Travelers Property Casualty Company of American v. Centex Homes et al

Filing 127

ORDER by Judge Samuel Conti in case 3:12-cv-00371-SC; granting in part and denying in part (11) Motion to Strike ; granting in part and denying in part (13) Motion to Dismiss; granting in part and denying in part (27) Motion to Amend/Correct ; in case 3:13-cv-00088-SC (sclc1, COURT STAFF) (Filed on 5/30/2013)

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IN THE UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA,

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Plaintiff,
Northern District of California

United States District Court

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v.
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CENTEX HOMES, NEWMEYER &
DILLION, RGL INC., RGL
FORENSICS, and DOES 1 through 10
inclusive,
Defendants.

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Case No. 13-0088-SC
Related Cases: 11-3638-SC,
12-0371-SC
ORDER RE: MOTIONS TO
DISMISS AND STRIKE

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I.

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INTRODUCTION
Plaintiff Travelers Property Casualty Company of America

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("Travelers") brings this action against Defendants Centex Homes

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("Centex"), Newmeyer & Dillion ("Newmeyer"), and RGL Inc. and RGL

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Forensics (collectively "RGL").

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dismiss and strike Travelers' Complaint under Federal Rules of

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Civil Procedure 12(b)(6) and 12(f).

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("Centex/N&D MTD").

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dismiss.

Centex and Newmeyer now move to

ECF Nos. 11 ("MTS"), 13

RGL has also filed a Rule 12(b)(6) motion to

ECF No. 27 ("RGL MTD").1

Pursuant to Civil Local Rule 7-

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28

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All three motions are fully briefed. ECF Nos. 15 ("Opp'n to
MTS"), 17 ("Opp'n to Centex/N&D MTD"), 21 ("Reply ISO MTS"), 22

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1(b), these motions are suitable for decision without oral

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argument.

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in part and DENIED in part.

For the reasons set forth below, the motions are GRANTED

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II.

BACKGROUND
Centex enters agreements with contractors and subcontractors

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to build various residential communities throughout California.

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ECF No. 1 ("Compl.") ¶ 10.

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liability insurance policies in connection with the construction

Centex's subcontractors obtain general

United States District Court

For the Northern District of California

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work they perform for Centex.

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an additional insured.

Id.

These policies name Centex as

Id.

Centex was sued in a number of construction defect actions in

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California superior court, including fourteen which are relevant to

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the instant action.

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Adkins, Ahlberg, Akins, Bradley, Cappawanna, Cartmill, Cooley,

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Conner, Deusenberry, Redig, Redhawk, and Spivack actions.2

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retained the law firm of Newmeyer to defend its interests in these

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suits and to pursue coverage from insurance carriers, including

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Travelers.

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by Newmeyer on behalf of Centex and agreed to defend Centex in the

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underlying actions.

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administrator to send out bills to insurance carriers, including

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Travelers, in connection with these underlying actions.

The relevant suits are the Acupan, Adams,

Id. ¶ 11.

Centex

Travelers accepted a number of tenders made

Id. ¶ 12.

Newmeyer used RGL as a third-party

Id. ¶ 13.

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25
26
27
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("Reply ISO Centex/N&D MTD"), 33 ("Opp'n to RGL MTD"), 35 ("Reply
ISO RGL MTD").
2

Travelers also brought suit in connection with the Bennett, Mira
Ali, Mira Loma, Spicer, and Yunker actions. The parties
subsequently stipulated to dismissal with prejudice of Travelers'
claims to the extent that they are predicated on these five
underlying actions. ECF No. 32.

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Travelers alleges that Centex, Newmeyer, and RGL overbilled

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Travelers, that Travelers paid more than it was obligated to pay

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towards Centex's defense in fourteen underlying construction defect

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actions, and that Centex and Newmeyer were unjustly enriched as a

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result.

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fraudulently misrepresented (1) Newmeyer's hourly rates, (2) the

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scope of Centex's tenders, and (3) other carriers' agreements to

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participate in Centex's defense.

Id. ¶ 14.

Specifically, Travelers alleges that Centex

Id. ¶ 35.

