HM Hotel Properties v. Peerless Indemnity Insurance Company et al
Filing
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ORDER granting 8 Motion to Dismiss for Failure to State a Claim. Signed by Judge David G Campbell on 6/18/2012.(NVO)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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HM Hotel Properties, an Arizona Limited
Liability Company,
ORDER
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No. CV12-0548 PHX-DGC
Plaintiff,
vs.
Peerless Indemnity Insurance Company;
and Does 1 - 50, inclusive,
Defendants.
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Defendant Peerless Indemnity Insurance Company (“Peerless”), formerly known
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as Colorado Casualty Insurance Company, moves to dismiss claims three through seven
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of Plaintiff HM Hotel Properties’ complaint for failure to state claims pursuant to
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Rule 12(b)(6). Doc. 8. Plaintiff has responded, Defendant has replied, and the parties
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have not requested oral argument. Docs. 13, 14. For the reasons stated below, the Court
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will grant the motion.
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I.
Background.
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This action was originally commenced in the Superior Court for Maricopa County.
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Doc. 3. Defendant removed the case to this Court. Doc. 3. The complaint alleges the
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following facts, which are assumed true for purposes of the motion.
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Plaintiff entered into an insurance contract with Defendant. Doc. 1 ¶ 7. Plaintiff
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paid Defendant an annual premium in exchange for coverage of its properties against
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damage caused by storms, including hail and wind. Doc. 1 ¶ 8. At all relevant times, the
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Plaintiff’s insurance policy was in effect.
Doc. 1 ¶ 12.
In selling and collecting
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premiums under the policy, Defendant represented to the Plaintiff that it would provide
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full and comprehensive coverage for storm damage in accordance with the policy terms.
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Doc. 1 ¶ 10.
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On or about October 5, 2010, high winds and hail severely damaged Plaintiff’s
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property, including damage to roofs, siding, and other components. Doc. 1 ¶¶ 14-15. On
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or about May 11, 2011, Plaintiff filed a claim for this storm-related damage. Doc. 1 ¶ 16.
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On or about May 17, 2011, an engineering company, retained by Defendant to inspect the
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property, reported only minimal wind and hail damage, leading to Defendant’s offer to
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settle the claim for $0. Doc. 1 ¶ 17. On or about November 14, 2011, after Plaintiff
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retained counsel, Defendant used Absolute Adjusting to perform another inspection.
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Doc. 1 ¶ 18. Based on that damage report, Defendant sent a check to Plaintiff’s counsel
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for $39,587.41, after depreciation. Doc. 1 ¶ 19.
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Plaintiff alleges seven counts: (1) breach of contract; (2) breach of the implied
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covenant of good faith and fair dealing; (3) intentional infliction of emotional distress;
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(4) negligent infliction of emotional distress; (5) fraud; (6) negligent misrepresentation;
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and (7) declaratory relief.
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II.
Legal Standard.
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When analyzing a complaint for failure to state a claim to relief under
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Rule 12(b)(6), the well-pled factual allegations “‘are taken as true and construed in the
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light most favorable to the nonmoving party.’” Cousins v. Lockyer, 568 F.3d 1063, 1067
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(9th Cir. 2009) (citation omitted). Legal conclusions couched as factual allegations “are
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not entitled to the assumption of truth,” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009),
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and therefore “‘are insufficient to defeat a motion to dismiss for failure to state a claim,’”
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In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010) (citation omitted). To avoid
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a Rule 12(b)(6) dismissal, the complaint must plead “enough facts to state a claim to
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relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
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This plausibility standard “is not akin to a ‘probability requirement,’ but it asks for more
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than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 129 S. Ct. at 1949
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(quoting Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the
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court to infer more than the mere possibility of misconduct, the complaint has alleged –
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but it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’” Id. at 1950 (quoting
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Fed. R. Civ. P. 8(a)(2)).
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The court may not assume that Plaintiff can prove facts different from those
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alleged in the complaint. See Associated Gen. Contractors of Cal. v. Cal. State Council
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of Carpenters, 459 U.S. 519, 526 (1983); Jack Russell Terrier Network of N. Cal. v. Am.
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Kennel Club, Inc., 407 F.3d 1027, 1035 (9th Cir. 2005).
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allegations of law and unwarranted inferences are not sufficient to defeat a motion to
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dismiss.” Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998); see also Iqbal, 129
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S. Ct. at 1949 (“Threadbare recitals of the elements of a cause of action, supported by
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mere conclusory statements, do not suffice.”) (citation omitted). “Rule 8 marks a notable
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and generous departure from the hyper-technical, code-pleading regime of a prior era, but
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it does not unlock the doors of discovery for a plaintiff armed with nothing more than
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conclusions.” Iqbal, 129 S. Ct. at 1950.
