Azad et al v. Tokio Marine HCC - Medical Insurance Services Group et al
Filing
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ORDER by Judge Phyllis J. Hamilton denying 63 Motion to Stay without Prejudice and Vacating Case Management Conference. (pjhlc2S, COURT STAFF) (Filed on 5/26/2017)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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MOHAMMED AZAD, et al.,
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Case No. 17-cv-00618-PJH
Plaintiffs,
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v.
TOKIO MARINE HCC - MEDICAL
INSURANCE SERVICES GROUP, et al.,
ORDER DENYING MOTION TO STAY
DISCOVERY WITHOUT PREJUDICE
AND VACATING CASE
MANAGEMENT CONFERENCE
Re: Dkt. No. 63
Defendants.
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United States District Court
Northern District of California
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Before the court is defendants’ motion to stay discovery pending the resolution of
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a number of motions to dismiss the complaint. Dkt. 63. The matter is fully briefed and
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suitable for decision without oral argument. Having read the parties’ papers and carefully
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considered their arguments and the relevant legal authority, the court hereby DENIES the
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motion as premature, without prejudice.
BACKGROUND
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This putative class action was filed on February 7, 2017 by plaintiffs Mohammed
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Azad and Danielle Buckley. Dkt. 1 (“Compl.”). Plaintiffs make claims against Tokio
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Marine HCC – Medical Insurance Services Group (“HCC”), a seller of short-term medical
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insurance, and other entities who allegedly worked with HCC. Also named as defendants
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are HCC Life Insurance Company (“HCC Life Insurance”), a subsidiary of Tokio Marine
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Holdings, LLC; Health Insurance Innovation, Inc. (“HII”); and Consumer Benefits of
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America (“CBA”). Compl. ¶¶ 5–7.
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HCC contracted with plaintiffs to provide them short-term medical insurance
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policies (“STMs”). Compl. ¶¶ 8–9. HCC Life Insurance was the underwriter on the
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polices. Compl. ¶ 16. HII is allegedly a “close affiliate” of HCC that works with HCC “in
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the sale, administration, and/or servicing” of the policies. Compl. ¶ 17. CBA provides
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discounts and other benefits to its members, and allegedly “works with” the other
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defendants to provide HCC policies to consumers. Compl. ¶¶ 7, 57.
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In brief, plaintiffs allege that HCC falsely represented that their policies provided
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comprehensive coverage and fair claim processing. In reality, plaintiffs allege that HCC
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misled policyholders about the scope of the coverage and made it unreasonably difficult
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to make a claim. Plaintiffs further allege that HCC had a common policy and practice of
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marketing their polices in a misleading manner, delaying and refusing to pay claims,
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providing deliberately unhelpful customer service, and generally obstructing
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policyholders’ claims in bad faith.
Much of the complaint is devoted to the experiences of the putative class
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United States District Court
Northern District of California
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representatives, who allegedly were told to submit burdensome documentation and had
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the payment of their claims delayed and denied in bad faith. Compl. ¶¶ 19–38. The
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complaint then reviews the aspects of HCC’s marketing materials, policies, and
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application forms that plaintiffs allege are misleading. Compl. ¶¶ 39–57. Finally, plaintiffs
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allege that HCC trains its customer service representatives to obstruct policyholders and
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give them the “runaround,” refusing to help and referring claimants to a “highly confusing”
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website. Compl. ¶¶ 58–72.
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Plaintiffs assert claims for (1) violations of the California Unfair Competition Law
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(the “UCL”); (2) violations of the California False Advertising Law (“FAL”); (3) breach of
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contract; (4) breach of the implied duty of good faith and fair dealing; and (5) unjust
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enrichment. The putative class is all “individuals who have purchased HCC health
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insurance policies from Defendants in the State of California, and/or all California
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residents for whom HCC denied their insurance claim, since a date to be ascertained
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through discovery.” Compl. ¶ 82.
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On April 13 and 14, 2017, the defendants separately filed motions to dismiss the
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complaint and/or strike its allegations, which are all noticed for hearing on June 14, 2017.
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Dkt. 48, 49, 58, 60. Currently, the initial case management conference is scheduled for
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the following day, June 15, 2017. Dkt. 65.
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On April 20, 2017, defendants filed a motion to stay discovery pending resolution
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of the motions to dismiss. Dkt. 63. This matter is fully briefed and ripe for decision.
DISCUSSION
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A.
Legal Standard
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District courts have “broad discretion” to stay discovery pending the disposition of
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a dispositive motion. See Hall v. Tilton, No. C 07-3233 RMW (PR), 2010 WL 539679, at
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*2 (N.D. Cal. Feb. 9, 2010). In particular, a district court may “stay discovery when it is
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convinced that the plaintiff will be unable to state a claim for relief.” Wenger v. Monroe,
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282 F.3d 1068, 1077 (9th Cir. 2002) (quotation omitted).
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Since a discovery stay requires a protective order, the moving party must show
United States District Court
Northern District of California
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“good cause.” Mlejnecky v. Olympus Imaging Am., Inc., No. 2:10-CV-02630, 2011 WL
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489743, at *5 (E.D. Cal. Feb. 7, 2011); Fed. R. Civ. P. 26(c)(1). In general, the party
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seeking a stay of discovery carries a “heavy burden” to make a “strong showing” why
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discovery should be denied. Gray v. First Winthrop Corp., 133 F.R.D. 39, 40 (N.D. Cal.