First, with respect to hourly rates, Tralevers points to the

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United States District Court

For the Northern District of California

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May 11, 2011 deposition of Jarett Coleman, Centex's general counsel

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and Rule 30(b)(6) witness, in an earlier case between Travelers and

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Centex in this District, Case No. 10-2757-CRB ("Travelers v. Centex

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I").

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have an informal agreement that Newmeyer will charge Centex a rate

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of $225 per hour for attorneys, $110 per hour for paralegals, $60

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per hour for law clerks, and $135 per hour for in-house experts.

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Id. ¶ 16.

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provide Centex with a defense, at which point they are allegedly

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increased to $515 per hour for attorney time, $210 per hour for

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paralegals, $70 per hour for law clerks, and $215 per hour for in-

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house experts.

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testimony shows that Newmeyer was charging Centex one rate and

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Travelers a higher rate.

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the lower rates paid by Centex merely represented an advance on

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Newmeyer's fees pending contribution from Centex's insurers.

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Compl. Ex. C at 25.

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insurers refused to contribute to its defense costs, Mr. Coleman

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responded: "At the end of the day, we . . . have a discussion on .

Id. ¶ 15.

Mr. Coleman testified that Centex and Newmeyer

These rates apply until an insurance carrier agrees to

Id. ¶ 21.

According to Travelers, Mr. Coleman's

However, Mr. Coleman also testified that

See

When asked what would happen if Centex's

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. . what's owed, and certainly [Centex] will take care of our

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responsibility

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with us."

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. . . , but that really hasn't become a big issue

Id.

Second, with respect to the scope of the tenders, Centex or

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its subcontractors purchased "wrap" insurance policies with regard

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to some or all of the work performed on the residential

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developments that are the subjects of the underlying construction

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defect actions.

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owner, general contractor, and subcontractors on a particular

A wrap policy is designed to cover the

Travelers alleges that Centex and Newmeyer tendered

United States District Court

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For the Northern District of California

Id.

Id. ¶ 24.

project.

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to Travelers the defense of some of the underlying actions only

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with respect to the homes that were not covered by wrap policies,

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but then submitted defense costs related to both wrap and non-wrap

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homes.

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Colleen Vanderburg, the corporate representative for RGL in

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Travelers v. Centex I, wherein Ms. Vanderburg allegedly testified

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that wrap carriers agreed to pay only 75 percent of defense costs

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for wrap homes in the underlying actions.

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Travelers, Ms. Vanderburg further testified that Newmeyer

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instructed RGL to take the remaining 25 percent and charge it to

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the other non-wrap insurance carriers, including Travelers.

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Curiously, the excerpts of Ms. Vanderburg's deposition that were

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attached to the Complaint do not evidence this testimony.

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Compl. Ex. E.

Id. ¶ 25.

Travelers' Complaint points to the deposition of

Id. ¶ 27.

According to

Id.

See

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As to the third and last set of alleged misrepresentations,

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Travelers pleads that Centex "by and through RGL" concealed from

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Travelers that certain carriers were participating in Centex's

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defense and thus misrepresented the percentage of fees paid by each

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carrier.

Id. ¶¶ 29-30.

As a result of these misrepresentations,

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Centex and Newmeyer allegedly billed and received payments in

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excess of 100 percent of the actual fees and costs incurred in the

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defense of Centex in connection with the underlying construction

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defect actions.

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Vanderburg's deposition in Travelers v. Centex I.

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Vanderburg allegedly testified that she advised Newmeyer that its

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requested allocations resulted in more than 100 percent of the

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total defense fees being billed out to the carriers.

Id. ¶ 31.

Travelers again points to Ms.
Id. ¶ 35.

Id.

Ms.

The

United States District Court

For the Northern District of California

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three-page deposition excerpt attached to the Complaint provides so

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little context that it is impossible to tell whether Travelers'

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allegations are consistent with Ms. Vanderburg's actual testimony.

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See Compl. Ex. E.

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testimony of Gary L. Barrera, an attorney at Newmeyer.

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33.

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collectively billed insurance carriers for more than 100 percent of

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the total defense fees incurred in the Kent action, another

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construction defect suit that is not at issue in this case.

