Ray Bourhis Associates v. Principal Life Insurance Company

Filing 17

ORDER DENYING 10 THE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT. Signed by Magistrate Judge Laurel Beeler on 11/16/2015.(lblc2, COURT STAFF) (Filed on 11/16/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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San Francisco Division
RAY BOURHIS ASSOCIATES,

United States District Court
Northern District of California

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Plaintiff,

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ORDER DENYING THE DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT

v.

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PRINCIPAL LIFE INSURANCE
COMPANY,

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Case No. 3:15-cv-04329-LB

[Re: ECF No. 10]

Defendant.

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INTRODUCTION

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This lawsuit was filed on August 24, 2015, served on August 25, 2015, and removed to federal

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court on September 22, 2015. (Notice of Removal, ECF No. 1.1) On September 29, 2015, in lieu

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of a motion to dismiss, the defendant Principal Life Insurance Company moved for summary

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judgment on the ground that California Code of Civil Procedure § 339(1)’s two-year statute of

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limitations bars the claims. (Motion, ECF No. 10.) The court denies the motion.
STATEMENT

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The plaintiff Robert Bourhis Associates (“RBA”) is a law firm. (Complaint, ECF No. 1-1, ¶ 1.)

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In 2012, RBA entered into a legal representation agreement with Donna Hill (“the Agreement”) to

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represent Ms. Hill in her claim for disability insurance benefits against Principal. (Id. ¶ 6 & Ex. 1.)

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Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the
ECF-generated page numbers at the tops of the documents.
ORDER (No. 3:15-cv-04329-LB)

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The Agreement provided that “[Ms. Hill] assigned to [RBA] an attorneys’ fee of 33 1/3% of any

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and all amounts of recovery prior to the filing of suit and commencement of depositions in said

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suit . . . .” (Id. ¶ 7 & Ex. 1.)

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At the same time, Principal received an “Authorization of Attorney Representation” letter from

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RBA that was signed by Ms. Hill. (Id. ¶ 8 & Ex. 2.) The letter stated that RBA represented Ms.

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Hill and instructed Principal to “[p]lease direct all communications regarding [Ms. Hill’s] claim to

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[RBA].” (Id. ¶ 8 & Ex. 2.) Principal complied with the Authorization from October 2012 until

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February 2013. (Id. ¶ 10.) During this time period, Principal sent all correspondence to Ms. Hill

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through RBA. (Id.)

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On March 1, 2013, Principal approved Ms. Hill’s claim for disability insurance benefits. (Id. ¶

United States District Court
Northern District of California

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11.) It sent RBA two checks totaling $56,090, which represented the past benefits owed to Ms.

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Hill. (Id.) Under her policy, for as long as she is disabled and until she turns 65 in 2032, Ms. Hill

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is entitled to receive $7,900 per month from Principal. (Id. ¶ 13.)

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With the checks, Principal sent a letter to RBA that stated, “If you [RBA] want us [Principal]

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to send Dr. Hill’s payment directly to her please let us know.” (Id. ¶ 11 & Ex. C.) Enclosed with

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this letter was an application for direct deposit that Ms. Hill could submit. (Id. & Ex. C.) Neither

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RBA nor Ms. Hill responded to Principal’s letter, and RBA continues to represent Ms. Hill. (Id. ¶

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12.) At no point was Principal ever informed that RBA was no longer representing Ms. Hill. (Id.)

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According to the Agreement and Authorization, RBA’s practice with respect to ongoing

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claims (such as Ms. Hill’s) is to monitor the claim and any and all requests or demands from the

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insurer for updated medical, vocational, or other information. (Id. ¶ 14.) When RBA receives

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benefit checks, it deposits them into a trust account and distributes the monies pursuant to the

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Agreement. (Id.)

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In April 2013, Principal began to send Ms. Hill’s monthly benefit checks directly to her,

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despite knowing that RBA still represented her. (Id. ¶ 16.) Principal never notified RBA that this

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change had taken place. (Id.) Because no correspondence was sent to RBA and no checks went

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through its office, RBA was not aware that Principal did this. (Id.)

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Nearly two years later, in March 2015, RBA realized that Principal had been improperly
ORDER (No. 3:15-cv-04329-LB)

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paying benefits directly to Ms. Hill. (Id. ¶ 17.) Not wanting to endanger its relationship with Ms.

