's 2008 purchase and assumption of WaMu's assets out of receivership.
According to the operative complaint, when Kwasha originally rented a safe deposit box in 2008, WaMu employees negligently recorded an incorrect but similar box number. When Kwasha called the same branch in September 2021, Rivas first told her there was no box recorded under her name. Less than a week later, Rivas later falsely stated-to Kwasha and her significant other-that in December 2010, Kwasha claimed she had lost her keys to the box, had the box drilled open, was given the contents of the box, and closed the account. Kwasha filed a 2021 lawsuit against Chase, but dismissed it after the mix-up in box numbers was discovered as part of a bank audit and the contents of the box were returned to her. Kwasha then filed the current action, seeking to hold Chase and Rivas liable for Rivas's false statement and for WaMu's negligent acts, which had caused Kwasha to incur attorney fees and costs to seek compensation for the contents of the box.
The trial court found the operative complaint allegations insufficient to state a claim for defamation because Rivas's false statement did not accuse Kwasha of any crime, and the language was not reasonably susceptible to a defamatory meaning. The court also concluded it lacked jurisdiction over the negligence claim because Kwasha had not exhausted her administrative remedies, as required under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. § 1811, et seq., FIRREA). We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
As well-recognized, on review of a sustained demurrer, we accept as true the well-pleaded allegations of the complaint, reading the complaint as a whole and its parts in their context. We accept all material facts, but we do not accept contentions, deductions or conclusions of fact or law. We may also consider matters which are properly judicially noticed. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.)
The Underlying Facts
In early 2007, Kwasha's mother gave her a diamond necklace, which held sentimental value for Kwasha because her father had purchased it for her mother. Kwasha had the necklace appraised at a value of $240,000. Concerned about possible loss or theft, she decided to insure the necklace and put it in a safe deposit box. Around July 2008, Kwasha rented a safe deposit box at the Studio City Branch of WaMu (the branch); she also gave her daughter, Hilary Stern Keller, access to the box.
Plaintiff cancelled the insurance in October 2010.
Kwasha alleges on information and belief that at the time she rented the box, the branch "had one box numbered 100510, and another box numbered simply 510," that the branch "rented her the box numbered 100510, but negligently recorded in [its] records that she had been rented the box numbered 510." Kwasha placed the necklace into the box she believed was numbered 510, but which in fact was numbered 100510.
"[O]n September 25, 2008, Chase bought most of the banking operations of WaMu from the receivership of the Federal Deposit Insurance Corporation, including the banking operations of" the branch where Kwasha had rented the box.
On Wednesday, September 8, 2021, Kwasha sent an email to defendant Michelle Rivas, an officer and employee of Chase, "inquiring about her safe deposit box, giving Rivas the number of the box WaMu had told her she had rented, i.e., 510, and stating that her daughter, Keller, was also on the box." On September 9 or 10, 2021, a phone conversation took place during which Rivas told Kwasha and Keller "there was no safe deposit box at the [branch] under [either of their] names or their social security numbers," but invited Kwasha to bring her keys for the box to the branch. Rivas's statement caused Kwasha bewilderment and anxiety, wondering what could have happened to the box she had rented and the necklace stored inside. Kwasha had maintained other accounts at the branch for more than 13 years without experiencing any problems with the accounts.
Rivas completed a Customer Complaint Details report stating she could not locate a box for the plaintiff, was attempting to locate a box, and had asked the customer to visit the branch with any key she may have" 'in order to assist her in researching further.'" On Saturday, September 11, 2021, Kwasha sent Rivas an email confirming she would be coming to the branch on Monday, September 13, 2021, and would appreciate if Rivas could set aside some time to meet with her to discuss what happened to the box, hoping to clarify the apparent misunderstanding and to take possession of the necklace at that time.
On Monday, September 13, 2021, just as Kwasha and her significant other, Gato Grossman, were going to the branch, Rivas called Kwasha on her cell phone. Kwasha answered the call on speakerphone in her car and told Rivas that she and Grossman were only a few minutes away. Rivas told Kwasha that Rivas had further investigated the matter, "and then emphatically stated to [Kwasha] that on December 27, 2010, [Kwasha] had come into the [branch], claimed she had lost her keys to her safe deposit box, had the box drilled open, was given the contents of the safe deposit box, and closed the account." Kwasha denied the accusation, but "Rivas refused to relent or even reconsider the matter, and remained adamant that [Kwasha] had accessed her safe deposit box and taken the property in the box."
