Pet Food Express Ltd. v. Applied Underwriters Inc. et al

Filing 65

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 10/17/2017 re 61 Defendants' Motion to Dismiss: IT IS ORDERED that defendants' motion to dismiss plaintiffs' complaints be, and the same hereby is, GRANTED as to plaintiffs' RICO claims; GRANTED as to plaintiffs' attempts to invalidate the RPA on the theory that defendants violated Insurance Code section 11735; and DENIED in all other respects. (Kirksey Smith, K)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 12 13 ----oo0oo---SHASTA LINEN SUPPLY, INC., on CIV. NO. 2:16-00158 WBS AC behalf of themselves and all others similarly situated, Plaintiffs, 14 15 16 17 18 v. APPLIED UNDERWRITERS, INC.; APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC.; CALIFORNIA INSURANCE COMPANY; and APPLIED RISK SERVICES, INC., 19 Defendants. 20 21 22 23 PET FOOD EXPRESS LTD., and ALPHA POLISHING, INC. d/b/a GENERAL PLATING CO., on behalf of themselves and all others similarly situated, 24 25 26 27 28 Plaintiffs, CIV. NO. 2:16-01211 WBS AC MEMORANDUM AND ORDER RE: DEFENDANTS’ MOTION TO DISMISS v. APPLIED UNDERWRITERS, INC.; APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC.; CALIFORNIA INSURANCE COMPANY; 1 1 2 and APPLIED RISK SERVICES, INC., Defendants. 3 4 ----oo0oo---- 5 6 Plaintiffs Shasta Linen Supply, (“Shasta”); Pet Food 7 Express, Ltd. (“Pet Food”); and Alpha Polishing1 (collectively 8 “plaintiffs”) initiated these actions2 against Applied 9 Underwriters Inc. (“AU”); Applied Underwriters Captive Risk 10 Assurance Company, Inc. (“AUCRA”); Applied Risk Services, Inc. 11 (“ARS”); and California Insurance Company, Inc. (“CIC”) 12 (collectively “defendants”)3 alleging that defendants 13 fraudulently marketed and sold a workers’ compensation insurance 14 program to them and other employers in violation of California 15 and federal law. 16 dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). 17 (Defs.’ Mot. to Dismiss (Docket No. 62).) 18 I. Factual and Procedural Background 19 20 Before the court is defendants’ Motion to California requires that all employers purchase workers’ compensation insurance coverage for employees that 21 22 23 1 The amended complaint in the Pet Food action added Alpha Polishing, Inc., as a new plaintiff. 2 24 25 26 27 28 On July 6, 2017, the court entered an order consolidating the actions for pre-trial purposes. (Shasta Docket 2:16-158 No. 59; Pet Food Docket 2:16-1211 No. 58.) 3 AU is the parent company of AUCRA and ARS, and controls CIC through another subsidiary. (SSAC ¶ 8, Ex. A, Ins. Comm’r’s June 20 Decision & Order (“Comm’r’s Order”) at 9-10 (Shasta Docket No. 56-1). 2 1 suffer injury or death due to an occupational accident. 2 Second Amended Compl. (“SSAC”) ¶ 3 (Shasta Docket No. 56); Pet 3 Food Amended Compl. (“PFAC”) ¶ 3 (Pet Food Docket No. 54).) 4 California Insurance Code also requires that all workers’ 5 compensation insurance policy forms, rates, and rating plans be 6 filed for approval with the California Workers Compensation 7 Insurance Rating Bureau (“the Bureau”) and approved by the 8 California Department of Insurance. 9 also California Insurance Code §§ 11658, 11735.) 10 (Shasta The (SSAC ¶ 22; PFAC ¶ 23; see Defendants allegedly marketed and sold a workers’ 11 compensation insurance program under the names EquityComp and 12 SolutionOne (collectively “the program”) to plaintiffs and other 13 California employers. 14 this policy with the Bureau and got approval from the Department 15 of Insurance. 16 policies took effect for the plaintiffs, defendants allegedly 17 required plaintiffs to sign a Reinsurance Participation Agreement 18 (“RPA”). 19 (SSAC ¶ 29; PFAC ¶ 30.) (SSAC ¶ 30; PFAC ¶ 31.) Defendants filed After the program’s (SSAC ¶¶ 28, 43; PFAC ¶¶ 29, 44.) Plaintiffs allege that the RPA modified the terms of 20 the existing insurance policies, including the rates, causing 21 plaintiffs to incur significantly higher costs for the insurance 22 program than defendants had marketed. 23 Plaintiffs claim that defendants used the RPA to charge excessive 24 rates and additional fees to plaintiffs and other program 25 participants. 26 deliberately misrepresented the costs of the program in their 27 marketing materials to induce plaintiffs to rely on those costs 28 and enter the program. (SSAC ¶ 70; PFAC ¶ 74.) Plaintiffs also allege that defendants (SSAC ¶¶ 2, 5, 7; PFAC ¶¶ 2, 5, 7.) 3 1 Additionally, plaintiffs claim that the RPA’s rates are 2 void because, among other things, defendants did not file the 3 rates with the Commissioner of the California Department of 4 Insurance (“the Commissioner”) as required by California 5 Insurance Code § 11735.4 6 concede the RPA was not filed or approved by the Department of 7 Insurance prior to its use. 8 9 (SSAC ¶ 38; PFAC ¶ 39.) Defendants (SSAC ¶¶ 28, 34; PFAC ¶¶ 29, 35.) On August 29, 2014, Shasta filed an administrative appeal with the California Department of Insurance, challenging, 10 among other things, the legality of the RPA. 11 Comm’r’s Order.) 