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Hill, RBA demanded in letters and phone calls to Principal that Principal pay it 33 1/3 of the total

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benefits Principal had paid directly to Ms. Hill from April 2013 forward. (Id. ¶ 17.) Since March

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2015, Principal has repeatedly refused to take responsibility for its improper payments to Ms. Hill

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or reimburse RBA for the payments in question. (Id. ¶ 18.)

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RBA filed its lawsuit against Principal in San Francisco Superior Court on August 24, 2015,
alleging two claims: intentional interference with contractual relations and negligent interference

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with prospective economic advantage. (Complaint, ECF No. 1-1, ¶¶ 20-35.) Principal timely

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removed the action to federal court on September 22, 2015 and then, without answering the

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complaint or filing a Rule 12(b)(6) motion to dismiss, moved for summary judgment on the

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United States District Court
Northern District of California

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ground that the two-year statute of limitations barred the claims. (Notice of Removal, ECF No. 1;

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Motion, ECF No. 10.) In support of its motion, it filed two declarations: 1) the Declaration of

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Michael Brisbin, which attaches RBA’s complaint as an exhibit, and 2) the Declaration of Doug

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Hanselman, which states that he wrote the March 1, 2011 letter from Principal and confirms that

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RBA contacted Principal in March 2015 about the payments (as RBA alleged in Paragraph 17 of

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the complaint). (Brisbin Decl., ECF No. 8-1; Hanselman Decl., ECF No. 10-1.) RBA opposed the

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motion, submitting its own declaration, and Principal filed its reply, also moving to strike RBA’s

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evidence. (Opposition, ECF No. 13; Whitehead Decl., ECF No. 13-1; Reply, ECF No. 14.) The

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court held a hearing on November 12, 2015. (Minute Order, ECF No. 16.)

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GOVERNING LAW
1. Tolling of Time to File Answer
A party may move at any time, with or without supporting affidavits, for summary judgment

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on part or all of the claims. See Fed. R. Civ. P. 56(b). This means that a party may file a summary-

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judgment motion before filing an answer. In contrast to Rule 12(a), which extends the time to file

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an answer when a Rule 12 motion is made, Rule 56 is silent about whether filing a summary-

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judgment motion tolls the time to file an answer. Some courts and commentators have concluded

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that by analogy to Rule 12(a), it is appropriate to extend the time to file the answer until after the

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court decides the summary-judgment motion “where such motion adequately contest the action.”
ORDER (No. 3:15-cv-04329-LB)

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See Mann v. Lee, No. C 07-00781 (MMC), 2009 U.S. Dist. Lexis 119744, at *4-7 (N.D. Cal. Dec.

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22, 2009) (collecting cases and citing 10A Wright & Miller, Fed. Prac. & Proc. § 2718 at 301 (3d

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ed. 1998)); but see Schwarzer, Tashima & Wagstaffe, Cal. Prac. Guide: Fed. Civ. Pro. before Trial

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§ 8:881 (The Rutter Group 2015) (citing Modrowski v. Pigatto, 712 F.3d 1166, 1170 (7th Cir.

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2013) (the filing of a motion for summary judgment under Rule 56 does not toll the time to

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answer)).

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Here, the plaintiff did not dispute that the summary-judgment motion adequately contests the

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action. The court concludes that it does; it challenges whether the action is timely, a challenge that

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often is brought under Rule 12(b)(6). By analogy to Rule 12(a)(4), the court extends the time to
file an answer. See Mann, 2009 U.S. Dist. Lexis 119744, at *4-7.

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United States District Court
Northern District of California

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2. Summary-Judgment Standard

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The court must grant a motion for summary judgment if the movant shows that there is no

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genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of

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law. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Material

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facts are those that may affect the outcome of the case. Anderson, 477 U.S. at 248. A dispute about

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a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for

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the non-moving party. Id. at 248-49.