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33.

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from Mr. Barrera's deposition attached to the Complaint is cryptic

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and lacks context.

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Travelers also points to the deposition
Id. ¶¶ 32-

Travelers alleges that Mr. Barrera testified that Centex

Id. ¶

Like the Vanderburg deposition excerpt, the two-page excerpt

See Compl. Ex. D.

Travelers asserts causes of action against Centex, Newmeyer,

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and RGL for fraud, violation of California Business and Professions

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Code section 17200 (the Unfair Competition Law ("UCL")), breach of

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fiduciary duty, reimbursement, and accounting.

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Centex, Newmeyer, and RGL now move to dismiss pursuant to Federal

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Rule of Civil Procedure 12(b)(6).

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strike paragraphs 29 through 35 of the Complaint.

Id. ¶¶ 568-596.

Centex and Newmeyer also move to

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III. DISCUSSION
A.

i.

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Defendants' Motions to Dismiss
Legal standard

A Rule 12(b)(6) motion to dismiss "tests the legal sufficiency
Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

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of a claim."

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"Dismissal can be based on the lack of a cognizable legal theory or

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the absence of sufficient facts alleged under a cognizable legal

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theory."

Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699

United States District Court

For the Northern District of California

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(9th Cir. 1988).

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a court should assume their veracity and then determine whether

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they plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 664 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1191, 1204 (9th Cir. 2011).

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"When there are well-pleaded factual allegations,

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. at 663 (citing Bell Atl. Corp. v.
The allegations made in a

Starr v. Baca, 633 F.3d

Claims sounding in fraud are subject to the heightened

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pleading requirements of Federal Rule of Civil Procedure 9(b),

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which requires that a plaintiff "state with particularity the

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circumstances constituting fraud."

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"To satisfy Rule 9(b), a

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pleading must identify the who, what, when, where, and how of the

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misconduct charged, as well as what is false or misleading about

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[the purportedly fraudulent] statement, and why it is false."

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United States ex rel Cafasso v. Gen. Dynamics C4 Sys., Inc., 637

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F.3d 1047, 1055 (9th Cir. 2011) (quotation marks and citations

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omitted).
ii.

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Centex and Newmeyer's motion to dismiss and RGL's motion to

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9

Fraud

dismiss each raise different grounds for dismissing Travelers'

United States District Court

For the Northern District of California

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fraud claims.

The Court reviews the arguments advanced in Centex

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and Newmeyer's motion first and then proceeds to the arguments

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raised in RGL's motion.
a.

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Centex and Newmeyer's motion

The elements of fraud are "misrepresentation, knowledge of its

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falsity, intent to defraud, justifiable reliance and resulting

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damage."

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(Cal. Ct. App. 2006).

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could not have reasonably relied on their alleged

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misrepresentations concerning Newmeyer's rates, because Travelers

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knew about Newmeyer and Centex's rate agreement at the time

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Travelers paid Centex's invoices for defense fees.

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at 7.

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allegedly illicit rate agreement in a deposition taken by Travelers

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on May 11, 2011.

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allegations that, in twelve of the fourteen construction defect

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actions, Travelers paid all of the invoices for Centex's defense

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fees and costs submitted after Mr. Coleman's deposition.

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Specifically, Travelers alleges that it paid invoices submitted

Gil v. Bank of Am., N.A., 138 Cal. App. 4th 1371, 1381
Centex and Newmeyer argue that Travelers

Centex/N&D MTD

According to the Complaint, Mr. Coleman revealed the

Compl. ¶¶ 15-17.

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The Complaint also contains

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after June 28, 2011 in the Acupan, Ahlberg, Bennet, Cappawanna,

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Cartmill, Cooley, Deusenberry, Mira Loma, Redig, and Redhawk

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actions.

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70, 410-11, 480-81, 487-88, 507-08.3

See Compl. ¶¶ 85-86, 230-31, 291-92, 340-41, 358-59, 369-

Travelers responds that the Complaint merely shows that, by

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May 11, 2011, Travelers had obtained testimony about the scheme

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from one individual.