According to Kwasha's complaint, "Rivas either knew the statement was false or failed to use reasonable care to determine the truth or falsity of the statement, and had no reasonable basis for making the statement." The complaint further states: "Rivas's accusations were slanderous in that they clearly conveyed the message that [Kwasha] was lying when she denied accessing her safe deposit box in 2010 and denied taking possession of the property in the box, and was attempting to commit bank fraud by extorting money from Chase for the value of the supposedly lost property. That was how [Kwasha] and Grossman understood the accusations, and how any normal person would interpret the accusations."
When plaintiff and Grossman entered the branch minutes after the phone conversation, Rivas did not come out to meet with them personally, but a different person stated she knew about the problem and that Rivas would be back in touch with plaintiff on Tuesday. Rivas later called Kwasha and said the matter had been referred to someone" 'higher up,'" who would be in touch with her within 10 days. However, no one from Chase contacted her and instead, "Chase deliberately and in bad faith ignored and stonewalled [Kwasha's] efforts to find out what happened to her safe deposit box and the" necklace.
In May 2022, after an audit determined there was no rental contract for box 100510, the box was drilled open and the property inside was inventoried. It was later determined that box 100510 was the box rented to Kwasha, and the contents were returned to her. "But for the discovering of Chase's negligence in mixing up the two boxes, Chase would still have [Kwasha's] property."
Prior Lawsuit
Kwasha filed a prior lawsuit against Chase on November 12, 2021. After the case was removed to federal court, Kwasha filed a first amended complaint on January 18, 2022. Both the November 12, 2021 complaint and the January 18, 2022 first amended complaint referenced Rivas's accusations. In a deposition, Rivas falsely testified that she did not recall making the accusatory statements to Kwasha on September 13, 2021. Rivas also stated she did not see Chase's records regarding Kwasha's ownership of box 510 until sometime after March 24, 2022.
In May 2022, plaintiff and Chase filed a joint stipulation to stay the federal case while they engaged in settlement discussions. Kwasha dismissed the case without prejudice on July 11, 2022.
Current Lawsuit
On July 18, 2022, Kwasha filed her initial complaint in the current action. The court sustained a demurrer to the initial complaint, but granted Kwasha leave to file an amended complaint on her defamation cause of action only. The demurrer to the remaining causes of action, for breach of contract, negligence, and conversion, were sustained without leave to amend. Kwasha filed a first amended complaint on November 21, 2022, followed by a second amended complaint (SAC) on December 20, 2022.
The SAC alleged two claims: one for defamation and one for negligence. Kwasha alleged that the accusations by Rivas and Chase were slanderous per se, and therefore actionable without proof of special damages. Alternatively, Kwasha suffered special damages in the form of extreme physical and emotional distress. Kwasha sought over $250,000 in damages. She also sought punitive damages, alleging that "Chase failed and refused to conduct a proper and adequate investigation of [her] claim and in bad faith stonewalled [her] in her attempt to discover what had happened to her safe deposit box and the [necklace], and in their false testimony regarding the discovery of the true facts."
With respect to the second cause of action for negligence, Kwasha alleged that WaMu negligently failed "to accurately record the renting of a safe deposit box to [Kwasha] and to maintain proper records reflecting which safe deposit box was rented to [Kwasha] to ensure she could access the correct box and retrieve her property." But for WaMu's negligence, Kwasha could have accessed her box without spending time and money to discover the negligence.
The court sustained the demurrer to the SAC and entered an order of dismissal on January 23, 2023. Kwasha filed a notice of appeal on March 20, 2023.
DISCUSSION
Standard of Review
We review de novo an order sustaining a demurrer without leave to amend. (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.)" 'When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment . . . .'" (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, quoting Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
"We liberally construe the pleading with a view to substantial justice between the parties [citations]; but, '[u]nder the doctrine of truthful pleading, the courts "will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed."' [Citations.]" (Ivanoff v. Bank of America, N.A. (2017) 9 Cal.App.5th 719, 726.)