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The party moving for summary judgment bears the initial burden of informing the court of the

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basis for the motion, and identifying portions of the pleadings, depositions, answers to

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interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material

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fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To meet its burden, “the moving party

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must either produce evidence negating an essential element of the nonmoving party’s claim or

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defense or show that the nonmoving party does not have enough evidence of an essential element

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to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co., Ltd. v. Fritz

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Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000); see Devereaux v. Abbey, 263 F.3d 1070,

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1076 (9th Cir. 2001) (“When the nonmoving party has the burden of proof at trial, the moving

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party need only point out ‘that there is an absence of evidence to support the nonmoving party’s

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case.’”) (quoting Celotex, 477 U.S. at 325).
ORDER (No. 3:15-cv-04329-LB)

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If the moving party meets its initial burden, then the burden shifts to the non-moving party to

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produce evidence supporting its claims or defenses. Nissan Fire & Marine Ins. Co., Ltd., 210 F.3d

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at 1103. The non-moving party may not rest upon mere allegations or denials of the adverse

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party’s evidence, but instead must produce admissible evidence that shows there is a genuine issue

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of material fact for trial. See Devereaux, 263 F.3d at 1076. If the non-moving party does not

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produce evidence to show a genuine issue of material fact, the moving party is entitled to

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summary judgment. See Celotex, 477 U.S. at 323.

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In ruling on a motion for summary judgment, inferences drawn from the underlying facts are
viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).

United States District Court
Northern District of California

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ANALYSIS

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Principal argues that summary judgment in its favor is appropriate because California Code of

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Civil Procedure § 339(1)’s two-year statute of limitations bars the claims. The court cannot reach

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that conclusion on this record.

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The court has diversity jurisdiction and thus applies the state statute of limitations. See

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Guaranty Trust Co. of New York v. York, 326 U.S. 99, 110-111 (1945). The parties do not dispute

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that California Code of Civil Procedure § 339(1)’s two-year statute of limitations for tort actions

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applies to RBA’s tort claims for intentional interference with contractual relations and negligent

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interference with prospective economic advantage. See Knoell v. Petrovich, 76 Cal. App. 4th 164,

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168 (1999) (the trial did not err by applying the two-year statute of limitations found in California

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Code of Civil Procedure § 339(1) to the plaintiff’s claims for interference with contractual

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relations and interference prospective business advantage); see also Bradix v. Seton Med. Ctr., No.

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C 12-2096 SI, 2012 WL 4903011, at *4 (N.D. Cal. Oct. 16, 2012) (“Under California law, a cause

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of action for intentional interference with a contractual relationship must be brought within two

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years.”); High Country Linens, Inc. v. Block, No. C 01-02180 CRB, 2002 WL 1998272, at *2 n.1

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(N.D. Cal. Aug. 20, 2002) (“Plaintiff’s claim of interference with prospective economic advantage

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is also time-barred by the two-year statute of limitations established by Cal. Civ. Proc. Code §

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339.”).
ORDER (No. 3:15-cv-04329-LB)

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The two-year limitations period starts running when the cause of action accrues. Cal Code.

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Civ. P. § 312; Fox v. Ethicon Endo–Surgery, Inc., 35 Cal.4th 797, 806 (Cal. 2005). “Generally

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speaking, a cause of action accrues at ‘the time when the cause of action is complete with all of its

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elements.’” Fox, 35 Cal.4th at 806 (quoting Norgart v. Upjohn Co., 21 Cal. 4th 383, 397 (Cal.

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1999)). The discovery rule is an exception to this general rule of accrual:

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[A]n exception to the “general rule of accrual is the ‘discovery rule,’ which
postpones accrual of a cause of action until the plaintiff discovers, or has reason to
discover, the cause of action.” Fox, 35 Cal. 4th at 806 (citing Norgart, 21 Cal. 4th at
39; Neel [v. Magana], 6 Cal. 3d [176,]187 [(1971)]). In several opinions over the
past forty years, the California Supreme Court has articulated a standard for the
application of the discovery rule, at least in the tort context. See generally Fox, 35
Cal. 4th 797; Norgart, 21 Cal. 4th 383; Bernson v. Browning–Ferris Indus., 7 Cal.
4th 926 (Cal. 1994); Jolly v. Eli Lilly & Co., 44 Cal. 3d 1103 (Cal. 1988); Gutierrez
v. Mofid, 39 Cal. 3d 892 (Cal. 1985); Sanchez v. South Hoover Hosp., 18 Cal. 3d 93
(Cal. 1976). As the California Supreme Court explained:

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United States District Court
Northern District of California

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A plaintiff has reason to discover a cause of action when he or
she “has reason at least to suspect a factual basis for its elements.”
Under the discovery rule, suspicion of one or more of the elements
of a cause of action, coupled with knowledge of any remaining
elements, will generally trigger the statute of limitations period.
Norgart explained that by discussing the discovery rule in terms of a
plaintiff’s suspicion of “elements” of a cause of action, it was
referring to the “generic” elements of wrongdoing, causation, and
harm. In so using the term “elements,” we do not take a
hypertechnical approach to the application of the discovery rule.
Rather than examining whether the plaintiffs suspect facts
supporting each specific legal element of a particular cause of action,
we look to whether the plaintiffs have reason to at least suspect that a
type of wrongdoing has injured them.