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contends that it needed additional discovery to confirm and expand

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upon the information gathered from Mr. Coleman.

Opp'n to Centex/N&D MTD at 8.

Id.

Travelers

This argument

United States District Court

For the Northern District of California

10

is unpersuasive.

Mr. Coleman was Centex's general counsel and

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30(b)(6) witness.

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Centex and, in fact, provided a detailed description of Centex and

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Newmeyer's billing arrangement.

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Travelers needed to confirm the fact that this allegedly illicit

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arrangement existed.

Thus, he was authorized to testify on behalf of

It is entirely unclear what more

Travelers further argues that an April 4, 2012 correspondence

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17

from Newmeyer to Travelers shows that Travelers had not yet

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discovered the full extent of the alleged overbilling scheme on May

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11, 2011.

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that it agreed to charge Centex $225 per hour for attorney time and

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insists that the $225 per hour that Centex had been paying Newmeyer

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merely represented an advance necessitated by the fact that

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insurance carriers routinely failed to provide an immediate, full

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and complete defense.

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supports Travelers' contention that it did not discover the full

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3

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28

Id. at 8-9.

In this correspondence, Newmeyer denies

Id. Ex. A.

Nothing in this correspondence

Travelers also asserts that it paid invoices submitted after June
28, 2011 in the Spicer and Yunker actions. 516-17, 554-55. As
discussed in note 2, supra, Travelers has stipulated to the
dismissal of its claims to the extent that they are predicated on
these actions.

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extent of Newmeyer and Centex's alleged fraud until after May 11,

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2011.

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in Mr. Coleman's May 11, 2011 deposition that Centex's payments to

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Newmeyer represented an advance.

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facts concerning Newmeyer and Centex's billing agreement.

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Newmeyer's correspondence does not deny that Centex had been paying

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Newmeyer for attorney time at a rate of $225 per hour.

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9

Newmeyer's correspondence merely reiterates the point made

The correspondence offers no new
Further,

Finally, Travelers argues that Mr. Coleman's deposition did
not reveal that Centex and Newmeyer were overbilling for

United States District Court

For the Northern District of California

10

paralegals, law clerks, and in-house experts.

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also unpersuasive.

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allegations regarding when or how Travelers learned about

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overbilling for non-attorney time.

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light of Travelers' allegations regarding Mr. Coleman's testimony

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about Newmeyer's attorney rates, it is implausible that Travelers

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was unaware of this alleged overbilling scheme when Travelers paid

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the invoices submitted by Newmeyer after May 11, 2011.

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deposition transcript attached to the Complaint shows that Mr.

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Coleman testified that Centex agreed to front a portion of

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Newmeyer's rates.

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believe that Centex was paying a fraction of all of the rates

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charged by Newmeyer.

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investigate the matter before paying any invoices submitted by

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Newmeyer after the May 11, 2011 deposition.

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26

b.

This argument is

First, Travelers' Complaint contains no

See Compl. ¶ 18.

Second, in

The

Based on this testimony, Travelers had reason to

At the very least, Travelers had reason to

RGL's motion

RGL moves to dismiss the remainder of Travelers' claim for

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fraud on the ground that Travelers has not pled the claim with the

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requisite particularity.

RGL MTD at 5-12.

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Specifically, RGL

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argues that Travelers' complaint fails to identify how RGL was

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involved in the alleged fraud.

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alleges that RGL knowingly billed Travelers for defense costs

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outside of the scope of Centex's tenders.

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Specifically, Travelers alleges that it only agreed to provide

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Centex with a defense in connection with non-wrap homes, and that

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RGL, at the direction of Newmeyer, billed Travelers for the defense

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of both wrap and non-wrap homes.

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allegations, Travelers points to the deposition testimony of Ms.

The Court disagrees.

See id.

United States District Court

For the Northern District of California

See Compl. ¶¶ 24-28.

In support of these

Id. ¶¶ 26-27.

10

Vandeberg in Travelers v. Centex I.

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Travelers

Together, these

facts state a plausible claim for fraud.

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RGL contends that "[m]erely citing to Ms. Vanderburg's

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testimony taken in another case is insufficient to plead fraud

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against RGL in this matter."