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III.
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Similarly, “conclusory
Analysis.
A.
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Counts 3 & 4 – Intentional & Negligent Infliction of Emotional
Distress.
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1.
Corporate Entity’s Capacity for Emotional Distress.
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A plaintiff alleging intentional infliction of emotional distress in Arizona must
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demonstrate three elements: (1) the defendant’s conduct was extreme and outrageous;
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(2) the defendant intended to cause emotional distress or “recklessly disregarded the near
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certainty” that his conduct would produce such distress; and (3) the defendant’s conduct
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actually caused severe emotional distress. Bodett v. Coxcom, Inc., 366 F.3d 736, 746 (9th
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Cir. 2004); Ford v. Revlon, 153 Ariz. 38, 734 P.2d 580, 585 (1987). Negligent infliction
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of emotional distress requires an additional showing of physical injury or “substantial,
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long-term emotional disturbances.” See Pierce v. Casas Adobes Baptist Church, 162
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Ariz. 269, 272, 782 P.2d 1162 (Ariz. 1989); Monaco v. HealthPartners of S. Arizona, 196
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Ariz. 299, 303, 995 P.2d 735 (Ariz. Ct. App. 1999).
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Plaintiff – a limited liability company – alleges it suffered extreme emotional
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distress and mental suffering resulting from Defendant’s breach of a material term in the
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insurance policy to provide Plaintiff coverage for hail and wind damage. Doc 1 ¶¶ 37-39.
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Defendant contends that, as a limited liability company, Plaintiff is incapable of emotion
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and therefore also incapable of suffering. Doc. 8 at 5. The issue of whether corporations
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or limited liability companies can recover damages for intentional infliction emotion
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distress (“IIED”) is one of first impression in Arizona.
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When confronted with an issue of first impression, Arizona courts look to
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decisions from other jurisdictions that have considered the issue. See, e.g., Midas Muffler
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Shop v. Ellison, 650 P.2d 496, 499 (Ariz. Ct. App. 1982) (stating that because tort of
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IIED in debtor-creditor situation was issue of first impression in Arizona, “an
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examination of decisions from other jurisdictions which have considered the precise
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question . . . is instructive”); Pankratz v. Willis, 744 P.2d 1182, 1189 (Ariz. Ct. App.
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1987) (relying on cases from other jurisdictions “that have squarely faced the issue” and
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concluding that unilateral separation of child from parent can be extreme and outrageous
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conduct); Edwards v. American Home Assurance Co., 361 F.2d 622, 625-26 (9th Cir.
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1966) (stating that because there appeared to be no Arizona case precisely on issue,
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“cases from other jurisdictions which have considered related problems may provide
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some guidelines, as they would to an Arizona court considering for the first time the
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problem here presented”); Cretens v. State Farm Fire & Cas. Co., 60 F. Supp.2d 982,
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987 (D. Ariz. 1999) (finding that New Jersey law on issue in question was persuasive
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authority and citing Takahashi v. Loomis Armored Car Serv., 625 F.2d 314, 316 (9th Cir.
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1980) for proposition that, in absence of controlling state law, federal court may look to
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well-reasoned decisions from other jurisdictions).
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Multiple federal courts, each applying state law, have found that a corporate
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plaintiff cannot suffer emotional distress because “a corporation lacks the cognizant
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ability to experience emotions.” FDIC v. Hulsley, 22 F.3d 1472, 1489 (10th Cir. 1994)
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(applying Oklahoma law); see, e.g., Nicor Intern. Corp. v. El Paso Corp., 292 F.Supp.2d
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1357, 1378 (S.D. Fla. 2003) (“corporation is incapable of suffering any emotional
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distress”); Earth Scientists (Petro Services) Ltd. v. U.S. Fidelity & Guar. Co., 619 F.
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Supp. 1465, 1474 (D. Kan. 1985) (holding corporations could not recover for the tort of
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outrage based on inability to suffer emotionally); Wilson v. Colonial Penn Life Ins. Co.,
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454 F. Supp. 1208, 1213 n.9 (D. Minn. 1978) (applying Minnesota law to bad faith and
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IIED claims) (“Certainly, the plaintiff National City Bank of Minneapolis is incapable of
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suffering emotional distress.”).
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Plaintiff cites no authority to contradict Defendant’s position or support its own.
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Absent Arizona precedent extending emotional distress damages to corporate entities, the
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Court declines to do so and adopts the general rule, recognized by the above cited cases.
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Plaintiff suggests that a distinction should be made between limited liability
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companies and corporations. Doc. 13 at 4. The courts which have addressed this issue,
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however, have not distinguished between the two types of entities. Interphase Garment
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Solutions, LLC v. Fox Television Stations, INC., 566 F. Supp.2d 460, 466
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(D. Md. 2008) (LLC cannot claim IIED) (citing Husley, 22 F.3d at 1489); Barreca v.