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Fox, 35 Cal. 4th at 806 (internal citations omitted).

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Wakefield v. Wells Fargo & Co., No. C 13–05053 LB, 2014 WL 5077134, at *9 (N.D. Cal. Oct. 9,

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2014).

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The parties do not dispute that RBA’s claims accrued in April 2013, when Principal began to

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send Ms. Hill’s monthly benefit checks directly to her. (See Motion, ECF No. 10 at 6 (citing

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Complaint, ECF No. 1-1, ¶ 16.)). The two-year statute of limitations thus bars RBA’s claims,

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asserted in a lawsuit filed more than two years later on August 24, 2015, unless the discovery rule

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postponed the accrual of its claims. Principal argues that the discovery rule does not postpone

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accrual, and there are no triable issues of material fact to suggest otherwise, because RBA should

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have known of its allegedly wrongful conduct “in April or May 2013.” (Id. at 7-8.) On this record,
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ORDER (No. 3:15-cv-04329-LB)

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the court disagrees and con
e
ncludes that there are tria
able issues o material fa Principa as the
of
act.
al,

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par moving for summary judgment, has not met i burden to show other
rty
f
y
h
its
o
rwise.

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RBA allege that it did not realize until March 2015 that Pr
es
u
rincipal was sending Ms Hill’s
s.
mo
onthly benefi checks dir
it
rectly to her. (Complaint ECF No. 1-1, ¶ 17). Pr
t,
rincipal asserts that RBA
A

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“fa to provid any explan
ails
de
nation as to why its offic its office manager, it office staff its
ce,
e
ts
ff,

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boo
okkeeper, its accountant its lead atto
s
t,
orney handli the case, Mr. Bourhi himself, or any of
ing
,
is
r

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oth employee of [RBA], responsible for receivin and nego
her
es
e
ng
otiating benefit checks, fa
failed to

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rea
alize, notice, or inquire about, not rec
a
ceiving $2[,]
]633.07 per month ($7,9 v .3333) in attorney
900

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fee from the disability ben
es
d
nefit check for [Ms.] Hil beginning in April 201 (Motion ECF No.
f
ll
13.”
n,

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10 at 7.) RBA’s “failure to notice missing income o $5,266.14 after two m
of
4
months, $7,8
899.21 after

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United States District Court
Northern District of California

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three months, and $10,532.28[ ] after four months, Principal c
a
f
,”
contends, “is clearly the fault of
s

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[RB its offic its staff, its bookkeep Mr. Bou
BA]
ce,
i
per,
urhis, its acco
ounting and bookkeeping system.”
g

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(Id Principal concludes th the “only inference to be drawn “from the fa [RBA] a
d.)
hat
y”
n
facts
alleges” is

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tha RBA “inex
at
xcusably fail to proper account f and reco
led
rly
for,
oncile month the attor
hly,
rney fees it

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wa to receive from [Ms.] Hill or [her] disability ch
as
H
hecks” and t
thus (essenti
ially) entitles it to
s

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jud
dgment as a matter law. (Id. at 8.)
m
(

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Based only on the comp
y
plaint’s alleg
gations (the only “evidence” that Principal cites), the court

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dis
sagrees that ̶ as a matter of law ̶ th only infer
r
he
rence is that RBA’s failu is inexcusable. Thus,
ure

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on this record, there are tria issues of material fa about the application of the statu of
able
o
fact
e
n
ute

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lim
mitations.

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CONCLU
USION

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Because the court conc
cludes that Pr
rincipal did not meet its summary-ju
udgment bur
rden, the

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cou 1) denies its summary
urt
s
y-judgment motion and 2) does not consider RB
BA’s evidenc and thus
ce

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den Principa motion to strike it. This disposes of ECF No 10.
nies
al’s
t
T
s
o.

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IT IS SO ORDERED.
O
.

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Dated: Nov
vember 16, 2015
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_____
__________
___________
__________
______
LAUR
REL BEELE
ER
Unite States Ma
ed
agistrate Judg
ge

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RDER (No. 3:15-cv-0432
3
29-LB)
OR

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