"A judgment of dismissal after a demurrer has been sustained without leave to amend will be affirmed if proper on any grounds stated in the demurrer, whether or not the court acted on that ground." (Carman v. Alvord (1982) 31 Cal.3d 318, 324; accord, Silva v. Langford (2022) 79 Cal.App.5th 710, 716.)
Defamation
1. Applicable Law
The tort of defamation "involves the intentional publication of a statement of fact that is false, unprivileged, and has a natural tendency to injure or which causes special damage." (Smith v. Maldonado (1999) 72 Cal.App.4th 637, 645 (Smith); see also Burrill v. Nair (2013) 217 Cal.App.4th 357, 383 (Burrill), disapproved on other grounds by Baral v. Schnitt (2016) 1 Cal.5th 376.) "Publication means communication to some third person who understands the defamatory meaning of the statement and its application to the person to whom reference is made. Publication need not be to the 'public' at large; communication to a single individual is sufficient." (Smith, at p. 645.)
A claim for defamation per se is subject to a different pleading and proof requirements than a claim for defamation per quod. "The term 'per se' when used in describing the effect of allegedly slanderous words means that the utterance of such words is actionable without proof of special damage. [Citations.]" (Correia v. Santos (1961) 191 Cal.App.2d 844, 851, italics omitted.) "[F]alse statements charging the commission of crime . . . are defamatory per se." (Burrill, supra, at p. 383.)
Defamation can be divided into two categories: slander claims are based upon an oral communication, and libel claims are based upon a written communication. (Jackson v. Mayweather (2017) 10 Cal.App.5th 1240, 1259-1260 [libel is an unprivileged, false written communication]; Nguyen-Lam v. Cao (2009) 171 Cal.App.4th 858, 867 [slander is form of oral defamation].) Civil Code section 46 describes four categories of statements that are slander per se, including statements that (1) accuse an individual of a crime, (2) impute a person with an infectious disease, (3) tend to directly injure the individual's professional reputation, and (4) impute a want of chastity or impotence. (Civ. Code, § 46.) "A slander that does not fit into these four subdivisions is slander per quod, and special damages are required for there to be any recovery for that slander. [Citation.]" (Regalia v. The Nethercutt Collection (2009) 172 Cal.App.4th 361, 367 (Regalia).)
If the alleged defamatory words "are ambiguous and susceptible of a harmless as well as a defamatory meaning, the plaintiff must state the defamatory meaning in which, according to his or her theory, they were used. This allegation of defamatory meaning, a statement of the pleader's opinion, is called the innuendo." (5 Witkin, Cal. Proc. (6th ed. 2024) Pleading § 738; see Smith, supra, 72 Cal.App.4th at p. 645.) "Where the language at issue is ambiguous, the plaintiff must also allege the extrinsic circ*mstances which show the third person reasonably understood it in its derogatory sense (the 'inducement'). [Citations.]" (Smith, at p. 646.)
An innuendo "is necessary where the words used are susceptible of either a defamatory or an innocent interpretation. [Citations.] And when the offending language is susceptible of an innocent interpretation, it is not actionable per se, but, in addition to an innuendo, it is necessary for the plaintiff to allege special damages by reason of the meaning gained from the publication. [Citation.]" (Washer v. Bank of America Nat'l Trust &Savings Asso. (1943) 21 Cal.2d 822, 828, overruled on other grounds, MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536, 551; see also Smith, supra, 72 Cal.App.4th at p. 646, fn. 4., italics omitted.)
" '[I]nducement' and 'innuendo' are terms of art: '[Where] the language is ambiguous and an explanation is necessary to establish the defamatory meaning, the pleader must do two things: (1) Allege his interpretation of the defamatory meaning of the language (the "innuendo," . . .); (2) support that interpretation by alleging facts showing that the readers or hearers to whom it was published would understand it in that defamatory sense (the "inducement").' [Citation.]" (Barnes-Hind, Inc. v. Superior Court (1986) 181 Cal.App.3d 377, 387.)
A "plaintiff cannot get to trial by setting forth a publication of harmless language and alleging that it means something harmful. The court will determine whether the language set out, under the circ*mstances described, could reasonably be understood in the defamatory sense alleged in the innuendo." (5 Witkin, Cal. Proc. (6th ed. 2024) Pleading § 739.)