12 of law because defendants did not file the RPA with the 13 Commissioner thirty days prior to when it was to take effect, as 14 required by § 11735. 15 (SSAC ¶ 8, Ex. A, Shasta argued that the RPA was void as a matter (Id. at 2.) On January 26, 2016, Shasta brought an action in this 16 court alleging fraud and unfair competition against defendants 17 for their marketing and sale of the insurance program and RPA. 18 (Shasta Compl. (Shasta Docket No. 1).) 19 Shasta again argued that the RPA was void because defendants did 20 not file it with the Commissioner prior to it taking effect, 21 thereby violating § 11735. 22 billing plaintiff under the void RPA constituted fraud and was an 23 unfair business practice. 24 dismiss the complaint to the extent it relied on § 11735, arguing 25 that a rate is legal unless and until the Commissioner holds a 26 hearing and disapproves the rate, pursuant to § 11737. 27 28 4 (Id. ¶ 3.) (Id. ¶ 4.) With respect to the RPA, Shasta argued that Defendants moved to (Defs.’ All statutes referenced are from the California Insurance Code unless stated otherwise. 4 1 2 June 13, 2016 Mot. to Dismiss at 6 (Shasta Docket No. 17).) On June 20, 2016, the court granted defendants’ motion 3 to dismiss to the extent Shasta relied on § 11735, stating that 4 “a rate that has not been filed as required by § 11735 is not an 5 unlawful rate unless and until the Commissioner conducts a 6 hearing and disapproves the rate.” 7 20 Order”) at 4 (Shasta Docket No. 30).) 8 alleged that the Commissioner had held a hearing and disapproved 9 the RPA, the court concluded that plaintiff did not plausibly 10 11 allege that the RPA was void. (June 20, 2016 Order (“June Because Shasta had not (Id.) On the same day as the court’s order of dismissal, the 12 Commissioner issued a Decision and Order in Shasta’s 13 administrative case, holding that the RPA must be filed and 14 approved by the Commissioner pursuant to § 11735 before use. 15 (SSAC ¶ 8, Ex. A, Comm’r’s Order.) 16 file the RPA before it took effect, the Commissioner stated, the 17 “RPA is void as a matter of law.” 18 Commissioner’s Order, Shasta filed a motion for reconsideration 19 of the June 20 Order granting the motion to dismiss. 20 Docket No. 33.) 21 reconsideration, holding that the Commissioner’s Order did not 22 control this court and that the court’s previous June 20 Order 23 was not clearly erroneous. 24 (Shasta Docket No. 47).) 25 Because defendants did not (Id.) Based on the (Shasta The court denied Shasta’s motion for (Mem. and Order Re: Mot. for Recons. Pet Food filed a separate class action against 26 defendants in state court asserting claims for unfair 27 competition, rescission, declaratory relief, and fraud. 28 action was removed to federal court on March 29, 2016. 5 The (Pet Food 1 Docket No. 1.) 2 to dismiss the Pet Food complaint to the extent it sought to 3 invalidate the RPA on the ground that it is an unfiled rate or 4 rating plan in violation of § 11735. 5 The court denied defendants’ motion to dismiss as moot because 6 Pet Foot’s complaint did not rely on § 11735. 7 Dismiss (Pet Food Docket No. 35).) 8 9 Defendants, as they had in the Shasta case, moved (Pet Food Docket No. 15.) (Order Re: Mot. to On June 21, 2017, the plaintiffs in both actions filed amended complaints that are nearly identical. The complaints 10 assert claims under the federal Racketeer Influence Corrupt 11 Organizations (“RICO”) statue, 18 U.S.C. § 1962; under the 12 California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code 13 § 17200; and for unjust enrichment. 14 II. Legal Standard 15 On a Rule 12(b)(6) motion, the inquiry before the court 16 is whether, accepting the allegations in the complaint as true 17 and drawing all reasonable inferences in the plaintiff’s favor, 18 the plaintiff has stated a claim to relief that is plausible on 19 its face. 20 plausibility standard is not akin to a ‘probability requirement,’ 21 but it asks for more than a sheer possibility that a defendant 22 has acted unlawfully.” 23 when the plaintiff pleads factual content that allows the court 24 to draw the reasonable inference that the defendant is liable for 25 the misconduct alleged.” 26 pleaded complaint may proceed even if it strikes a savvy judge 27 that actual proof of those facts is improbable.” 28 v. Twombly, 550 U.S. 544, 556 (2007). See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Id. Id. “The “A claim has facial plausibility Under this standard, “a well- 6 Bell Atl. Corp. 1 2 III. Discussion A. 3 Racketeer Influenced and Corrupt Organizations Claim To state a RICO claim, plaintiffs must allege (1) the 4 conduct of (2) an enterprise that affects interstate commerce (3) 5 through a pattern (4) of racketeering activity or collection of 6 unlawful debt. 7 must be the proximate cause of harm to the victim. Holmes v. 8 Sec. Inv’r Prot. Corp., 503 U.S. 258, 268 (1992). Defendants’ 9 motion only challenges whether the complaints (1) sufficiently 10 plead an enterprise and (2) allege a specific intent to defraud 11 as required to plead mail and wire fraud as “racketeering 12 activity.” 