Peerless Insurance Company v. Cleer Gear LLC et al

Filing 32


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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 For the Northern District of California United States District Court 10 11 PEERLESS INSURANCE COMPANY, Plaintiff, 12 13 14 No. C 14-0135 MMC ORDER GRANTING PLAINTIFF AND COUNTERDEFENDANT’S MOTION TO DISMISS COUNTERCLAIMANTS’ THIRD, FOURTH, AND FIFTH COUNTERCLAIMS FOR RELIEF; AFFORDING COUNTERCLAIMANTS LEAVE TO FILE AMENDED COUNTERCLAIMS v. CLEAR GEAR, LLC; PETER TSOU dba CLEAR GEAR 15 Defendants. 16 17 / AND RELATED COUNTERCLAIMS. / 18 19 20 21 22 23 24 25 Before the Court is plaintiff/counterdefendant Peerless Insurance Company’s (“Peerless”) motion, filed June 13, 2014, to dismiss defendants/counterclaimants Clear Gear, LLC and Peter Tsou’s (collectively, “Clear Gear”) Third, Fourth, and Fifth Counterclaims for Relief pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. Clear Gear has filed opposition, to which Peerless has replied. Having read and considered the papers filed in support of and in opposition to the motion, the Court rules as follows.1 26 27 28 1 By order filed July 11, 2014, the Court took the matter under submission and vacated the hearing noticed for July 18, 2014. 1 A. Third Counterclaim for Relief 2 In this insurance coverage action, the Third Counterclaim for Relief asserts a claim 3 of fraud in the form of both affirmative misrepresentations and concealment, and is 4 premised on Peerless’s denial of insurance coverage. The Third Counterclaim is subject to 5 dismissal for two reasons. 6 First, to the extent the Third Counterclaim is based on false statements found in the 7 contract itself, such statements only give rise to a fraud claim where the insured can show 8 “the insurer did not intend to fulfill its representations as to coverage at the time the contract 9 was entered into.” See Miller v. National American Life Ins. Co., 54 Cal. App. 3d 331, 338 10 & n.4 (1976) (emphasis in original). Here, Clear Gear’s conclusory allegations of 11 Peerless’s intent not to perform (see Counterclaim ¶¶ 42(B), 43(A)) are insufficient to 12 support an inference of such intent. See, e.g., Sunnyside Development Co., LLC v. Opsys 13 Ltd., 2005 WL 1876106, at *6 (N.D. Cal. Aug. 8, 2005) (dismissing fraud claim arising from 14 breach of contract where plaintiff alleged failure to perform but complaint contained no facts 15 to support inference of intent not to perform at time contract entered); Tenzer v. 16 Superscope, Inc., 39 Cal. 3d 18, 30 (1985) (noting “something more than nonperformance 17 is required to prove the defendant’s intent not to perform his promise”; listing, among 18 circumstances tending to show scienter, insolvency, hasty repudiation of promise, and 19 continued assurances after performance clearly not forthcoming). 20 Second, to the extent the Third Counterclaim might be based on statements aside 21 from those contained in the contract itself, the allegations contained therein lack the 22 specificity required of fraud claims. (See, e.g. Counterclaim ¶ 42 (alleging affirmative 23 misrepresentations occurred “[b]oth before the events that are the subject of the [underlying 24 lawsuit], as well as afterward,” that “[t]he misrepresentations were made by various 25 individuals that were empowered to speak on behalf of [plaintiff],” and that “[t]he 26 misrepresentations were made both orally and in writing”)); Fed. R. Civ. Pro. 9(b); Cafasso, 27 U.S. ex rel. v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) 28 (holding, under Rule 9(b), “pleading must identify the who, what, when, where, and how of 2 1 the misconduct charged, as well as what is false or misleading about the purportedly 2 fraudulent statement, and why it is false) (internal quotations, citation, and alteration 3 omitted). 4 Accordingly, defendants’ Third Counterclaim for Relief is subject to dismissal. 5 B. 6 The Fourth Counterclaim for Relief alleges a claim of negligent misrepresentation 7 that is based exclusively on and incorporates by reference the same misrepresentations 8 alleged in the Third Counterclaim for Relief (see Counterclaim ¶¶ 42, 55), which 9 misrepresentations are alleged in the Fourth Counterclaim to have been “made without Fourth Counterclaim for Relief 10 reasonable grounds for believing them to be true” (see id. ¶ 56). Where a complaint 11 “allege[s] a unified course of fraudulent conduct and rel[ies] entirely on that course of 12 conduct as the basis of [a] claim,” such claim “is said to be ‘grounded in fraud’” and thus 13 “must satisfy the particularity requirement of Rule 9(b).” See Kearns v. Ford Motor Co., 567 14 F.3d 1120, 1126 (9th Cir 2009) (internal quotation and citation omitted). In this instance, 15 Clear Gear’s Fourth Counterclaim is a claim “grounded in fraud,” see Kearns, 567 F.3d at 16 1127; Cal. Civ. Code §§ 1709, 1710 (defining “fraudulent deceit” as including “[t]he 17 assertion, as a fact, of that which is not true, by one who has no reasonable ground for 18 believing it to be true”), and, as such, suffers from the same deficiencies as Clear Gear’s 19 Third Counterclaim. 20 Accordingly, defendants’ Fourth Counterclaim for Relief is subject to dismissal. 21 C. 22 The Fifth Counterclaim for Relief seeks to hold Peerless vicariously liable for the 23 alleged negligence of Irene Herman and Irene Herman Insurance Services (collectively, 24 “Herman”), the “insurance agents, brokers, [and] producers” (see Counterclaim ¶ 7) from 25 whom Clear Gear alleges it “purchased the insurance policies at issue here” (see id. ¶ 13). 26 Even assuming Clear Gear has sufficiently alleged a claim of negligence as to Herman, 27 however, Clear Gear fails to plead such claim against Peerless, as Clear Gear fails to 28 allege any facts to support a finding that an agency relationship existed between Herman Fifth Counterclaim for Relief 3 1 and Peerless. See, e.g., Mercury Ins. Co. V. Pearson, 169 Cal. App. 4th 1064, 1072 2 (2008) (affirming dismissal of vicarious liability claim against insurer; holding “mere 3 allegation” of agency insufficient); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (holding 4 “legal conclusions” not supported by “factual allegations” fail to state claim upon which relief 5 can be granted). 6 Accordingly, defendants’ Fifth Counterclaim for Relief is subject to dismissal. CONCLUSION 7 8 For the reasons stated above: 9 Peerless’s motion to dismiss is hereby GRANTED, and the Third, Fourth, and Fifth 10 Counterclaims for Relief are hereby DISMISSED with leave to amend to cure the 11 deficiencies described above. 12 In the event Clear Gear wishes to file an Amended Counterclaim, it shall do so no 13 later than August 6, 2014. In any such Amended Counterclaim, Clear Gear may amend 14 only the Third through Fifth Counterclaims for Relief. Clear Gear may not add any new 15 federal or state law claims, or add any new counterdefendant, without first obtaining leave 16 of court. See Fed. R. Civ. P. 15(a)(2). 17 IT IS SO ORDERED. 18 19 Dated: July 23, 2014 MAXINE M. CHESNEY United States District Judge 20 21 22 23 24 25 26 27 28 4

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