Great America Insurance Company et al v. Chang et al

Filing 49

Order by Hon. Samuel Conti granting 45 Motion to Dismiss. (sclc1, COURT STAFF) (Filed on 1/17/2013)

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1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 United States District Court For the Northern District of California 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 GREAT AMERICAN INSURANCE COMPANY, and GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, ) Case No. 12-00833-SC ) ) ORDER GRANTING THIRD-PARTY ) DEFENDANT'S MOTION TO DISMISS Plaintiffs, ) ) v. ) ) MICHAEL CHANG, d/b/a SUNRISE ) CLEANERS, INC., and ROXANNE ) CHANG, d/b/a, SUNRISE CLEANERS, ) INC., ) ) Defendants. ) ) ) MICHAEL CHANG, d/b/a SUNRISE ) CLEANERS, INC., and ROXANNE ) CHANG, d/b/a, SUNRISE CLEANERS, ) INC., ) ) Third-Party ) Plaintiffs, ) ) v. ) ) FIREMAN'S FUND INSURANCE ) COMPANY, ) ) Third-Party ) Defendant. ) ) 1 I. 2 INTRODUCTION Now before the Court is Fireman's Fund Insurance Company's 3 ("FFIC") Motion to Dismiss Michael and Roxanne Chang's 4 (collectively, "the Changs") Third-Party Complaint. 5 ("Mot."). 6 ("Reply"), and appropriate for determination without oral argument. 7 For the reasons set forth below, the Court GRANTS the motion on the 8 ground that the Changs have failed to establish subject-matter 9 jurisdiction. ECF No. 48 The Motion is fully briefed, ECF Nos. 47 ("Opp'n"), 48 United States District Court For the Northern District of California 10 11 12 II. BACKGROUND This case involves an insurance coverage dispute arising from 13 an underlying lawsuit filed against the Changs, Bilal Kartal v. 14 Michael Chang, et al., Case No. CIV 458146, San Mateo Superior 15 Court (hereinafter, the "Kartal Action"). 16 The Kartal action concerns the alleged contamination of a property 17 owned by Michael Chang that is located on Baldwin Avenue in San 18 Mateo, California. 19 a related insurance dispute arising from claims that Michael Chang 20 asserted in a different litigation in which he sought to recover 21 pollution and investigation costs from the California Underground 22 Storage Tank Fund (the "Storage Tank Fund Action"). 23 Id. ¶¶ 4, 6. ECF No. 16 ("FAC") ¶ 11. The instant action also involves Id. ¶ 11. The Changs tendered claims to Great American Insurance Company 24 and Great American Insurance Company of New York (collectively, 25 "Great American") for insurance benefits under two policies issued 26 by Great American between 1977 and 1983. 27 American is defending the Changs in the Kartal action under a 28 reservation of rights and has advanced other claimed amounts, also 2 Id. ¶ 20. Although Great 1 under a reservation of rights, Great American alleges that it has 2 no duty to defend or indemnify the Changs in the underlying 3 actions. 4 the Changs in February 2012 (hereinafter, "the Great American 5 Action"). 6 has no duty to defend or indemnify the Changs with respect to the 7 Kartal Action or other pollution claims involving the Baldwin 8 Avenue property. 9 American also seeks reimbursement of amounts paid in connection United States District Court For the Northern District of California 10 11 Id. ¶¶ 12-19. ECF No. 1. Great American filed this action against Great American seeks a declaration that it FAC at 43-44 ("Prayer for Relief"). with the Changs' insurance claims. Great Id. On September 21, 2012, the Changs filed a third-party 12 complaint against FFIC for breach of contract, breach of the 13 covenant of good faith and fair dealing, and declaratory relief. 14 ECF No. 33 (Third-Party Complaint ("TPC")). 15 rambling and opaque, but the Changs appear to allege that FFIC 16 issued insurance policies to Christopher Chang in connection with 17 the Baldwin Avenue property between 1984 and 1989. 18 41, 86. 19 under the policies and, thus, are entitled to FFIC coverage for the 20 Kartal Action and the Storage Tank Fund Action. 21 to the Changs, FFIC breached these insurance agreements in bad 22 faith, withheld unidentified information, and somehow colluded with 23 Great American to obstruct the Changs' access to the benefits of 24 the FFIC and Great American policies. The TPC is sometimes See TPC ¶¶ 40- The Changs further allege that they are beneficiaries See id. According See id. ¶¶ 63, 88, 106. 25 Among other things, the Changs seek damages resulting from 26 FFIC's refusal to pay their claims and defend the Kartal Action and 27 the Storage Tank Fund Action, as well as a judicial determination 28 3 1 that FFIC has a duty to defend and indemnify the Changs in those 2 actions. 