18 U.S.C. § 1962(c). In addition, the conduct 13 1. Enterprise 14 Pursuant to RICO, it is “unlawful for any person 15 employed by or associated with any enterprise engaged in. . . 16 interstate or foreign commerce, to conduct or participate, 17 directly or indirectly, in the conduct of such enterprise’s 18 affairs through a pattern of racketeering activity.” 19 1962(c). 20 partnership, corporation, association, or other legal entity, and 21 any union or group of individuals associated in fact although not 22 a legal entity.” 23 of persons associated together for a common purpose of engaging 24 in a course of conduct.” 25 576, 583 (1981). 26 18 U.S.C. § An “enterprise” is defined as “any individual, 18 U.S.C. § 1961(4). It may include “a group United States v. Turkette, 452 U.S. To establish liability under § 1962(c), the plaintiff 27 “must allege and prove the existence of two distinct entities: 28 (1) a ‘person’; and (2) an ‘enterprise’ that is not simply the 7 1 same ‘person’ referred to by a different name.” 2 Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). 3 define their enterprise, known as the AU RPA Enterprise, as an 4 “association-in-fact.” 5 AU RPA Enterprise, as pled, satisfies the elements of an 6 associated-in-fact enterprise, but instead question whether 7 plaintiffs have been able to sufficiently allege distinctiveness 8 between the RICO persons and the enterprise. 9 Cedric Kushner Plaintiffs Defendants do not challenge whether the The “enterprise” at issue consists of the four 10 corporate defendants themselves and five individuals associated 11 with those companies. 12 name all members of an associated-in-fact enterprise as 13 individual RICO persons, River City Mkts., Inc. v. Fleming Foods 14 W., Inc., 960 F.2d 1458, 1461–62 (9th Cir. 1992), but must 15 establish that those individual members are “separate and 16 distinct” from the enterprise they collectively form, Living 17 Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F. 3d 353, 361 18 (9th Cir. 2005). 19 (SSAC ¶ 73; PFAC ¶ 77.) A plaintiff may Defendants argue that the companies are essentially 20 indistinguishable from one another, and thus they cannot form an 21 enterprise that is distinct from the corporations themselves. 22 (Defs.’ Mem. of P. & A. at 17.) 23 corporations are named as defendants and RICO persons does not 24 necessarily mean that a distinct RICO enterprise has not been 25 alleged. 26 for the purpose of conducting the affairs of the AU RPA 27 Enterprise, thereby creating an enterprise that exists separately 28 from the businesses of the four companies. However, that the four Plaintiffs allege that the corporations came together 8 (Pls.’ Mem. of P. & 1 2 A. at 16.) The Ninth Circuit has indicated that an enterprise 3 consisting of related but legally distinct entities likely does 4 satisfy the distinctiveness requirement. 5 Corp., 978 F. 2d 1529, 1534 (9th Cir. 1992) (when determining 6 whether these entities are distinct, “the only important thing is 7 that [the enterprise] be either formally. . . or practically. . . 8 separable from the individual.” 9 while the companies may not be practically separate, they have 10 11 Sever v. Alaska Pulp (citations omitted)). Here, maintained their formal, legal separation. However, the Ninth Circuit has not explicitly addressed 12 whether legal separation is sufficient to satisfy the 13 distinctiveness requirement, and district courts within the 14 circuit remain split on the question of what is required to show 15 distinctness. 16 separation of the defendant entities satisfies the RICO 17 distinctiveness requirement.” 18 Civ. No. 2:13-8833 CAS, WL 93363, at *7 (C.D. Cal. Jan. 5, 2015); 19 see also Monterey Bay Military Hous., LLC v. Pinnacle Monterey 20 LLC, 116 F. Supp. 3d 1010, 1046 (N.D. Cal. 2015), order vacated 21 in part on reconsideration on other grounds, Civ. No. 14-3953 22 BLF, WL 4624678 (N.D. Cal. Aug. 3, 2015) (“Defendants cannot shed 23 their other corporate distinctions when it suits them, 24 particularly where it is alleged that the separate corporate 25 entities were critical in carrying out the racketeering 26 activity.”); Negrete v. Allianz Life Ins. Co. of N. Am., 926 F. 27 Supp. 2d 1143, 1151 (C.D. Cal. 2013) (finding that the “formal 28 separation [of parent and subsidiary companies] is alone Some courts conclude that “the formal, legal Waldrup v. Countrywide Fin. Corp., 9 1 sufficient to support a finding of distinctiveness”). 2 require “something more” than mere legal distinctiveness, like 3 different or uniquely significant roles in the enterprise. 4 e.g., In re Countrywide Fin. Corp. Mortg. Mktg. & Sales Practices 5 Litig., 601 F. Supp. 2d 1201 (S.D. Cal. 2009). 6 Others See, Here, plaintiffs have plausibly pled that each 7 subsidiary had a distinct role in the enterprise.5 8 78; PFAC ¶ 77-82.) 