15

Ms. Vanderburg was referencing a specific construction defect

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action in her deposition and was not making generalizations about

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RGL's billing practices.

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testimony, Travelers has pled sufficient facts to place RGL on

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notice of the particular circumstances constituting the alleged

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fraud.

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with any other evidence offered by Travelers, is adequate to prove

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that RGL engaged in fraud in this case is a question for another

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day and is not appropriate for Rule 12(b)(6) motion to dismiss.

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hold that Travelers must come forth with more specific deposition

25

testimony to survive a motion to dismiss would set an impossibly

26

high pleading standard.

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28

Id.

MTD at 8.

RGL further argues that

But with or without Ms. Vanderburg's

Whether or not Ms. Vanderburg's deposition testimony, along

To

RGL also argues that Travelers has failed to plead sufficient
facts to show that Travelers detrimentally relied on RGL's

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misrepresentations or that RGL intended to defraud Travelers.

2

at 12.

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detrimental reliance by alleging that it paid more than its share

4

of defense costs as a result of RGL's failure to disclose that

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Centex's defense bills included costs associated with wrap homes.

6

With respect to intent, RGL is arguing the wrong pleading standard.

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Rule 9(b) requires a plaintiff to allege the circumstances

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constituting fraud with particularity.

9

However, "[m]alice, intent, knowledge, and other conditions of mind

These arguments are also unavailing.

Travelers has pled

Fed. R. Civ. P. 9(b).

United States District Court

of a person may be averred generally."

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stage of the litigation, Travelers' general allegations as to

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intent are sufficient.
c.

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Id.

Accordingly, at this

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For the Northern District of California

MTD

See Compl. ¶ 572.

Disposition

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In sum, the facts alleged in the Complaint undermine

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Travelers' contention that it reasonably relied on Defendants'

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alleged misrepresentations concerning Newmeyer's hourly rates.

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Travelers' fraud claim is DISMISSED WITH PREJUDICE to the extent

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that it is predicated on allegations that it was overbilled for

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attorney time after May 11, 2011.

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because, to state a plausible claim, Travelers would need to plead

21

facts inconsistent with those set forth in its operative complaint.

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Travelers' fraud claim is DISMISSED WITH LEAVE TO AMEND to extent

23

that it is predicated on allegations that it was overbilled for the

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work of Newmeyer's paralegals, law clerks, and in-house experts

25

after May 11, 2011.

26

Travelers amended complaint shall set forth how it reasonably

27

relied on Defendants' misrepresentations in this regard.

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///

Amendment would be futile

Consistent with the guidance set forth above,

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iii. UCL

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2

The UCL prohibits unfair competition, including, inter alia,

3

"any unlawful, unfair or fraudulent business act."

Cal. Bus. &

4

Prof. Code § 17200.

5

disjunctive, it establishes three varieties of unfair competition—

6

acts or practices which are unlawful, or unfair, or fraudulent."

7

Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554

8

(Cal. Ct. App. 2007) (quotations omitted).

9

Travelers is suing under the fraudulent prong of the UCL, it has

"Because [section 17200] is written in the

While it appears that

United States District Court

For the Northern District of California

10

failed to allege as much.

11

intends to bring a cause of action under the fraudulent prong of

12

the UCL, it has failed to state a claim.

13

UCL, "a fraudulent business practice is one that is likely to

14

deceive members of the public."

15

Inc., 177 Cal. App. 4th 1235, 1255 (Cal. Ct. App. 2009).

16

points out, Travelers fails to explain how the fraudulent practices

17

alleged here, which relate to a single private commercial insurance

18

transaction, could possibly mislead the public.

19

Travelers' UCL claim is DISMISSED in its entirety.

20

grants Travelers leave to amend to cure the deficiencies described

21

above.
iv.

22
23

Further, to the extent that Travelers

For the purposes of the

Morgan v. AT&T Wireless Servs.,
As RGL

Accordingly,
The Court

Breach of fiduciary duty

"In order to plead a cause of action for breach of fiduciary

24

duty, there must be shown the existence of a fiduciary

25

relationship, its breach, and damage proximately caused by that

26

breach.