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1990) (citing Blackenship v. Hearst Corp., 519 F.2d 418, 429 9th Cir. 1975)).
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“The Ninth Circuit Court of Appeals has not announced a clear standard against
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which to evaluate a request or motion to stay discovery in the face of a pending,
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potentially dispositive motion.” Mlejnecky, 2011 WL 489743, at *6 (E.D. Cal. Feb. 7,
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2011); see also Tradebay, LLC v. eBay, Inc., 278 F.R.D. 597, 602 (D. Nev. 2011). In
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light of this uncertainty, the court in Mlejnecky engaged in a thorough analysis of how
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district courts in the Ninth Circuit have addressed such motions, distilling the following
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principles. See Mlejnecky, 2011 WL 489743 at *5–*8.
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First, the “Federal Rules of Civil Procedure do not provide for an automatic stay of
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discovery pending resolution of a motion to dismiss.” In re Valence Tech. Sec. Litig., No.
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C 94-1542-SC, 1994 WL 758688, at *2 (N.D. Cal. Nov. 18, 1994). Accordingly, courts
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generally do not “look favorably” upon requests for a blanket discovery stay merely
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because a dispositive motion has been filed. Novelposter v. Javitch Canfield Grp., No.
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13-CV-05186-WHO, 2014 WL 12618174, at *1 (N.D. Cal. May 23, 2014).
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Second, courts in the Northern District of California have applied a two-factor test
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to evaluate a motion to stay discovery pending resolution of a dispositive motion. “First,
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the pending motion must be potentially dispositive of the entire case, or at least
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dispositive on the issue at which discovery is aimed.” Mlejnecky, 2011 WL 489743 at *6.
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“Second, the court must determine whether the pending, potentially dispositive motion
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can be decided absent additional discovery.” Id.; accord Hall, 2010 WL 539679 at *2.
If both of the factors are met, the court “may issue a protective order” staying
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discovery. Smith v. Levine Leichtman Capital Partners, Inc., No. C 10-00010 JSW, 2011
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WL 13153189, at *1 (N.D. Cal. Feb. 11, 2011) (citing The Pacific Lumber Co. v. Nat’l
Union Fire Ins. Co. of Pittsburgh, Pa., 220 F.R.D. 349, 352 (N.D. Cal. 2003)). Discovery
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United States District Court
Northern District of California
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should proceed if “either prong of the test is not met.” Mlejnecky, 2011 WL 489743 at *6.
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B.
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Analysis
Defendants’ motion to stay argues that they should not face “costly and
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burdensome discovery” in light of the pending motions to dismiss, which are potentially
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“meritorious and case dispositive.” The stay would cause no harm to plaintiffs, because it
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is “limited and brief” and the motions to dismiss will be heard by the court in a few weeks.
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Defendants thus argue that the two-part test for a stay is met. Plaintiffs respond that
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defendants have not shown an “immediate and clear possibility” that the dispositive
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motions will be granted. Mlejnecky, 2011 WL 489743 at *8. Moreover, plaintiffs allege
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that a stay would prejudice them by delaying resolution of their claims.
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The court finds that defendants’ motion to stay discovery is premature. It is
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defendants’ “heavy” burden to show “good cause” to justify a stay. Fed. R. Civ. P
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23(c)(1); Gray, 133 F.R.D. at 40 (citing Blackenship, 519 F.2d at 429). Plaintiffs have not
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served any discovery on defendants (to the court’s knowledge), and they cannot do so
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until after the Rule 26(f) conference. See Fed. R. Civ. P. 26(d)(1). The court cannot
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evaluate the burden and proportionality of the discovery until the requests are actually
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made. Although defendants are correct that a brief stay would cause no substantial
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prejudice to plaintiffs, “a mere lack of prejudice is not the same as ‘good cause’ and falls
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far short of the ‘strong showing’ required.” Novelposter, 2014 WL 12618174 at *1. The
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court therefore DENIES defendants’ motion to stay discovery because defendants have
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not met their burden. Of course, this denial is without prejudice to defendants later
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seeking a stay or protective order should any actual discovery requests be unduly
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burdensome or disproportionate to the needs of the case at this stage.
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However, it is not this court’s typical practice to conduct a case management
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conference (CMC) until the pleadings are settled. Although the parties stipulated to
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schedule the initial CMC on June 15, 2017, see Dkt. 65, the court finds that conducting a
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CMC on that date would be inappropriate in light of defendants’ pending motions to
dismiss. The court therefore VACATES the June 15, 2017 case management
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United States District Court
Northern District of California
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conference. The court will reschedule the initial CMC once it has ruled on the pending
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Rule 12(b) motions. Insofar as the date of the Rule 26(f) conference is based on the date
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of the initial CMC, no discovery will be permitted, by operation of the Federal Rules of
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Civil Procedure, until the court has ruled on the motions and rescheduled the initial CMC.
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See Fed. R. Civ. P. 26(d)(1), (f)(1).
CONCLUSION
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For the foregoing reasons, defendants’ motion to stay discovery is DENIED. The
case management conference set for June 15, 2017 is VACATED.
IT IS SO ORDERED.
Dated: May 26, 2017
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__________________________________
PHYLLIS J. HAMILTON
United States District Judge
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