2. Analysis
We focus our analysis solely on whether Kwasha has stated a cause of action for slander per se. By failing to raise any argument about the possibility that the SAC adequately alleged slander per quod, Kwasha has waived any such argument. (Cahill v. San Diego Gas &Electric Co. (2011) 194 Cal.App.4th 939, 956 [arguments not supported by "reasoned argument" are waived].)
Kwasha's defamation claim is based on Rivas's alleged statement, made on speakerphone in Grossman's presence, that Kwasha had come to the branch in December 2010, claimed she had lost her keys to the box, had the box drilled open, removed the contents, and then closed the account. Kwasha alleges the innuendo, or defamatory meaning, of Rivas's statements was that Kwasha "was lying when she denied accessing her safe deposit box in 2010 and denied taking possession of the property in the box, and was attempting to commit bank fraud by extorting money from Chase for the value of the supposedly lost property."
The trial court correctly concluded that the SAC failed to state a cause of action for defamation. As alleged, Rivas's oral statement-that Kwasha was given the contents of her safe deposit box in 2010-cannot be reasonably construed as accusing Kwasha of a crime. Much of Kwasha's opening brief focuses on whether Rivas's statement was based on bank records or not. But the basis of Rivas's statement is not at issue. Chase does not argue that the statement was true, and later events, included in the SAC allegations, demonstrate it was not: in May 2022, a branch audit revealed that the bank in fact still had Kwasha's property, in box 100510, and after that discovery, the bank returned the property to Kwasha. While a statement's falsity is essential to a claim of defamation, it is not alone sufficient to establish defamation per se.
Kwasha offers no persuasive argument that Rivas's incorrect statement accused Kwasha of a crime, as required to bring it within Civil Code section 46. The statement does not mention fraud, extortion, or any crime. Nor does the statement on its face even address Kwasha's conduct in September 2021, when she was coming to the bank in an effort to find her property, or what Kwasha might attempt to do thereafter. Rather, Rivas confined her statement to what purportedly happened over a decade earlier: Rivas told Kwasha that, in 2010, Kwasha came into the bank and took possession of her own property and closed her account. By making a statement about a past event, in which Kwasha was alleged to have engaged in perfectly legal conduct, Rivas offered the bank's explanation as to why it no longer had possession of Kwasha's property. The statement does not constitute slander per se, as it is not reasonably susceptible to the meaning that Kwasha advances by innuendo. The trial court did not err in rejecting Kwasha's effort to recharacterize the words Rivas used as a statement that Kwasha was attempting, in 2021, to extort or defraud the bank. "The question whether a statement is reasonably susceptible to a defamatory interpretation is a question of law for the trial court. Only once the court has determined that a statement is reasonably susceptible to such a defamatory interpretation does it become a question for the trier of fact whether or not it was so understood." (Smith, supra, 72 Cal.App.4th at p. 647.)
As the trial court explained in its ruling, the alleged statements are not reasonably susceptible to a defamatory statement, whether or not the alleged extrinsic circ*mstances are taken into account. We agree that the allegations were insufficient to state a cause of action for defamation per se.
Negligence
Kwasha contends that the exhaustion of remedies requirement under FIRREA is inapplicable to her negligence claim because she was not damaged until she incurred attorney fees and costs in connection with suing Chase to recover the property in her safe deposit box. We disagree. Kwasha's claim against Chase is barred because the basis for her claim rests solely upon the negligence of WaMu in recording the incorrect box number, and she failed to exhaust her remedies as required under FIRREA.
1. Applicable Law
Congress passed FIRREA after the savings and loans crisis of the 1980's. (Benson v. JPMorgan Chase Bank, N.A. (9th Cir. 2012) 673 F.3d 1207, 1211 (Benson).) FIRREA gives the Federal Deposit Insurance Corporation (FDIC) "authority to 'act as receiver or conservator of a failed institution for the protection of depositors and creditors.' [Citation.] It provides detailed procedures to allow the FDIC to consider certain claims against the receivership estate, see 12 U.S.C. § 1821, (d)(3)-(10), 'to ensure that the assets of a failed institution are distributed fairly and promptly among those with valid claims against the institution, and to expeditiously wind up the affairs of failed banks,' [citation] . . . . [¶] FIRREA requires that a plaintiff exhaust these administrative remedies with the FDIC before filing certain claims." (Benson, at p. 1211; Saffer v. JPMorgan Chase Bank, N.A. (2014) 225 Cal.App.4th 1239, 1246 (Saffer).) The requirement for exhaustion of administrative remedies is based on section 1821, subdivision (d)(13)(D), which states "Except as otherwise provided in this subsection, no court shall have jurisdiction over-[¶] (i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the [FDIC] has been appointed receiver, including assets which the [FDIC] may acquire from itself as such receiver; or [¶] (ii) any claim relating to any act or omission of such institution or the [FDIC] as receiver."
