1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 VINCE DENO, et al., Case No. 22-cv-00513-JD
7 Plaintiffs, ORDER RE MOTION TO DISMISS v. 8
9 STATE FARM GENERAL INSURANCE COMPANY, et al., 10 Defendants.
11 12 This insurance coverage dispute arises from a July 2020 fire that is said to have severely 13 damaged a historic San Francisco home owned by plaintiffs Vince Deno and Carla Deno. Dkt. 14 No. 1 ¶¶ 17, 19. The Denos says that State Farm General Insurance Company and State Farm 15 Mutual Automobile Insurance (State Farm) declined to pay the full amount of the Denos’ 16 homeowners’ insurance policy and refused to cover their additional living expenses under the 17 policy limits. Id. ¶¶ 20-32. The complaint alleges claims for: (i) breach of contract; (ii) breach of 18 the implied covenant of good faith and fair dealing; (iii) violation of California’s Unfair 19 Competition Law, Cal. Bus & Prof. Code § 17200, et seq.; (iv) fraud; (v) negligent 20 misrepresentation; and (vi) promissory estoppel. State Farm asks to dismiss State Farm Mutual 21 Automobile Insurance (State Farm Auto) on the grounds that State Farm Auto is not a party to the 22 Denos’ policy. Dkt. No. 11 at 5-7. State Farm also asks to dismiss the UCL, fraud, and negligent 23 misrepresentation claims under Federal Rules of Civil Procedure 12(b)(6) and 9(b). Id. at 8-11. 24 The parties’ familiarity with the record is assumed, and the motion to dismiss is denied in all 25 respects. 26 Rule 12(b)(6) is governed by well-established standards. See McLellan v. Fitbit, Inc., No. 27 3:16-CV-00036-JD, 2018 WL 2688781, at *1 (N.D. Cal. June 5, 2018). To meet the requirements 1 showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), on the basis of plausible and 2 non-conclusory allegations of facts, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A 3 claim is plausible on its face if, accepting all factual allegations as true and construing them in the 4 light most favorable to the plaintiff, the Court can reasonably infer that the defendant is liable for 5 the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plausibility analysis is 6 “context-specific” and not only invites but “requires the reviewing court to draw on its judicial 7 experience and common sense.” Id. at 679. 8 Because some of the claims here sound in fraud, Rule 9(b) also applies. Kearns v. Ford 9 Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Rule 9(b) requires that “a party must state with 10 particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). A “pleading 11 must identify the who, what, when, where, and how of the misconduct charged, as well as what is 12 false or misleading about the purportedly fraudulent statement, and why it is false.” United States 13 ex rel. Anita Silingo v. WellPoint, Inc., 904 F.3d 667, 677 (9th Cir. 2018) (internal quotation and 14 citation omitted); see also McLellan, 2018 WL 2688781, at *1. Conclusory allegations with no 15 “particularized supporting detail” are not sufficient. United States v. United Healthcare Ins. Co., 16 848 F.3d 1161, 1180 (9th Cir. 2016); McLellan, 2018 WL 2688781, at *1. 17 I. CLAIMS AGAINST STATE FARM AUTO 18 State Farm says that State Farm Auto should be dismissed because it was not a party to the 19 Denos’ insurance policy, and the complaint does not plausibly allege alter-ego liability. Dkt. No. 20 11 at 5-7. The complaint alleges that State Farm Auto is the parent of State Farm General, that 21 “each was the alter-ego of the other,” and that the State Farm entities jointly issued a homeowners’ 22 policy to the Denos. Dkt. No. 1 ¶¶ 6-7, 10, 18. The Denos did not attach the homeowners’ policy 23 to their complaint. 