Great America Insurance Company et al v. Chang et al

Filing 28

Order by Hon. Samuel Conti denying 19 Motion to Dismiss.(sclc1, COURT STAFF) (Filed on 8/24/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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GREAT AMERICAN INSURANCE
COMPANY, and GREAT AMERICAN
INSURANCE COMPANY OF NEW YORK,

United States District Court

For the Northern District of California

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Plaintiffs,

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v.
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MICHAEL CHANG, d/b/a SUNRISE
CLEANERS, INC., and ROXANNE
CHANG,

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Defendants.
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) Case No. 12-00833-SC
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) ORDER DENYING MOTION TO
) DISMISS
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I.

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INTRODUCTION
Now before the Court is Defendants Michael Chang and Roxanne

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Chang's (collectively, the "Changs") Motion to Dismiss Great

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American Insurance Company and Great American Insurance Company of

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New York's (collectively, "Great American") First Amended Complaint

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("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6).1

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No. 19 ("MTD").

ECF

Great American filed an opposition to the Motion,

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The Changs also ostensibly move under Federal Rule of Civil
Procedure 12(b)(1). MTD at 1-2. Though Rule 12(b)(1) pertains to
subject-matter jurisdiction, the Changs do not mention the issue
once in their moving papers. The Court finds that the exercise of
subject-matter jurisdiction is appropriate here. There is complete
diversity among the parties and the pleadings allege an amount in
controversy well in excess of $75,000. See 28 U.S.C. § 1332.

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but the Changs declined to file a reply.

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Pursuant to Civil Local Rule 7-1(b), the Court finds this matter

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appropriate for determination without oral argument.

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reasons set forth herein, the Changs' Motion is DENIED.

ECF No. 25 ("Opp'n").

For the

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II.

BACKGROUND
This case involves an insurance coverage dispute arising from

Kartal v. Michael Chang, et al., Case No. CIV 458146, San Mateo

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United States District Court

an underlying lawsuit filed against the Changs entitled Bilal

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For the Northern District of California

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Superior Court, and related cross-actions (the "Kartal Action").

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ECF No. 16 ("FAC") ¶ 11.

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contamination of a property owned by Michael Chang that is located

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on Baldwin Avenue in San Mateo, California.

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instant action also involves a related insurance dispute arising

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from claims that Michael Chang asserted in a different litigation,

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seeking to recover pollution and investigation costs from the

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California Underground Storage Tank Fund.

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The Kartal action concerns the alleged

Id. ¶¶ 4, 6.

The

Id. ¶ 11.

The Changs tendered claims to Great American for insurance

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benefits under two policies issued by Great American between 1977

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and 1983 (the "Great American Policies").

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Great American is defending the Changs in the Kartal action under a

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reservation of rights and has advanced other claimed amounts, also

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under a reservation of rights, Great American alleges that it has

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no duty to defend or indemnify the Changs.

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Specifically, Great American alleges that the Changs'

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representatives sought to manufacture a defense obligation under

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the Great American Policies with respect to the Kartal Action by

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arranging for others to sue Michael Chang.

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Id. ¶ 20.

Although

Id. ¶¶ 12-19.

See, e.g., id. ¶ 55-81.

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Great American filed the instant action against the Changs in

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February 2012.

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declaratory relief as well as a claim for breach of the Great

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American Policies' "Cooperation Clause" and "No Voluntary Payment

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Clause."

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it has no duty to defend or indemnify the Changs with respect to

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the Kartal Action or other pollution claims involving the Baldwin

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Avenue property.

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American also seeks reimbursement of amounts paid in connection

United States District Court

For the Northern District of California

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ECF No. 1.

FAC ¶¶ 115-62.

The FAC asserts a number of claims for

Great American seeks a declaration that

Id. at 43-44 ("Prayer for Relief").

with the Changs' claims.

Great

Id.

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III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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

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complaint must be both "sufficiently detailed to give fair notice

Navarro v.

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. at 663. (citing Bell Atl. Corp.

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The allegations made in a

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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).

Starr v. Baca, 633 F.3d

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IV.

DISCUSSION

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The Changs' Motion is not an exemplar of legal argument.

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Though the Changs move under Rule 12(b)(6), much of their motion is

United States District Court

For the Northern District of California

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devoted to affirmative defenses and factual matters which are

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inappropriate for resolution on a motion to dismiss for failure to

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state a claim.

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the Court's attention from the FAC's allegations to purported

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"facts" outside the pleadings, they do not support those "facts"

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with any evidence.2

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detail below.

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Not only do the Changs improperly attempt to turn

The Court addresses these deficiencies in more

The Changs' attorney, Gregg S. Garrison ("Garrison"), did file a
declaration in support of the Motion. ECF No. 19-2 ("Garrison
Decl."). However, the Garrison Declaration asserts absolutely no
facts. Nor are there any documents attached to the declaration.
The full body of the Garrison Declaration is reproduced below:
I, Gregg S. Garrison, hereby declare under penalty of
perjury that:

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1. I am an attorney duly licensed to practice law in the
State of California and this Federal Judicial District
and I attorney for the moving parties herein.

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2. The statements herein are true and correct to my own
knowledge or I believe them to be true.

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I declare under penalty of perjury under the laws of the
State of California that the foregoing is true and
correct.

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It is unclear whether something was accidentally left out of the
declaration or if Garrison merely intended to establish that he is
a duly licensed attorney.

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The Changs argue that this action should not be allowed to

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proceed because it was filed with "malice" and for an "improper

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purpose."