3 4 5 III. DISCUSSION FFIC now moves to dismiss the TPC on the following grounds: 6 (1) the TPC is not a proper impleader under Federal Rule of Civil 7 Procedure 14; (2) the Court lacks subject-matter jurisdiction; and 8 (3) the TPC fails to state a claim because it is "prolix, verbose, 9 incomprehensible, and full of irrelevant material." United States District Court For the Northern District of California 10 Mot. at 1. The Court addresses each of these issues below. 11 A. 12 "A trial court must act within its sound discretion when 13 determining whether a third-party defendant may be impleaded under 14 [Federal] Rule [of Civil Procedure] 14." 15 & Gas Co., 845 F.2d 196, 199 (9th Cir. 1988). 16 defendant to file a third-party complaint against "a nonparty who 17 is or may be liable to it for all or part of the claim against it." 18 Fed. R. Civ. P. 14(a)(1). 19 asserted under Rule 14 when that claim is dependent on the outcome 20 of the main claim. 21 characteristic of a Rule 14 claim is that [the] defendant is 22 attempting to transfer to the third-party defendant the liability 23 asserted against him by the original plaintiff. 24 the alleged third-party claim arises from the same transaction or 25 set of facts as the original claim is not enough." 26 Charles Alan Wright & Arthur R. Miller, Federal Practice and 27 Procedure § 1446 (1971 ed.)). Rule 14 Impleading Stewart v. Am. Int'l Oil Rule 14 allows a Thus, a third-party claim may only be Stewart, 845 F.2d at 200. 28 4 "The crucial The mere fact that Id. (quoting 6 1 Here, FFIC argues that the TPC is improper under Rule 14 2 because FFIC's alleged liability to the Changs is not derivative of 3 or dependent on the Changs' liability to Great American. 4 7. 5 American and FFIC have a duty to defend and indemnify them in the 6 Kartal Action and the Storage Tank Fund Action. 7 Changs are unsuccessful in the Great American Action but prevail on 8 the claims asserted in the TPC, FFIC may be liable for all of the 9 potential defense, investigation, and clean-up costs in the The Court disagrees. MOT. at The Changs allege that both Great Thus, if the United States District Court For the Northern District of California 10 underlying actions. 11 unsuccessful on its claims and continues to defend and indemnify 12 the Changs in the underlying actions, then FFIC's liability will be 13 more limited. 14 recovery from Great American and FFIC and the costs associated with 15 the underlying actions are finite, FFIC's total potential liability 16 is contingent on Great American's. 17 On the other hand, if Great American is Since the Changs presumably cannot get double This finding is further supported by the California Supreme 18 Court's recent decision in State v. Continental Insurance Company, 19 55 Cal. 4th 186, 201 (Cal. 2012). 20 Continental dealt with "long tail" claims for the clean-up of a 21 contaminated property. 22 such cases an insured has a right to "stack" its policy limits, 23 meaning that "when more than one policy is triggered by an 24 occurrence, each policy can be called upon to respond to the claim 25 up to the full limits of the policy." 26 omitted). 27 exhausted, [the insured] is entitled to seek indemnification from 28 any of the remaining insurers [that were] on the risk . . . ." Like the instant action, 55 Cal. 4th at 195. The court held that in Id. at 200 (quotations "When the policy limits of a given insurer are 5 Id. 1 (quotations omitted). 2 stack their FFIC and Great American policies, FFIC's indemnity 3 obligations may be contingent on a determination of Great 4 American's in the Great American Action. Thus, because the Changs may be entitled to 5 B. 6 FFIC argues that even if the TPC is a proper impleader, it Subject-Matter Jurisdiction 7 should be dismissed for lack of subject-matter jurisdiction. 8 third-party plaintiffs, the Changs bear the burden of establishing 9 the propriety of the Court's exercise of jurisdiction. As See United States District Court For the Northern District of California 10 Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 11 (1994). 12 matter jurisdiction is proper under: (1) 28 U.S.C. § 1331, which 13 provides for federal question jurisdiction; (2) 28 U.S.C. § 1332; 14 which provides for diversity jurisdiction; (3) the Federal 15 Declaratory Judgment Act ("DJA"), 28 U.S.C. § 2201, and (4) 28 16 U.S.C. § 1367, which provides for supplemental jurisdiction. 