27

cause of action."

28

(Cal. Ct. App. 1991).

The absence of any one of these elements is fatal to the
Pierce v. Lyman, 1 Cal. App. 4th 1093, 1101
RGL moves to dismiss Travelers' claim for

12

1

breach of fiduciary duty on the grounds that Travelers has failed

2

to allege sufficient facts to establish that it was in a fiduciary

3

relationship with RGL.

4

Complaint shows a fiduciary relationship "based on RGL's capacity

5

as the third-party administrator retained to collect payments made

6

by Travelers (and others) for disbursement to Centex and Newmeyer."

7

Opp'n to RGL MTD at 11.

8

that Centex and Newmeyer retained RGL to collect payments from

9

Travelers and other insurers may evidence a fiduciary relationship

RGL MTD at 15.

Travelers responds that the

This argument is unavailing.

The fact

United States District Court

For the Northern District of California

10

between RGL and Centex, but it does not establish a fiduciary

11

relationship between RGL and Travelers.

12

Travelers' contention that a fiduciary relationship existed here

13

merely because RGL acted as a trustee "as to the money" it

14

collected from Travelers.

15

Travelers' claim for breach of fiduciary duty is DISMISSED WITH

16

PREJUDICE as to RGL.
v.

17

Equally unpersuasive is

See Opp'n at 11.

Accordingly,

Reimbursement

18

As part of its claim for reimbursement, Travelers alleges that

19

when it agreed to participate in Centex's defense in the underlying

20

construction defect actions, it specifically reserved its right to

21

seek reimbursement from Centex for any defense-related payments

22

that were not potentially covered.

23

further alleges that it has the right to reimbursement from all

24

three defendants because they collected more attorney's fees than

25

they were legally entitled to collect, intentionally overbilled

26

Centex, and submitted bills for a portion of the defense of wrap

27

homes.

28

Compl. ¶ 588.

Travelers

Id. ¶ 590.

Newmeyer and RGL move to dismiss on the ground that Travelers

13

1

has no legal basis for seeking reimbursement against them.

2

Centex/N&D MTD at 10-11; RGL MTD at 16.

3

Travelers has asserted no contractual basis for seeking

4

reimbursement against Newmeyer or RGL.

5

enunciated any independent legal right to reimbursement against

6

them.

7

reimbursement against an insured for defense costs incurred as a

8

result of defending claims that were "not even potentially covered"

9

by the subject policy.

The Court agrees.

Nor has Travelers

Under California law, an insurer has a right of

Buss v. Super. Ct., 16 Cal. 4th 35, 39

United States District Court

For the Northern District of California

10

(Cal. 1997).

However, neither Newmeyer nor RGL is an insured under

11

any of the policies involved in this case.
Travelers asserts that it has an independent right to

12
13

reimbursement against Newmeyer and RGL under California Penal Code

14

sections 550(b)(1) and 550(c)(4).

15

15.

16

Travelers Prop. Cas. Co. of Am. v. Centex Homes, C 12-0371 PJH,

17

2013 WL 141201, at *1 (N.D. Cal. Jan. 11, 2013).

18

better now.

19

unlawful to knowingly present false or misleading information in

20

support of a claim for payment pursuant to an insurance policy.

21

Under section 550(c)(4), "[r]estitution shall be ordered for a

22

person convicted of violating this section."

23

criminal action, there is no possibility that RGL will be

24

"convicted" of presenting false or misleading information.

25

Accordingly, section 550(b)(1) and 550(c)(4) are inapposite here.

26

For these reasons, Travelers' claim for reimbursement is

27

Opp'n to Centex/N&D MTD at 13-

This argument was previously rejected in a related case.

See

It fares no

Penal Code section 550(b)(1) provides that it is

As this is not a

DISMISSED WITH PREJUDICE as to RGL and Newmeyer.

28

14

vi.

1
2

Accounting

Travelers asserts a claim for accounting, alleging that all of

3

the named defendants wrongfully collected more attorney's fees and

4

costs than they were legally entitled to collect, resulting in

5

their possession of monies rightfully belonging to Travelers.