24 State Farm Auto will not be dismissed at this stage of the case. A motion to dismiss under 25 Rule 12(b)(6) is directed to the adequacy of the complaint as it is pleaded. It is rarely appropriate 26 to venture beyond what is alleged in or attached to the complaint itself. See, e.g., Perez v. Mortg. 27 Elec. Registration Sys., Inc., No. 3:17-cv-04880-JD, 2018 WL 3109599, at *1 (N.D. Cal. June 25, 1 19-cv-08255-JD, 2020 WL 5702111, at *4 (N.D. Cal. Sept. 24, 2020). State Farm relies on facts 2 outside the complaint. See, e.g., Dkt. No. 11 at 5 (“[T]he separate corporate existence of State 3 Farm General Insurance Company and State Farm Mutual Insurance Company is subject to 4 judicial notice by reference to records on file with the California Secretary of State.”); id. at 7 (“It 5 is undisputed that Plaintiffs did not contract with State Farm Mutual Auto. The Policy was issued 6 by State Farm General.”); Dkt. No. 23 at 2 (“The Policy Declarations page only includes one State 7 Farm entity -- State Farm General insurance Company.”). 8 This is not suited to a Rule 12(b)(6) motion, but the contention may be renewed down the 9 line as circumstances warrant. The request for judicial notice, Dkt. No. 11-1, is denied. The Court 10 did not consider those materials. 11 II. UCL CLAIM 12 The UCL claim will go forward. The UCL defines “unfair competition” to include “any 13 ‘unlawful, unfair, or fraudulent business act or practice.” Rosell v. Wells Fargo Bank, N.A., No. 14 12-cv-06321-JD, 2014 WL 4063050, at *5 (N.D. Cal. Aug. 15, 2014) (quoting Cal. Bus. & Prof. 15 Code § 17200). The statute’s “coverage is sweeping, embracing anything that can properly be 16 called a business practice and that at the same time is forbidden by law.” Cel-Tech Commc’ns, 17 Inc. v. Los Angeles Cellular Tel. Co., 973 P.2d 527, 539 (Cal. 1999) (quotation and citation 18 omitted). “By proscribing ‘any unlawful’ business practice, section 17200 ‘borrows’ violations of 19 other laws and treats them as unlawful practices that the unfair competition law makes 20 independently actionable.” Id. at 539-40 (quotation and citation omitted). Consequently, 21 “[c]onduct that is independently actionable under some other law can form the basis of a UCL 22 claim.” Jones v. Progressive Casualty Ins. Co., No. 16-cv-06941-JD, 2018 WL 4521919, at *3 23 (N.D. Cal. Sept. 19, 2018). The Denos’ UCL claim is predicated on their breach of contract, 24 breach of implied warranty, fraud, and negligent misrepresentation claims that State Farm 25 promised certain coverages under their homeowners’ insurance policy but “in fact had no intention 26 of paying these amounts in this and other similar loss events in California.” Dkt. No. 1 ¶ 51. 27 “That is enough under the UCL.” Jones, 2018 WL 4521919, at *4. 1 790.03, do not point to a different conclusion. See Dkt. No. 11 at 8. The UIPA defines a number 2 of unfair methods of competition and unfair and deceptive acts or practices in the business of 3 insurance. The statute does not grant a private right to sue, and the California Supreme Court has 4 cautioned against UIPA claims dressed in other robes. See Moradi-Shalal v. Fireman’s Fund Ins. 5 Cos., 758 P.2d 58, 68 (Cal. 1988); Zhang v. Super.
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 VINCE DENO, et al., Case No. 22-cv-00513-JD