9 for the program that itself articulates how operating through (SSAC ¶ 73- Additionally, defendants received a patent 10 separate companies facilitated the AU Program scheme. 11 37, Ex. E, “Reinsurance Participation Plan,” Patent No. 7,908,157 12 B1 (Docket No. 54-5).)6 13 is not sufficient, the plaintiffs have been able to plead that 14 each of the four corporate entities played a unique role in the 15 enterprise, thus satisfying the “something more” standard. 16 17 (SSAC ¶ Accordingly, even if legal separateness Defendants further argue that an enterprise must be not only different than the “persons” alleged to have committed the 18 19 20 21 22 23 24 25 26 27 28 5 In the complaints, plaintiffs state that “[d]efendants’ decision to sell the illegal workers’ compensation insurance Program as separate corporate forms, and via the AU RPA Enterprise rather than through divisions of AU, facilitated and made possible the unlawful activity because separating the regulatory approval of the GC policies filed by CIC from the rest of the AU Program, including the RPA, enabled AU to circumvent the necessary regulatory checks-and-balances needed in comprehensive state workers’ compensation systems. . . .It also enabled Defendants to trick employers as to the legality of the Program being offered.” (SSAC ¶¶ 77-78; PFAC ¶¶ 81-82.) 6 The court may consider the patent because plaintiffs attached it to their complaint. See Lee v. City of Los Angeles, 250 F. 3d 668, 689 (9th Cir. 2001)(stating that a court may consider material which is properly submitted as part of the complaint). 10 1 RICO violation, but also different than the conduct that makes up 2 the alleged pattern of racketeering activity. 3 Circuit has rejected the latter requirement. 4 Microsoft Corp., 486 F. 3d 547, 549 (9th Cir. 2007) (rejecting 5 the obligation for a separate structure distinct from the 6 racketeering activity). 7 the distinctiveness requirement. However, the Ninth See, e.g., Odom v. Accordingly, plaintiffs have satisfied 8 2. Racketeering Activity 9 Racketeering activity is any act indictable under the 10 several provisions of Title 18 of the United States Code, 11 including the predicate acts alleged by plaintiffs in this case: 12 mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343. 13 Cohen v. Trump, Civ. No. 10-940 GPC WVG, WL 690513, at *3 (S.D. 14 Cal. Feb. 21, 2014). 15 are: (1) the existence of a scheme to defraud; (2) the use of the 16 mails or wires to further the scheme; and (3) a specific intent 17 to defraud. 18 751 F. 3d 990, 998 (9th Cir. 2014). 19 specific intent to deceive or defraud only needs to be alleged 20 generally. 21 factual circumstances of the fraud itself must be alleged with 22 particularity, the state of mind--or scienter--of the defendants 23 may be alleged generally”). 24 plaintiffs must first prove “the existence of a scheme which was 25 reasonably calculated to deceive persons of ordinary prudence and 26 comprehension,” and then, “by examining the scheme itself” the 27 court may infer defendants’ specific intent to defraud. The elements of mail fraud or wire fraud Eclectic Props. E., LLC v. Marcus & Millichap Co., The third requirement of a Odom, 486 F. 3d at 554 (explaining that “while the To satisfy this requirement, 28 11 United 1 States v. Green, 745 F. 2d 1205, 1207 (9th Cir. 1984) (citations 2 omitted). 3 Here, plaintiffs allege that defendants developed a 4 scheme to conceal the true nature of the insurance program from 5 regulators so that defendants could burden employers, like the 6 plaintiffs, with oppressive and unconscionable terms. 7 PFAC ¶ 6.) 8 the plaintiffs into believing the program was legal, and 9 deceptively failed to explain how the program operated. 10 (SSAC ¶ 6; The complaints further allege that defendants misled (SSAC ¶¶ 42-55; PFAC ¶¶ 43-56.) 11 However, plaintiffs concede that defendants disclosed 12 in program documents that the RPA was not a filed retrospective 13 rating plan, and detailed how the profit sharing program would 14 work. 15 described in detail, in a publicly available patent, how the 16 program would operate. 17 even gone as far as to patent their planned methodology.” 18 ¶ 36; PFAC ¶ 37.) 19 (SSAC ¶ 52; PFAC ¶ 53.) Additionally, defendants As plaintiffs explain, “[d]efendants have (SSAC Moreover, while the RPA was never officially filed with 20 the Department of Insurance, it does appear that the Department 21 was aware of the RPA’s existence. 22 Department explained that, 23 24 25 26 27 28 In its 2013 report, the The EquityComp product is sold with an accompanying Profit Sharing Plan through the Company’s affiliate, Applied Underwriters Captive Risk Assurance, Company, Inc. (AUCRA). AUCRA then enters into a Reinsurance Participation Agreement with the insured in order to form a segregated protective cell by which the insured shares in a portion of the premiums and losses between the Company and the insured protected cell. 12 1 (Defs.’ Req. for Judicial Notice in Supp. of Mot. to 2 Dismiss, Ex. 9 (Docket No. 61-1).)7 3 infer that defendants actively concealed the structure of the 4 insurance program or the existence of the RPA from regulators, 5 plaintiffs, or the public generally. 6 plausible 7 alternative explanation” for the behavior. 8 679. is that 9 defendants simply did not think the RPA needed to be filed. This if Here, the the allegations “obvious why An intent to defraud is not give rise alternative defendants to an “obviously Iqbal, 556 U.S. at explanation” 10 explanation 11 insurance program’s structure and the existence of the RPA in 12 documents that were provided to plaintiffs and in a publicly 13 available patent, and yet did not file the RPA. 14 clarifies From this, the court cannot explicitly described the The Ninth Circuit has explained that “defendants’ 15 provision of adverse information to the public by way of 16 disclosures negates an inference that they acted with an intent 17 to defraud.” 18 1425 (9th Cir. 1994)(citations omitted). 19 fact knew that the RPA needed to be filed, then publicly 20 disclosing the fact that it was unfiled would constitute adverse 21 information. 22 regarding the RPA, including that fact that it was not filed, 23 both directly with plaintiffs and in a publicly available patent, 24 they have been able to refute any inference of fraud. 25 26 27 28 7 In re Worlds of Wonder Sec. Litig., 35 F. 3d 1407, Here, if defendants in Thus, because defendants shared information The court takes judicial notice of the existence of this report, which is an official record, and the fact that these statements were made by the Department, thereby putting the Commissioner on notice as to the RPA. However, the court does not take notice of the truth of the facts asserted within the report. See Lee, 250 F. 3d at 689. 13 1 Accordingly, plaintiffs have not sufficiently alleged a 2 plausible basis to infer a specific intent to defraud, and their 3 RICO claim must be dismissed. 4 even if plaintiffs were given leave to amend the court cannot see 5 how they would be able to plead facts to create a plausible 6 inference that defendants intended to conceal the structure of 7 the program and thereby defraud plaintiffs. 8 A. 9 Given the existence of the patent, California Unfair Competition Law 1. Standing 10 Plaintiffs assert a claim for injunctive relief and 11 restitution under the UCL, Cal. Bus. & Prof. Code § 17200, et 12 seq. 13 either of these remedies, and thus have failed to plead a viable 14 UCL claim. 15 able to show (1) that he or she has suffered an “injury in fact,” 16 (2) that the injury is “fairly traceable” to the challenged 17 conduct, and (3) that it is “likely”, as opposed to “merely 18 speculative,” that the injury will be redressed by a favorable 19 decision. 20 (1992). Defendants argue that plaintiffs lack standing to seek A plaintiff has Article III standing if he or she is Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 21 a. 22 Injunctive Relief Plaintiffs originally requested an order enjoining 23 defendants’ allegedly unlawful business practices. 24 PFAC ¶ 155.) 25 26 27 28 8 8 (SSAC ¶ 151; To establish standing to seek prospective The court addresses the issue of whether plaintiffs have standing to seek an injunction because the parties briefed this topic at length. However, the court notes that at oral arguments plaintiffs stated that they were not seeking an injunction but instead wanted a declaratory judgment stating that the RPA and entire program were void. In determining whether 14 1 injunctive relief, plaintiff must show, in addition to the 2 requirements listed above, that the harm suffered is “concrete 3 and particularized” and there must be a “sufficient likelihood 4 that [he or she] will again be wronged in a similar way.” 5 of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). 6 City Defendants argue that because plaintiffs admittedly do 7 not intend to participate in defendants’ insurance program in the 8 future, they are unable to allege a real and immediate threat of 9 future injury. However, the purportedly unlawful RPAs that have 10 already been issued to plaintiffs allow defendants to continue 11 billing, collecting, and holding plaintiffs’ monies well past the 12 present date. 13 Phillips v. Apple, Inc., the court dismissed the plaintiffs’ 14 claim for injunctive relief because they had not offered any 15 “reason for the Court to find a likelihood of future harm.” 16 No. 15-04879 LHK, WL 1579693, at *9 (N.D. Cal. Apr. 19, 2016). 17 However, in this case, the existence of the operative contract 18 creates a real and immediate threat of repeated injury for the 19 plaintiffs. 20 defendants’ program in order to be harmed in the future. 