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dealing with affirmative claims for malicious prosecution.

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8-9 (citing Zamos v. Stroud, 32 Cal. 4th 958, 87 P.3d 802 (Cal.

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2004)).

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"malicious prosecution" qualifies as an affirmative defense --

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rather than a cause of action -- under California law.

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does qualify, a Rule 12(b)(6) motion is an inappropriate vehicle

MTD at 8.

In support, the Changs cite to case law
Id. at

However, the Changs offer no authority suggesting that

Even if it

United States District Court

For the Northern District of California

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for asserting, let alone proving, an affirmative defense.

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the Changs have offered absolutely no evidence of malice or any of

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the other elements of a malicious prosecution claim.

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Court declines to grant a Rule 12(b)(6) motion based on a

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counterclaim, masquerading as an affirmative defense, that has yet

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to be pled or proved.3

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Further,

In sum, the

Next, the Changs seek a summary determination that the facts

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presented in the Kartal Action created a duty to defend and

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indemnify under the Great American Policies.

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example, the Changs ask the Court to find that the negligent act

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giving rise to the Kartel Action took place sometime between 1981

Id. at 9-12.

For

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To the extent that Garrison intends to declare that all of the
facts asserted in the Motion are true, the Court may not properly
consider his declaration on a Rule 12(b)(6) motion. Further, the
declaration lacks foundation and is too vague to be admissible.
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The Changs raise what seems to be another affirmative defense or
crossclaim later in their motion, arguing that "Great American
worked in improper consort, either explicitly or implicitly for
none of the carriers representing parties to file Cross Complaints
[sic]." MTD at 15. The Changs appear to argue that Great American
engaged in an improper scheme to prevent others from suing Michael
Chang. Once again, they offer no evidence in support of this
conclusory assertion. Even if they did, the Court would not be
inclined to consider it on a Rule 12(b)(6) motion to dismiss.

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and 1983, during the Great American policy period.

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Such factual findings are inappropriate on a motion to dismiss.

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Even if this were a motion for summary judgment, the Changs have

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offered no evidence in support of their contention.

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Changs do not address relevant policy language and case law cited

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in the FAC which tend to suggest that the time of an "occurrence"

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triggering coverage is not the time when the act causing damage was

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committed, but rather the time when the complaining party suffered

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resulting injury.

Id. at 11.

Moreover, the

See FAC ¶ 34 ("This policy applies to

United States District Court

For the Northern District of California

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occurrences taking place anywhere during the policy period");

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Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal. 4th 645, 670, 913

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P.2d 878 (1995) ("[T]he triggering of liability coverage under a

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CGL policy is established at the time the complaining third party

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was actually damaged.").

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The Changs also move to dismiss Great American's claim for

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breach of the Cooperation Clause on the ground that they "fully

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cooperated with [Great American]."

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Changs appear to misconstrue the purpose of a Rule 12(b)(6) motion

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to dismiss.

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a factual determination about whether or not the Changs cooperated

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with Great American.

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alleged in the FAC give rise to a cognizable and plausible claim

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for a breach of contract.

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Changs correctly state that the Court is not bound to accept as

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true allegations that amount to nothing more than legal

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conclusions.

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what aspects of the FAC are lacking.

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argument, the FAC is far from conclusory.

MTD at 14.

Once again, the

At this stage of the litigation, the Court cannot make

Id.

It can only determine whether the facts

The Court concludes that they do.

The

However, they never follow through and explain

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Contrary to the Changs'
It contains detailed

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factual allegations concerning the Changs' alleged scheme to

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manufacture a defense obligation under the Great American Policy.

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See, e.g., FAC ¶¶ 50-82.

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allege the specific contents of various emails between the Changs,

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their counsel, and various other attorneys describing plans to

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manufacture a defense obligation.

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In fact, Great American goes so far as to

Finally, the Changs argue that the FAC does not state a

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plausible claim because they "cannot determine which of the two

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Plaintiffs is suing which of the two Defendants or various possible

United States District Court

For the Northern District of California

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combinations thereof, regarding the multiple contracts or

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Stipulations to Policy Language alleged in Plaintiffs' herein First

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Amended Complaint [sic]."

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merit if the FAC were vague about which plaintiff is suing which

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defendant under which insurance contract.

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clearly states that both Great American Insurance Company and Great

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American Insurance Company of New York seek declaratory relief and

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other remedies with respect to both Michael Chang and Roxanne Chang

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under both insurance policies at issue.

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20, 90, 96.4

MTD at 8.

This argument might have some

But it is not.

The FAC

See, e.g., FAC ¶¶ 13, 15,

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V.

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CONCLUSION
In sum, the Changs have failed to articulate a coherent reason

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for dismissing Great American's FAC.

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Motion to Dismiss is DENIED and the FAC remains undisturbed.

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case management conference set for September 21, 2012 at 10:00 a.m.

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Accordingly, the Changs'
The

In light of the borderline frivolous arguments advanced in their
brief, the Court feels compelled to remind the Changs' counsel of
their Rule 11 obligations. Nonetheless, nothing in this Order
should be construed as an invitation for Great American to file a
motion for Rule 11 sanctions.

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in Courtroom 1, 450 Golden Gate Avenue, San Francisco, California,

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shall proceed as scheduled.

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management statement at least seven (7) days prior.

The parties are to file one joint case

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IT IS SO ORDERED.

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Dated:

August 24, 2012
UNITED STATES DISTRICT JUDGE

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United States District Court

For the Northern District of California

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