7 Plaintiffs, ORDER RE MOTION TO DISMISS v. 8
9 STATE FARM GENERAL INSURANCE COMPANY, et al., 10 Defendants.
11 12 This insurance coverage dispute arises from a July 2020 fire that is said to have severely 13 damaged a historic San Francisco home owned by plaintiffs Vince Deno and Carla Deno. Dkt. 14 No. 1 ¶¶ 17, 19. The Denos says that State Farm General Insurance Company and State Farm 15 Mutual Automobile Insurance (State Farm) declined to pay the full amount of the Denos’ 16 homeowners’ insurance policy and refused to cover their additional living expenses under the 17 policy limits. Id. ¶¶ 20-32. The complaint alleges claims for: (i) breach of contract; (ii) breach of 18 the implied covenant of good faith and fair dealing; (iii) violation of California’s Unfair 19 Competition Law, Cal. Bus & Prof. Code § 17200, et seq.; (iv) fraud; (v) negligent 20 misrepresentation; and (vi) promissory estoppel. State Farm asks to dismiss State Farm Mutual 21 Automobile Insurance (State Farm Auto) on the grounds that State Farm Auto is not a party to the 22 Denos’ policy. Dkt. No. 11 at 5-7. State Farm also asks to dismiss the UCL, fraud, and negligent 23 misrepresentation claims under Federal Rules of Civil Procedure 12(b)(6) and 9(b). Id. at 8-11. 24 The parties’ familiarity with the record is assumed, and the motion to dismiss is denied in all 25 respects. 26 Rule 12(b)(6) is governed by well-established standards. See McLellan v. Fitbit, Inc., No. 27 3:16-CV-00036-JD, 2018 WL 2688781, at *1 (N.D. Cal. June 5, 2018). To meet the requirements 1 showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), on the basis of plausible and 2 non-conclusory allegations of facts, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A 3 claim is plausible on its face if, accepting all factual allegations as true and construing them in the 4 light most favorable to the plaintiff, the Court can reasonably infer that the defendant is liable for 5 the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plausibility analysis is 6 “context-specific” and not only invites but “requires the reviewing court to draw on its judicial 7 experience and common sense.” Id. at 679. 8 Because some of the claims here sound in fraud, Rule 9(b) also applies. Kearns v. Ford 9 Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Rule 9(b) requires that “a party must state with 10 particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). A “pleading 11 must identify the who, what, when, where, and how of the misconduct charged, as well as what is 12 false or misleading about the purportedly fraudulent statement, and why it is false.” United States 13 ex rel. Anita Silingo v. WellPoint, Inc., 904 F.3d 667, 677 (9th Cir. 2018) (internal quotation and 14 citation omitted); see also McLellan, 2018 WL 2688781, at *1. Conclusory allegations with no 15 “particularized supporting detail” are not sufficient. United States v. United Healthcare Ins. Co., 16 848 F.3d 1161, 1180 (9th Cir. 2016); McLellan, 2018 WL 2688781, at *1. 17 I. CLAIMS AGAINST STATE FARM AUTO 18 State Farm says that State Farm Auto should be dismissed because it was not a party to the 19 Denos’ insurance policy, and the complaint does not plausibly allege alter-ego liability. Dkt. No. 20 11 at 5-7. The complaint alleges that State Farm Auto is the parent of State Farm General, that 21 “each was the alter-ego of the other,” and that the State Farm entities jointly issued a homeowners’ 22 policy to the Denos. Dkt. No. 1 ¶¶ 6-7, 10, 18. The Denos did not attach the homeowners’ policy 23 to their complaint. 24 State Farm Auto will not be dismissed at this stage of the case. A motion to dismiss under 25 Rule 12(b)(6) is directed to the adequacy of the complaint as it is pleaded. It is rarely appropriate 26 to venture beyond what is alleged in or attached to the complaint itself. See, e.g., Perez v. Mortg. 27 Elec. Registration Sys., Inc., No. 3:17-cv-04880-JD, 2018 WL 3109599, at *1 (N.D. Cal. June 25, 1 19-cv-08255-JD, 2020 WL 5702111, at *4 (N.D. Cal. Sept. 24, 2020). State Farm relies on facts 2 outside the complaint. See, e.g., Dkt. No. 11 at 5 (“[T]he separate corporate existence of State 3 Farm General Insurance Company and State Farm Mutual Insurance Company is subject to 4 judicial notice by reference to records on file with the California Secretary of State.”); id. at 7 (“It 5 is undisputed that Plaintiffs did not contract with State Farm Mutual Auto. The Policy was issued 6 by State Farm General.”); Dkt. No. 23 at 2 (“The Policy Declarations page only includes one State 7 Farm entity -- State Farm General insurance Company.”). 