21 Additionally, the Consent Order and Settlement (SSAC ¶¶ 37, 40, 55; PFAC ¶¶ 38, 41, 56.) In Civ. Plaintiffs need not make a future purchase of 22 23 24 25 26 27 28 plaintiffs have standing to seek declaratory relief, “the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Golden v. Zwickler, 394 U.S. 103, 108 (1969). Here, because the existing RPA is still being enforced, there is sufficient immediacy and reality. Accordingly, plaintiffs have standing to seek declaratory relief. 15 1 Agreement9 settled all regulatory issues going forward. 2 these documents, while they affect the defendants’ ability to 3 sell future policies, do not affect the current RPA that has been 4 issued to plaintiffs. 5 consent order, AUCRA would stop issuing new RPAs but could 6 continue to administer and inforce RPAs.” 7 6 (Shasta Docket No. 62).) 8 injury from future programs, plaintiffs still face a real and 9 immediate threat of injury from the RPA that has already been However, Defendants concede that “pursuant to the (Defs.’ Mot to Dismiss Thus, while there may be no risk of 10 issued to them. 11 standing in order to seek injunctive relief.10 12 Accordingly, plaintiffs have established b. 13 Restitution In order to have standing to seek restitution, a 14 plaintiff must “(1) establish a loss or deprivation of money or 15 property sufficient to qualify as injury in fact, i.e., economic 16 injury, and (2) show that that economic injury was the result of, 17 i.e., caused by, the unfair business practice.” 18 Super. Ct., 51 Cal. 4th 310, 322 (2011). 19 allege that they expended money because of the defendants’ acts 20 of unfair competition, they need not prove compensable loss. 21 Monarch Plumbing Co., Inc. v. Ranger Ins. Co., Civ. No. 2:06-1357 22 23 24 25 26 27 28 9 Kwikset Corp v. While plaintiffs must The court takes judicial notice of the Consent Order and Settlement Agreement because they are public records whose existence “can be accurately and readily determined from sources whose accuracy cannot readily be questioned.” See Fed. R. Civ. P. 201(b). Additionally, plaintiffs refer to the Settlement Agreement in their Amended Complaint and it forms the basis of one or more of their claims. As such, even if it were not an official record, the court could take judicial notice of it. See United States v. Ritchie, 342 F. 3d 903, 908 (9th Cir. 2003). 10 See footnote 8. 16 1 WBS KJM, WL 2734391 at *6 (E.D. Cal. Sept. 25, 2006)(standing 2 established where plaintiffs alleged injury in form of higher 3 insurance premiums). 4 to prove a right to damages (or, here, restitution), that does 5 not demonstrate that [they] lack standing to argue for [their] 6 entitlement to them.” 7 758, 789 (2010). 8 9 While plaintiffs “may ultimately be unable Clayworth v. Pfizer, Inc., 49 Cal. 4th Here, plaintiffs allege that “[t]he RPA, as enforced by Defendants, resulted in significant premiums, fees, charges, 10 and/or penalties to Plaintiff[s] and Class members in excess of 11 those advertised during the marketing of the program or that 12 would have been paid in the absence of Defendants’ wrongful 13 conduct.” 14 required to prove the specific amount they overpaid as a result 15 of defendants’ conduct at the pleading stage, plaintiffs’ 16 allegation, albeit general, is sufficient to establish standing 17 to make a claim for restitution. 18 (SSAC ¶ 140; PFAC ¶ 144.) Because plaintiffs are not Plaintiffs may only recover the portion of the funds 19 that defendants have retained as a result of the alleged unfair, 20 fraudulent, or unlawful business practice. 21 II, 240 Cal. App 4th 779, 802 (4th Dist. 2015). 22 are asking for exactly that--for “full restitution of all 23 monetary sums unlawfully obtained by defendants.” 24 PFAC ¶ 147). 25 only to the return of money or property that was once in the 26 possession of [a plaintiff].” 27 Martin Corp., 29 Cal. 4th 1134, 1149 (2003). 28 also allows a plaintiff to recover money or property in which In re Tobacco Cases Here, plaintiffs (SSAC ¶ 143; Restitution, “as used in the UCL, is not limited Korea Supply Co. v. Lockheed 17 Rather, restitution 1 plaintiff has a vested interest. 2 ownership interest in “any profits [the defendant] may have 3 gained through interest or earnings on the plaintiffs’ money that 4 [defendant] wrongfully held.” 5 Cal. App. 4th 889, 915 (4th Dist. 2007). 6 seeking disgorgement of profits earned by defendants as a result 7 of their alleged unlawful collection and retention of monies. 8 Because the Juarez court clarifies that plaintiffs may have an 9 ownership interest in this form of money, plaintiffs have 10 Id. Plaintiffs may have an Juarez v. Arcadia Fin., Ltd., 152 Here, plaintiffs are standing to seek restitution. 11 The court may, at a later stage, ultimately determine 12 that plaintiffs would have suffered the same harm whether or not 13 defendants had complied with the law, and thus find that 14 plaintiffs are not entitled to restitution. 15 stage plaintiffs have sufficiently pled their right to 16 restitution. 17 2. 18 Unlawful Conduct a. 19 However, at this “Borrowing” Insurance Code § 11658 The UCL forbids unlawful, unfair, and fraudulent 20 business practices. (Cal. Bus. & Prof. Code § 17200.) 