"FIRREA's jurisdictional bar applies to claims asserted against a purchasing bank when the claim is based on the conduct of the failed institution." (Benson, supra, 673 F.3d at p. 1214, fn. omitted.) The plaintiffs in Benson were victims of a Ponzi scheme that was carried out in part through Nevada limited liability companies that used WaMu banking services to sell fraudulent certificates of deposit (CDs). (Benson, supra, 673 F.3d at pp. 1208-1210.) The Benson plaintiffs alleged in their complaint that two WaMu employees, a bank manager and a commercial banking officer, provided substantial assistance to two principals of the Ponzi scheme, and the scheme did not end until several months after the FDIC "seized WaMu pursuant to its authority under FIRREA" on September 22, 2008. (Id. at p. 1210.) In March 2009, the Securities and Exchange Commission filed a case against a third principal, alleging that the three principals and their associates had sold $68 million in fraudulent CDs. (Ibid.) The Benson plaintiffs filed suit against Chase, the bank that had purchased most of WaMu's assets and liabilities under a purchase and assumption agreement with the FDIC, and the trial court dismissed the action, finding it lacked jurisdiction because plaintiffs had not exhausted their administrative remedies under FIRREA. (Id. at pp. 1210-1211.)
2. Analysis
Kwasha argues that at the time WaMu failed, there was no claim to be made against WaMu or the FDIC, and presenting her negligence claim was impossible because she had not suffered any injury. She further argues that Chase is liable for WaMu's negligence because the purchase and assumption agreement between the FDIC and Chase included language that Chase assumed liability for obligations that would otherwise have fallen on WaMu.
However, Kwasha did not address Benson in her opening brief, and we are not persuaded by her attempt to distinguish Benson in her reply brief. The reply brief argues that the Benson plaintiffs "sued Chase as the successor in interest on a claim arising against WaMu prior to its receivership," whereas Kwasha is not bringing a claim against Chase for lost property as WaMu's successor in interest but is rather bringing "a separate claim for damages incurred in suing Chase because of WaMu's negligence for which Chase is liable because it assumed WaMu's liabilities."
Kwasha's reasoning is flawed. In both Benson and the current case, WaMu's alleged negligent acts took place before the FDIC receivership, but the plaintiffs did not become aware of their injuries/claims until after Chase had acquired WaMu's assets. As the Benson court made clear, when the alleged wrongful conduct is carried out by the failed institution (WaMu in both cases), courts lack jurisdiction over claims stemming from that wrongful conduct unless the administrative remedies under FIRREA have been exhausted. (Benson, supra, 673 F.3d at pp. 1214-1215.) Here, because WaMu's incorrect recording of her box number is the wrongful conduct upon which Kwasha bases her negligence claim, it does not matter that she was not injured until after the FDIC receivership. Where the failed institution, here WaMu, is the entity that committed the allegedly negligent act or wrongful acts, FIRREA requires exhaustion of administrative remedies for courts to have jurisdiction. Kwasha's claim is barred under FIRREA.
Leave to Amend Not Required
Plaintiff bears the burden of proving a reasonable possibility that a defect can be cured, and plaintiff can make such a showing for the first time on appeal. (City of Torrance v. Southern California Edison Company (2021) 61 Cal.App.5th 1071, 1083-1084.) Kwasha does not contend on appeal that any of the defects in the SAC can be cured by amendment, so we find the trial court correctly sustained Chase's demurrer without leave to amend.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to JPMorgan Chase Bank, N.A. and Michelle Rivas.
We concur: KIM, J. LEE, J. [*]
[*] Judge of the San Bernardino County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