8 This is not suited to a Rule 12(b)(6) motion, but the contention may be renewed down the 9 line as circumstances warrant. The request for judicial notice, Dkt. No. 11-1, is denied. The Court 10 did not consider those materials. 11 II. UCL CLAIM 12 The UCL claim will go forward. The UCL defines “unfair competition” to include “any 13 ‘unlawful, unfair, or fraudulent business act or practice.” Rosell v. Wells Fargo Bank, N.A., No. 14 12-cv-06321-JD, 2014 WL 4063050, at *5 (N.D. Cal. Aug. 15, 2014) (quoting Cal. Bus. & Prof. 15 Code § 17200). The statute’s “coverage is sweeping, embracing anything that can properly be 16 called a business practice and that at the same time is forbidden by law.” Cel-Tech Commc’ns, 17 Inc. v. Los Angeles Cellular Tel. Co., 973 P.2d 527, 539 (Cal. 1999) (quotation and citation 18 omitted). “By proscribing ‘any unlawful’ business practice, section 17200 ‘borrows’ violations of 19 other laws and treats them as unlawful practices that the unfair competition law makes 20 independently actionable.” Id. at 539-40 (quotation and citation omitted). Consequently, 21 “[c]onduct that is independently actionable under some other law can form the basis of a UCL 22 claim.” Jones v. Progressive Casualty Ins. Co., No. 16-cv-06941-JD, 2018 WL 4521919, at *3 23 (N.D. Cal. Sept. 19, 2018). The Denos’ UCL claim is predicated on their breach of contract, 24 breach of implied warranty, fraud, and negligent misrepresentation claims that State Farm 25 promised certain coverages under their homeowners’ insurance policy but “in fact had no intention 26 of paying these amounts in this and other similar loss events in California.” Dkt. No. 1 ¶ 51. 27 “That is enough under the UCL.” Jones, 2018 WL 4521919, at *4. 1 790.03, do not point to a different conclusion. See Dkt. No. 11 at 8. The UIPA defines a number 2 of unfair methods of competition and unfair and deceptive acts or practices in the business of 3 insurance. The statute does not grant a private right to sue, and the California Supreme Court has 4 cautioned against UIPA claims dressed in other robes. See Moradi-Shalal v. Fireman’s Fund Ins. 5 Cos., 758 P.2d 58, 68 (Cal. 1988); Zhang v. Super. Ct., 304 P.3d 163, 166 (Cal. 2013). 6 Nevertheless, claims “premised on fraud, breach of contract and breach of the implied covenant of 7 good faith and fair dealing” may proceed under the UCL even if the “alleged conduct also may 8 have violated the [UIPA].” Diaz v. First Am. Home Buyers Prot. Corp., 541 F. App’x 773, 775 9 (9th Cir. 2013) (citing Zhang, 304 P.3d at 177). The Denos’ UCL claim fits comfortably within 10 these parameters. See Dkt. No. 1 ¶ 51; Jones, 2018 WL 4521919, at *4. 11 State Farm also says that the UCL claim must fail because the Denos do not seek equitable 12 relief. Dkt. No. 11 at 8-9. It is true that UCL remedies “are generally limited to injunctive relief 13 and restitution.” Sharpe v. Puritan’s Pride, Inc., 466 F. Supp. 3d 1066, 1071 (N.D. Cal. 2020) 14 (quoting Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 943 (Cal. 2003)). But State 15 Farm points to no California or federal law that prohibits a plaintiff from pursuing equitable 16 claims in the alternative to legal remedies at the pleadings stage. Dkt. No. 11 at 8-9. In any event, 17 the complaint’s prayer for relief expressly seeks restitution, and the policy premiums the Denos 18 paid to State Farm are recoverable under the UCL. See Dkt. No. 1 at 19, ¶ 52; Sharpe, 466 F. 19 Supp. 3d. at 1071 (“The Court ‘may make such orders or judgments … as may be necessary to 20 restore to any person in interest any money or property, real or personal, which may have been 21 acquired by means of such unfair competition.’”) (quoting Cal. Bus. & Prof. Code § 17203). 22 III. FRAUD AND NEGLIGENT MISREPRESENTATION CLAIMS 23 The fraud and negligent misrepresentation claims will also go forward. State Farm argues 24 that the complaint does not sufficiently allege intent for the fraud claim. Dkt. No. 11 at 10. It 25 adds that, because the Denos allege fraud based on a false promise, they are precluded from 26 claiming that the same promise was a negligent misrepresentation. Id. at 11. 