17 ¶¶ 1, 3. In the TPC, they allege that the exercise of subject- TPC 18 The first three grounds are clearly not applicable here. 19 exercise of federal question jurisdiction is inappropriate because 20 the TPC raises only issues of state contract law. 21 108. 22 since the Changs and FFIC are all citizens of California.1 23 Further, the DJA does not provide an independent basis for the 24 exercise of federal jurisdiction. 25 case of actual controversy within its jurisdiction, . . . any court The See id. ¶¶ 75- As to 28 U.S.C. § 1332, there is no diversity of citizenship See 28 U.S.C. § 2201(a) ("In a 26 27 28 1 The citizenship of the parties is unclear from the TPC. FFIC asserts that there is no diversity in its Motion, Mot. at 2, and the Changs have not contested the point. 6 1 of the United States . . . may declare the rights and other legal 2 relations of any interested party . . . .") (emphasis added). 3 The Changs' assertion of supplemental jurisdiction presents a 4 closer question. 5 of which the district courts have original jurisdiction, the 6 district courts shall have supplemental jurisdiction over all other 7 claims that are so related to claims in the action within such 8 original jurisdiction that they form part of the same case or 9 controversy . . . ." Under 28 U.S.C. § 1367(a), "in any civil action When assessing supplemental jurisdiction, the United States District Court For the Northern District of California 10 issue of whether a party has been properly impleaded under Rule 11 14(a) is not dispositive. 12 F.3d 1370, 1374 (9th Cir. 1995).2 13 not be invoked "merely to enable state and federal suits to be 14 consolidated in federal court whenever ordinary notions of judicial 15 economy would make that a desirable result, but instead should be 16 reserved for cases where failure to exercise federal jurisdiction 17 would prevent a party from obtaining justice." 18 at 381-82. 19 jurisdiction over Rule 14(a) claims between non-diverse parties 20 when those claims arise out of the "same transaction or occurrence" 21 as the claim over which the court has unquestioned federal 22 jurisdiction. 23 Id. See Galt G/S V. Hapag Lloyd A.G., 60 Supplemental jurisdiction should Hartford, 846 F.2d Thus, a district court may only assert supplemental Id. at 382. Factual overlap alone is insufficient. 24 25 2 26 27 28 See also Hartford Accident and Indem. Co. v. Sullivan, 846 F.2d 377, 382 (7th Cir. 1988) ("Dicta in a few cases can be read to suggest that any 14(a) claim is within the ancillary jurisdiction of the federal courts, [citations omitted], but it is doubtful that the suggestion was intended, and if it was we respectfully disagree with it.") (emphasis in the original). 7 1 Here, there is some factual overlap between the Great American 2 Action and the claims asserted in the TPC, since both actions arise 3 out of the alleged contamination at the Baldwin Avenue property. 4 However, the claims in the Great American Action and the TPC are 5 not so related that they form the same case or controversy. 6 resolution of the Great American Action will turn on the language 7 of the insurance policies Great American issued to the Changs. 8 contrast, the resolution of the TPC will turn on the language of 9 the FFIC policies issued to Christopher Chang. The In Thus, the two United States District Court For the Northern District of California 10 actions arise out of distinct transactions -- the Great American 11 policies and the FFIC policies -- and a judgment in one action will 12 not affect the outcome of the other. 13 The Changs argue that the two actions arise from the same 14 transaction or occurrence because Great American and FFIC colluded: 15 16 17 18 19 The collusion and intertwined nature between the actions of [Great American] and FFIC is central to the claims we present. FFIC and [Great American] have taken a series of actions and inactions, including the suppression [of] the filing of cross complaints and suppression of policy information, and other actions to artificially not trigger defense obligations. 20 21 Opp'n at 4. 22 colluded or why they were obligated to file cross-complaints 23 against each other. 24 conclusory and otherwise incoherent. 25 The Changs' opposition brief does nothing to clarify the matter 26 except to cryptically refer to "evidence" attached to the TPC. 27 Opp'n at 9. 28 collection of random documents. It is not entirely clear how Great American and FFIC The TPC's allegations on this matter are See TPC ¶¶ 39, 63-64, 106. See But that evidence is nothing more than a disorganized See ECF No. 33-1. 