6

Compl. ¶ 595.

7

Travelers has merely asserted that RGL acted as a third-party

8

administrator and has alleged no facts establishing that RGL kept

9

any of the fees and costs collected from Travelers.

RGL moves to dismiss this claim on the ground that

MTD at 17.

United States District Court

For the Northern District of California

10

Travelers responds that no federal or California authority requires

11

a showing that the defendant personally has monies belonging to the

12

plaintiff.

13

However, California law does require "a showing that a

14

relationship exists between the plaintiff and defendant that

15

requires an accounting, and that some balance is due the plaintiff

16

that can only be ascertained by an accounting."

17

McLoughlin, 173 Cal. App. 4th 156, 179 (Cal. Ct. App. 2009).

18

authority cited by Travelers suggests that the requisite

19

relationship may exist where the defendant takes over assets which

20

may belong to the plaintiff, id., "where . . . the accounts are so

21

complicated that an ordinary legal action demanding a fixed sum is

22

impracticable," Civic W. Corp. v. Zila Indus., Inc., 66 Cal. App.

23

3d 1, 14 (Cal. Ct. App. 1977) (internal quotations omitted), or

24

where the amount of money owed to Plaintiff is unknown and cannot

25

be determined without an accounting, Cordon v. Wachovia Mortgage,

26

776 F. Supp. 2d 1029, 1040 (N.D. Cal. 2011).

27
28

Teselle v.
The

The facts pled in the Complaint suggest that the second and
third conditions could plausibly apply here.

15

Travelers alleges

1

that all of the defendants took steps to overbill Travelers for

2

Centex's defense costs.

3

administrator might be necessary to determine Travelers' damages.

4

Accordingly, RGL's motion to dismiss Travelers' claim for an

5

accounting is DENIED.

An accounting of Centex's third-party

vii. The Redig Action

6

Newmeyer and Centex also move to dismiss Travelers' claims to

7
8

the extent that they are predicated on the Redig action because

9

Travelers is also pursuing claims arising out of this construction

United States District Court

For the Northern District of California

10

defect lawsuit in Sacramento County Superior Court.

11

Newmeyer and Centex point to Travelers' Amended Cross-Complaint in

12

Centex Homes v. Ad Land Venture, et al., Case No. 34-2011-01112151.

13

ECF No. 14 ("Centex/N&D RJN") Ex. A ("Ad Land Am. Cross Compl.").

14

In that Cross-Complaint, Travelers contends that its obligation for

15

Newmeyer's defense fees is limited to the rate of $225 per hour

16

"and not the inflated higher rate which Centex was never obligated

17

to pay."

18

However, as set forth in Section III.A.ii supra, the Court has

19

dismissed Travelers' fraud claim to the extent that it is

20

predicated on allegations that Travelers was overbilled for

21

attorney fees in the Redig action.

22

a risk of duplication or inconsistent judgments as to the Redig

23

action.4

Id. ¶ 100.

Specifically,

Travelers has made similar allegations here.

Accordingly, there is no longer

24
25
26
27
28

4

In any event, "[a]bstention from the exercise of federal
jurisdiction is the exception, not the rule." Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 813 (1976).
Courts may decline to exercise federal jurisdiction in
consideration of a parallel state action only in exceptional
circumstances. Id. This case does not present such exceptional
circumstances.

16

1

B.

Motion to Strike

2

Federal Rule of Civil Procedure 12(f) provides that a court

3

may, on its own or on a motion, "strike from a pleading an

4

insufficient defense or any redundant, immaterial, impertinent, or

5

scandalous matter."

6

because they are often used as delaying tactics and because of the

7

limited importance of pleadings in federal practice."

Rosales v.

8

Citibank, 133 F. Supp. 2d 1177, 1180 (N.D. Cal. 2001).

In most

9

cases, a motion to strike should not be granted unless "the matter

Motions to strike "are generally disfavored

United States District Court

For the Northern District of California

10

to be stricken clearly could have no possible bearing on the

11

subject of the litigation."

12

352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004).