21 Plaintiffs allege that defendants violated § 1165811 by failing to 22 23 24 25 26 27 28 11 Section 11658(a) states: “A workers’ compensation insurance policy or endorsement shall not be issued by an insurer to any person in this state unless the insurer files a copy of the form or endorsement with the rating organization pursuant to subdivision (e) of Section 11750.3 and 30 days have expired from the date the form or endorsement is received by the commissioner from the rating organization without notice from the commissioner, unless the commissioner gives written approval of the form or endorsement prior to that time.” 18 1 file the RPA with the Bureau or receive approval from the 2 California Department of Insurance, thereby engaging in an 3 unfair, unlawful, and/or fraudulent business practice. 4 11658(a) does not provide a private right of action. 5 Ins. Exch. v. Super. Ct., 137 Cal. App. 4th 842, 850 (2d Dist. 6 2006)(“a statute creates a private right of action only if the 7 statutory language or legislative history affirmatively indicates 8 such an intent”). 9 private cause of action, but rather attempt to “borrow” § 10 Section See Farmers However, plaintiffs do not purport to state a 11658(a) to satisfy the “unlawful” prong of the UCL. 11 The Ninth Circuit has held that a violation of a 12 section of the California Insurance Code may be “borrowed” to 13 make a claim under the UCL. 14 Co., 225 F.3d 1042, 1048 (9th Cir. 2000). 15 serve as the predicate for a Business and Professions Code 16 section 17200 action; it may be. . . civil or criminal, federal, 17 state or municipal, statutory, regulatory, or court-made.” 18 Gafcon, Inc. v. Ponsor & Assocs., 98 Cal. App. 4th 1388, 1425 n. 19 15 (4th Dist. 2002). 20 “[i]t does not matter whether the underlying statute also 21 provides for a private cause of action; section 17200 can form 22 the basis for a private cause of action even if the predicate 23 statute does not.” 24 Chabner v. United of Omaha Life Ins. “Virtually any law can The Chabner court further clarified that 225 F.3d at 1048. A plaintiff cannot “plead around an absolute bar to 25 relief simply by recasting the cause of action as one for unfair 26 competition.” 27 narrow. 28 must actually ‘bar’ the action or clearly permit the conduct.” Id. (citations omitted). But this limit is To prevent an action under the UCL, “another provision 19 1 Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1122 (9th Cir. 2 2009). 3 cases in which the courts did not allow plaintiffs to borrow a 4 violation of Insurance Code § 790 to form the basis of a UCL 5 claim. 6 before Chabner, in which the court explicitly held that “even 7 assuming that [previous cases] prevent causes of action based on 8 section 790.03(f), it does not necessarily follow that they also 9 prevent causes of action based on” other sections of the Defendants cite to a number of California Court of Appeal However, all of the cases cited by defendants occurred 10 Insurance Code. 225 F.3d at 1049. Because there is nothing that 11 bars the borrowing of § 11658 for the purposes of a UCL claim, 12 plaintiffs may borrow that section to use as the basis of their 13 UCL claim. 14 interpretation, which allows an Insurance Code violation to be 15 borrowed to make a UCL claim, absent a contrary ruling by the 16 California Supreme Court. 17 06-1150 WBS GG, 2007 WL 1723617, at *3 (E.D. Cal. June 11, 2007). Moreover, this court is bound by the Ninth Circuit’s See, e.g., Johnson v. Barlow, Civ. No. 18 b. Sections 11375 and 11737 19 The court previously dismissed Shasta’s claims “to the 20 extent that plaintiff seeks to invalidate the RPA on the theory 21 that defendants violated California Insurance Code § 11735.”12 22 (June 20 Order at 5.) 23 Commissioner had not conducted a hearing and disapproved of the 24 RPA’s rates. 25 12 26 27 28 At the time of the court’s ruling, the The court explained that using a rate that was not Section 11735(a) states: “Every insurer shall file with the commissioner all rates and supplementary rate information that are to be used in this state. The rates and supplementary rate information shall be filed not later than 30 days prior to the effective date. Upon application by the filer, the commissioner may authorize an earlier effective date.” 20 1 filed pursuant to “§ 11735 is not an unlawful rate unless and 2 until the Commissioner conducts a hearing and disapproves the 3 rate.” (Id.) 4 The day the court issued the order, the Commissioner 5 issued its Decision and Order, finding that defendants’ RPA was 6 in fact unfiled and therefore void as a matter of law. 7 Order.) 8 claims the court previously dismissed, but, in light of the 9 Commissioner’s ruling, the complaints now explicitly state that 10 the Commissioner has conducted a hearing and disapproved of the 11 RPA under § 11735. 