8 As the 1 documents are not referenced in the TPC or otherwise identified, it 2 is entirely unclear what they are to supposed to be or what they 3 are supposed to prove. 4 dozens and span over one hundred pages, the Changs do not identify 5 where one begins and the next ends. 6 Further, though the documents number in the In sum, the Changs have failed to meet their burden of 7 establishing subject-matter jurisdiction. Accordingly, FFIC's 8 motion to dismiss for lack of subject-matter jurisdiction is 9 GRANTED. The Court GRANTS the Changs leave to amend the TPC so as United States District Court For the Northern District of California 10 to assert proper grounds for subject-matter jurisdiction and 11 reminds counsel that conclusory allegations of jurisdiction will 12 not suffice. 13 C. 14 As the Changs have failed to establish subject-matter Rule 8 Pleading Requirements 15 jurisdiction, the Court need not address FFIC's Rule 12(b)(6) 16 motion to dismiss for failure to state a claim. 17 Changs have been granted leave to amend to establish jurisdiction, 18 some guidance on this issue could avoid the need for further 19 briefing. 20 However, since the Rule 8 requires a pleading to be "concise and direct" and to 21 set forth a "short and plain statement of the claim showing that 22 the pleader is entitled to relief." 23 Additionally, the allegations made in a complaint must be both 24 "sufficiently detailed to give fair notice to the opposing party of 25 the nature of the claim so that the party may effectively defend 26 against it" and "sufficiently plausible" such that "it is not 27 unfair to require the opposing party to be subjected to the expense 28 of discovery." Fed. R. Civ. P. 8(a)(2), (d). Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir. 2011). 9 1 "When there are well-pleaded factual allegations, a court should 2 assume their veracity and then determine whether they plausibly 3 give rise to an entitlement to relief." 4 U.S. 662, 664 (2009). 5 as true all of the allegations contained in a complaint is 6 inapplicable to legal conclusions. 7 elements of a cause of action, supported by mere conclusory 8 statements, do not suffice." 9 v. Twombly, 550 U.S. 544, 555 (2007)). United States District Court However, "the tenet that a court must accept Threadbare recitals of the Id. at 663. (citing Bell Atl. Corp. FFIC takes issue with the length and the clarity of the TPC. 10 For the Northern District of California Ashcroft v. Iqbal, 556 11 MOT. at 10-13. The Court is not concerned with the length. At 31 12 pages and 108 paragraphs, the TPC is far less burdensome than FFIC 13 makes it out to be. However, the Court is concerned with the 14 clarity of the TPC. There appears to be no order -- chronological 15 or otherwise -- to the general allegations. 16 errors and typos make many sentences difficult to understand. 17 of the factual allegations are conclusory. 18 specific, but the TPC fails to provide sufficient background or 19 context to make them comprehensible. 20 these factual allegations relate to the Changs' claims for relief. 21 Additionally, as discussed above, the relevancy of the 22 undifferentiated mass of exhibits attached to the TPC is not 23 readily apparent. 24 FFIC, as well as the Court. 25 correct them.3 Rampant grammatical Some A number of others are It is unclear how some of These deficiencies place an improper burden on The Changs' amended complaint should 26 3 27 28 If these deficiencies are not corrected, the Court suggests that FFIC consider a Rule 12(f) motion to strike, in addition to a Rule 12(b)(6) motion to dismiss for failure to state a claim. The motion to strike should identify particular paragraphs containing 10 1 IV. CONCLUSION 2 For the foregoing reasons, the Court GRANTS Fireman's Fund 3 Insurance Company's motion to dismiss the Third-Party Complaint for 4 lack of subject-matter jurisdiction. 5 Plaintiffs Michael Chang and Roxanne Chang leave to amend their 6 complaint within thirty (30) days of the signature date of this 7 Order. The Court also GRANTS Failure to do so will result in dismissal of this action. 8 9 IT IS SO ORDERED. United States District Court For the Northern District of California 10 11 12 Dated: January 17, 2013 UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 "redundant, immaterial, impertinent, or scandalous matter[s]." Fed. R. Civ. P. 12(f). 11 See

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