13

Platte Anchor Bolt, Inc. v. IHI, Inc.,

Newmeyer and Centex move to strike paragraphs 29 through 35 of

14

the Travelers' Complaint, as well as Complaint Exhibits D and E.

15

In these paragraphs, Travelers alleges that Centex and Newmeyer, by

16

and through RGL, concealed that certain insurance carriers were

17

participating in Centex's defense and thus misrepresented to

18

Travelers the percentage of Newmeyer's fees being paid by each

19

carrier.

20

testified at his deposition that Centex billed insurance carriers

21

for more than 100 percent of the total defense fees incurred in the

22

Kent action.

23

Vanderburg testified that Newmeyer billed insurance carriers for

24

more than 100 percent of Centex's defense costs.

25

to the Complaint contain short excerpts from the depositions of Ms.

26

Vanderburg and Mr. Barrera.

27

provide so little context that it is unclear about what the

28

deponents are actually testifying.

In paragraph 33, Travelers alleges that Mr. Barrera

In paragraph 35, Travelers alleges that Ms.

Exhibits D and E

These excerpts are so short and

17

1

Centex and Newmeyer move to strike paragraphs 29 through 35

2

and Exhibits D and E on the ground that they relate to the Kent

3

action.

4

does not assert any causes of action related to the Kent action in

5

this case.

6

that Travelers does assert claims related to the Kent action, those

7

claims are duplicative of claims asserted in a related case

8

currently pending before the undersigned.

9

that many of the allegations targeted by the motion to strike are

MTS at 5.

Id.

As Centex and Newmeyer point out, Travelers

Further, the Defendants argue that to the extent

Id.

United States District Court

For the Northern District of California

10

unrelated to the Kent action.

11

argues that the allegations which do relate to the Kent action show

12

that Centex and Newmeyer "have a pattern and practice" of

13

misrepresenting the number of insurance carriers participating in

14

Centex's defense.

15

MTS Opp'n at 1.

Travelers responds

Travelers also

Id.

The Court finds that the Complaint's references to the Kent

16

action are redundant and immaterial.

Travelers asserts six causes

17

of action based on the defendants' conduct in fourteen underlying

18

construction defect suits.

19

action.

20

in connection with the Kent action is irrelevant here.

21

Travelers wishes to establish a pattern or practice of

22

misrepresentation, then it can point to the defendants' conduct in

23

the fourteen construction defect actions at issue in this case.

24

Accordingly, the Court strikes paragraph 33 of the Complaint, the

25

only paragraph that expressly references the Kent action.

26

Paragraphs 29 through 32, 34 through 35, and Exhibits D and E

27

remain undisturbed, as Centex and Newmeyer have failed to enunciate

28

a coherent reason why they should be struck.

Not one of these suits is the Kent

That Centex and Newmeyer may have made misrepresentations

18

If

1

IV.

CONCLUSION
For the foregoing reasons, Defendants Centex Homes and

2
3

Newmeyer & Dillion's motion to dismiss is GRANTED in part and

4

DENIED in part, as is Defendants RGL Inc. and RGL Forensics' motion

5

to dismiss.

6

•

Plaintiff Travelers Property Casualty Company of America's

7

claim for fraud is DISMISSED WITH PREJUDICE to the extent that

8

it is based on allegations that Travelers was overbilled for

9

attorney time after May 11, 2011.

Traveler's fraud claim is

United States District Court

For the Northern District of California

10

dismissed with leave to amend to the extent that it is

11

predicated on allegations that Travelers was overbilled for

12

non-attorney time after May 11, 2011.

13

•

Travelers' UCL claim is DISMISSED with leave to amend.

14

•

Travelers' claim for breach of fiduciary duty is DISMISSED
WITH PREJUDICE as to RGL.

15
16
17

•

Travelers' claim for reimbursement is DISMISSED WITH PREJUDICE
as to RGL and Newmeyer.

18

Centex and Newmeyer's motion to strike is also GRANTED in part and

19

DENIED in part.

20

Travelers' Complaint.

The Court hereby strikes paragraph 33 of

21
22

IT IS SO ORDERED.

23
24
25

Dated: May 30, 2013
UNITED STATES DISTRICT JUDGE

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27
28

19