12 (Comm’r’s Plaintiffs’ amended complaints now re-allege the same (SSAC ¶¶ 8, 56-58; PFAC ¶¶ 8, 57-59.) Shasta previously filed a motion for reconsideration in 13 light of the Commissioner’s Order, and this court denied the 14 motion, holding that “the Commissioner’s Order does not control 15 this court.” 16 Order stated that failure to file the RPA pursuant to section 17 11735 “renders the plan[] unlawful.” 18 That interpretation directly conflicts with this court’s June 20 19 Order, which held that a rate does not become unlawful unless and 20 until the Commissioner acts to disapprove it. 21 4.) 22 maintains the position, as it has in previous rulings, that under 23 section 11737, an unfiled rate is not unlawful per se. 24 (Mem. and Order Re: Mot. for Recons. at 11) The (Comm’r’s Order at 62). (June 20 Order at The court again disagrees with the Commissioner and Further, the Commissioner did not conduct a formal rate 25 disapproval hearing pursuant to § 11737(d). 26 disapprove a rate, the Commissioner must first “serve notice on 27 the insurer of the intent to disapprove and shall schedule a 28 hearing to commence within 60 days of the date of the notice.” 21 In order to legally 1 Cal. Ins. Code § 11737(d). 2 protocol. 3 disapproved of the RPA’s rates, the disapproval would be 4 prospective only, see Cal. Ins. Code § 11737(g), and apply only 5 to RPAs issued after June 20, 2016. 6 fall into that category. 7 The Commissioner did not follow this Even assuming the Commissioner had properly The Plaintiffs’ RPAs do not Plaintiffs have not successfully argued that the 8 Commissioner’s Order constituted a rate disapproval hearing 9 within the meaning of section 11737 that rendered the RPA 10 retroactively unlawful. 11 previous dismissal remains applicable and defendants’ reliance on 12 the prior ruling is appropriate. 13 again grant defendants’ motion to dismiss plaintiffs’ claims to 14 the extent they seek to declare defendants’ use of the RPA was 15 illegal on the theory that defendants failed to comply with § 16 11735. 17 B. Thus, the court’s reasoning for its Accordingly, the court will Unjust Enrichment 18 California courts are divided with regard to whether 19 unjust enrichment is a freestanding cause of action or simply a 20 general principle that underlies various legal doctrines and 21 remedies. 22 finding that unjust enrichment is not a freestanding cause of 23 action. 24 (9th Cir. 2009). 25 for unjust enrichment may still be maintained as an independent 26 claim for quasi-contract. 27 3d 753, 762 (9th Cir. 2015). 28 restitution is based on the theory that a defendant “has been The Ninth Circuit has followed the latter approach, See Bosinger v. Belnden CDT, Inc., 358 F. App’x 812, 815 However, it has since clarified that a claim Astiana v. Hain Celestial Grp., 783 F. A claim for quasi-contract seeking 22 1 unjustly conferred a benefit through mistake, fraud, coercion, or 2 request.” 3 648, 661 (4th Dist. 2011) (“Common law principles of restitution 4 require a party to return a benefit when the retention of such 5 benefit would unjustly enrich the recipient; a typical cause of 6 action involving such remedy is ‘quasi-contract.’”). 7 Id.; see also Munoz v. MacMillan, 195 Cal. App. 4th Defendants argue that plaintiffs cannot plead a claim 8 for quasi-contract because a valid express contract exists. 9 However, “where the defendant obtained a benefit from the 10 plaintiff by fraud, duress, conversation, or similar conduct. . . 11 the plaintiff may choose not to sue in tort, but instead to seek 12 restitution on a quasi-contract theory.” 13 123 Cal. App. 4th 379, 388 (1st Dist. 2004). 14 McBride v. Boughton, In Astiana, the plaintiff alleged that she was entitled 15 to relief because the defendant had “‘enticed’ plaintiffs to 16 purchase their products through ‘false and misleading’ labeling, 17 and that [defendant] had been unjustly enriched as a result.” 18 Astiana, 783 F.3d at 762. 19 straightforward statement is sufficient to state a quasi-contract 20 cause of action.” 21 “[d]efendants were unjustly enriched when they deceptively sold 22 Plaintiffs and Class members the illegal [insurance] program and 23 received and retained the benefits.” 24 Opp’n to Defs.’ Mot. to Dismiss at 25 (Docket No. 63); SSAC ¶¶ 2, 25 6, 10, 153-156; PFAC ¶¶ 2, 6, 10, 157-160.) 26 statement is sufficient to state a quasi-contract cause of 27 action. 28 enrichment claim as a claim for quasi-contract and deny the Id. The Ninth Circuit held that “this Here, plaintiffs allege that (Pls.’ Mem. of P. & A. in As in Astiana, this Accordingly, the court will construe plaintiffs’ unjust 23 1 motion to dismiss as to this claim. 2 IT IS THEREFORE ORDERED that defendants’ motion to 3 dismiss plaintiffs’ complaints be, and the same hereby is, 4 GRANTED as to plaintiffs’ RICO claims; GRANTED as to plaintiffs’ 5 attempts to invalidate the RPA on the theory that defendants 6 violated Insurance Code section 11735; and DENIED in all other 7 respects. 8 Dated: October 17, 2017 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24

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