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Nickolas, 683 N.W.2d 111, 124 (Iowa 2004) (“as a limited liability company, certainly
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cannot suffer emotional distress; such would stretch the bounds of the legal fiction of
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corporate personhood too far”).
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The Court concludes that Plaintiff has failed to state a claim for intentional or
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negligent infliction of emotional distress because, as a corporate entity, it cannot
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experience emotional distress.
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2.
Request to Amend Complaint.
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Plaintiff requests leave to amend its complaint to join individual members of the limited
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liability company as additional plaintiffs in the event the Court finds that a limited
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liability company cannot seek damages for emotional distress.
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Defendant correctly asserts that Plaintiff’s request does not comply with LRCiv 15.1
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because it fails to attach a copy of the proposed amended pleading. The request for leave
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Doc. 14 at 4-5.
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to amend is denied.
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C.
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Defendant contends that the fraud and negligent misrepresentation claims are not
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pled with sufficient particularity. Rule 9(b) requires a party alleging fraud to “state with
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particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The
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complaint “must state the time, place, and specific content of the false representations as
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well as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v.
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Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986) (citations omitted). A
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complaint of fraud must specify “the who, what, when, where, and how” of the alleged
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Counts 5 & 6 – Fraud & Negligent Misrepresentation.
misconduct. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003).
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Fraud.
Plaintiff’s fraud claim fails for lack of particularity.
While Plaintiff alleges
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generally that “Defendant made numerous misrepresentations to Plaintiff, both orally and
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in writing,” Plaintiff’s complaint does not provide the dates, speaker, or content of the
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misrepresentations. Doc. 1 ¶ 45. Plaintiff correctly states the law as it regards the
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availability of a fraud claim when a promise is made with no intent to perform,
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Doc. 1 at 6 (citing Caldwell v. Tilford, 90 Ariz. 202, 205, 367 P.2d 239, 241 (1961)), but
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the complaint lacks specific facts to support that allegation.
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2.
Negligent Misrepresentation.
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The Rule 9(b) standard also applies to negligent misrepresentation. Gould v.
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Marshall & Isley Bank, No. CV11–1299–PHX–DGC. 2012 WL 827115, at *5 n.2
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(D. Ariz. March 12, 2012) (citing Sweeney v. Darricarrere, No. 2:09–cv–00266 JWS,
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2009 WL 2132696, at * 12 n. 109 (D. Ariz. July 14, 2009) (“It is well established in the
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Ninth Circuit that both claims for fraud and negligent misrepresentation must meet Rule
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9(b)’s particularity requirements.”) (quoting Neilson v. Union Bank of Cal., N.A., 290
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F.Supp.2d 1101, 1141 (C.D.Cal.2003) (internal quotations omitted)).
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Plaintiff’s negligent misrepresentation allegation likewise fails to meet the
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particularity standard of Rule 9(b). The complaint states only legal conclusions regarding
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“false representations as to past and present material facts.” Doc. 1 ¶ 50-54. The “who,
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what, when, where, and how” of the misrepresentations are not provided. Vess, 317 F.3d
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at 1106.
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D.
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The United States Supreme Court has “repeatedly characterized the Declaratory
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Judgment Act as ‘an enabling Act, which confers a discretion on the courts rather than an
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absolute right upon the litigant.’” Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)
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(quoting Public Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952)); see also
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Green v. Mansour, 474 U.S. 64, 72 (1985); Cardinal Chemical Co. v. Morton Int’l, Inc.,
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508 U.S. 83, 95 n.17 (1993). “[W]hen deciding whether to hear claims under the
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Declaratory Judgment Act, district courts should ‘avoid needless determination of state
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law issues’ and ‘should avoid duplicative litigation.’” Madrid v. Concho Elementary
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School Dist. No. 6 of Apache County, 439 Fed. App’x 566, 567 (9th Cir. 2011) (quoting
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Am. Cas. Co. of Reading, Pa. v. Krieger, 181 F.3d 113, 1118 (9th Cir. 1999). Further,
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when the claim is merely a derivative of the included contract claim, the district court
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may read the declaratory relief claim as part of the breach of contract claim. Id.
Count 7 – Declaratory Relief.
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Here, as in Madrid, the declaratory judgment claim is nothing more than a
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duplication of the breach of contract claim contained in count one of the Complaint.
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Doc. 1 ¶ 1-31. The claim is therefore dismissed as duplicative.
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IT IS ORDERED that Defendant’s motion to dismiss (Doc. 8) is granted as
stated above.
Dated this 18th day of June, 2012.
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