27 These points are not well taken. To start, Rule 8(d) expressly permits the Denos to plead 1 complaint plausibly pleads intent for both claims. 2 The elements of fraud under California law are (1) a misrepresentation (i.e., a false 3 representation, concealment, or nondisclosure), (2) scienter or knowledge of its falsity, (3) intent 4 to induce reliance, (4) justifiable reliance, and (5) resulting damage. Lazar v. Super. Ct., 909 P.2d 5 981, 984 (Cal. 1996); see also Cal. Civ. Code § 1709. Negligent misrepresentation requires (1) a 6 misrepresentation of a past or existing material fact, (2) made without reasonable ground for 7 believing it to be true, (3) intent to induce reliance, (4) justifiable reliance, and (5) resulting 8 damage. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Servs. Grp., Inc., 9 89 Cal. Rptr. 3d 473, 483 (Cal. Ct. App. 2009). Rule 9(b) provides that allegations of “[m]alice, 10 intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. 11 Civ. P. 9(b); see also Ashcroft, 556 U.S. at 686-87. 12 The complaint clearly sets out the who, what, where, when, and how of the alleged fraud 13 and negligent misrepresentation. It alleges that the Denos were advised by State Farm’s agent, 14 Casey Pughe, that under the additional living expenses benefits in their insurance policy, they 15 could purchase a new home and be reimbursed at the full fair market rental value of their fire- 16 damaged home (approximately $60,000 per month) for the period of the restoration, and that the 17 reimbursement could be put toward the purchase of a new home. Dkt. No. 1 ¶¶ 55, 58. The 18 complaint says the Denos reasonably relied on Pughe’s statements, purchased a house, and were 19 injured when State Farm paid only the fair market rental value of the new home (just $3,300 per 20 month). Id. ¶¶ 56-57, 59. 21 As for scienter and intent, the complaint says “State Farm knew or should have known that 22 the coverage position represented by Mr. Pughe was false and/or misleading, that the Denos would 23 reasonably rely on those misrepresentations and that State Farm would repudiate that coverage 24 position after the Denos purchased their new property. State Farm intended for the Denos to rely 25 on these misrepresentations in an effort to avoid paying the approximately $60,000 of monthly 26 ALE benefits to which the Denos were otherwise entitled under the Policy.” Id. ¶ 58. It further 27 alleges that “State Farm’s conduct was implemented with the intent to deceive [the Denos] and 1 misrepresentation claim, the complaint repeats the same factual allegations and adds that “[w]hen 2 || State Farm made these representations to the Denos, they intended the Denos to rely upon them 3 and the Denos did rely upon them to their detriment” and that “State Farm had no reasonable basis 4 || for believing that its representations regarding the Denos ALE coverage was true and/or would be 5 adhered to by State Farm.” Jd. {| 66. The scienter and intent allegations satisfy Rule 9(b) and are 6 || plausible in light of the other allegations that State Farm’s business model creates incentives to 7 minimize and underpay homeowners’ insurance claims. Jd. 13-16. 8 The complaint provides State Farm with ample “notice of the particular misconduct which 9 is alleged to constitute the fraud charged so that they can defend against the charge and not just 10 || deny that they have done anything wrong.” McDonald vy. Kiloo ApS, 385 F. Supp. 3d 1022, 1039 11 (N.D. Cal. 2019) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). That is 12 all that Rule 9(b) requires. /d. (citing Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 990 (9th 13 Cir. 2008)); see also McLellan, 2018 WL 2688781, at *1 (“The touchstone of Rule 9(b) is 14 || notice.”). 15 || Iv. PUNITIVE DAMAGES 16 State Farm’s last argument is that the Denos have not alleged the necessary elements for 3 17 punitive damages. See Dkt. No. 11 at 11-17. Punitive damages are a remedy, and the question is 18 deferred until an adequate record is available to the Court with respect to the grounds for enhanced 19 damages. 20 IT IS SO ORDERED. 21 Dated: September 8, 2022 22 23 JAMEYPONATO 24 UnitedfStates District Judge 25 26 27 28