Cumbre, Inc. et al v. State Compensation Insurance Fund, No. 4:2009cv02706 - Document 30 (N.D. Cal. 2009)
Court Description: ORDER DENYING PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION AND GRANTING DEFENDANT'S MOTION TO DISMISS by Judge Claudia Wilken; re denying 8 Motion for Preliminary Injunction; granting 14 Motion to Dismiss. (ls, COURT STAFF) (Filed on 9/22/2009)
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Cumbre, Inc. et al v. State Compensation Insurance Fund Doc. 30 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 United States District Court For the Northern District of California 10 11 12 No. C 09-02706 CW CUMBRE, INC., a California corporation, and Coachella Valley Insurance Service, Inc., a California corporation, Plaintiffs, 13 14 15 16 v. STATE COMPENSATION INSURANCE FUND, a public enterprise fund, Defendant. / 17 18 ORDER DENYING PLAINTIFFS’ MOTION FOR A PRELIMINARY INJUNCTION AND GRANTING DEFENDANT’S MOTION TO DISMISS On June 24, 2009, Plaintiffs Cumbre, Inc. and Coachella Valley 19 Insurance Service, Inc., filed a motion for a preliminary 20 injunction to require Defendant State Compensation Insurance Fund 21 to admit Plaintiffs as approved State Fund brokers. 22 2009, Defendant filed a motion to dismiss. 23 argument and all of the papers filed by the parties, the Court 24 denies Plaintiffs’ motion for a preliminary injunction and grants 25 Defendant’s motion to dismiss. 26 27 28 On July 14, Having considered oral BACKGROUND Plaintiffs are both California corporations in the insurance brokerage business. Defendant is a public enterprise fund and Dockets.Justia.com 1 California agency organized under the Department of Industrial 2 Relations.1 United States District Court For the Northern District of California 3 See Cal. Ins. Code § 11773; Cal. Lab. Code § 56. On January 1, 2003, the parties entered into a written 4 contract which authorized Plaintiffs as brokers to obtain workers’ 5 compensation insurance for its clients from Defendant. 6 2003, Defendant notified Plaintiffs that it was terminating the 7 contract because their “book of business” produced a “consistently 8 unprofitable loss ratio.” 9 (RJN), Exh. 1 at ¶¶ 12, 17. On April 2, Defendant’s Request for Judicial Notice Plaintiffs appealed the termination 10 decision to Defendant, but Defendant rejected the appeal. 11 the termination, Plaintiffs were not permitted to place new 12 business with Defendant. 13 maintain their existing policies. 14 termination, Plaintiffs’ policies produced over $1,425,000 in 15 commissions. 16 $580,000 in commissions. 17 against Defendant in state court for damages from the termination. After However, Plaintiffs were allowed to In the year before the After the termination, Plaintiffs’ policies amassed On July 2, 2003, Plaintiffs filed suit 18 In 2004, while the lawsuit was pending, Defendant offered to 19 reinstate all terminated brokers, including Plaintiffs, under the 20 condition that the brokers dismiss all lawsuits connected to the 21 2003 termination. 22 litigation with State Fund which arises in whole or in part out of 23 State Fund’s termination of any brokers or State Fund’s broker 24 rehabilitation program are not eligible for reinstatement.” 25 Plaintiffs chose not to dismiss the lawsuit and they were not The letter stated: “Brokerages engaged in 26 1 27 28 The Court grants Defendant’s request to take judicial notice of the court documents submitted in opposition to Plaintiffs’ motion for a preliminary injunction and in support of its motion to dismiss. 2 United States District Court For the Northern District of California 1 reinstated. 2 to allege a cause of action for violating 42 U.S.C. § 1983 claiming 3 that Defendant’s reinstatement offer impeded Plaintiffs’ 4 constitutional right of access to the courts guaranteed in the 5 petition clause of the First Amendment. 6 Defendant’s demurrer to the § 1983 claim concluding that § 1983 7 does not provide a cause of action against state agencies that 8 choose to impose conditions such as the instant reinstatement 9 condition. Plaintiffs then amended their complaint in state court The state court granted Plaintiffs amended their complaint again and asserted 10 that Defendant’s reinstatement condition violated their fundamental 11 “right to petition the government for redress of grievances 12 provided for in the First Amendment to the United States 13 Constitution. 14 cause of action and the state court granted the motion without 15 leave to amend. 16 legal issues. RJN, Exh. 13, ¶ 58. Defendant demurred to that The short order on the motion did not discuss the RJN, Exh. 16. 17 The parties then cross-moved for summary judgment on the 18 remaining causes of action: (1) violation of the duty of fair 19 procedure; (2) unfair competition pursuant to California Business 20 and Professions Code §§ 17200 et seq.; and (3) intentional 21 interference with economic advantage. 22 Defendant’s motion, denied Plaintiffs’ motion and dismissed the 23 case. 24 reversed in part the trial court’s summary judgment order and 25 affirmed the trial court’s grant of Defendant’s demurrer to 26 Plaintiffs’ § 1983 claim. 27 addressed Plaintiffs’ argument that Defendant “impermissibly 28 infringed upon its constitutional right to petition the court for Plaintiffs appealed. The state court granted The court affirmed in part and The appellate court specifically 3 1 redress of grievances.” 2 “conclude[d] that [Plaintiffs] cannot establish that [Defendant’s] 3 conditional reinstatement offer resulted in a deprivation of a 4 constitutional right.” 5 on two claims: (1) violation of the duty of fair procedure and 6 (2) unfair competition. 7 procedure claim was tried before a jury, which found for Defendant; 8 and the §§ 17200 et seq. claim was tried before the court, which 9 also found for Defendant. United States District Court For the Northern District of California 10 11 RJN, Exh. 25 at 45. Id. at 47. The court The case was remanded for trial The violation of the duty of fair The court entered judgment on June 5, 2009 and Plaintiffs filed a notice of appeal on July 9, 2009. Meanwhile, on March 24, 2009, Plaintiffs filed another 12 application to be brokers for Defendant. 13 Defendant denied the application, noting that Plaintiffs were still 14 engaged in litigation against Defendant. 15 16 17 18 19 20 On March 31, 2009 Defendant stated, As you know, in March 2004, State Fund offered to reinstate Cumbre and all other terminated brokers effective August 1, 2004, on certain conditions. One of those conditions was that the broker not be engaged in litigation against State Fund concerning the broker termination program. . . . Consequently, to the extent your clients wish to seek reinstatement as brokers having contractual relationships with State Fund, that process should not occur prior to the resolution of the pending litigation. Complaint, Exh. B. 21 Plaintiffs filed the present lawsuit on June 17, 2009. 22 Plaintiffs claim the latest denial unconstitutionally conditioned 23 their broker application on relinquishing their “fundamental right 24 of access to the courts, which is part of the right to petition the 25 government for redress of grievances provided for in the First 26 Amendment to the United States Constitution.” 27 Plaintiffs seek a preliminary injunction requiring Defendant “to 28 enter into broker agreements with plaintiffs on the same terms and 4 Complaint ¶ 11. 1 conditions as [Defendant] contracts with its other newly appointed 2 brokers.” Id. at ¶ 12. 3 4 LEGAL STANDARD I. United States District Court For the Northern District of California 5 Motion for a Preliminary Injunction “A plaintiff seeking a preliminary injunction must establish 6 that he is likely to succeed on the merits, that he is likely to 7 suffer irreparable harm in the absence of preliminary relief, that 8 the balance of equities tips in his favor, and that an injunction 9 is in the public interest.” Winter v. Natural Res. Def. Council, 10 Inc., ___ U.S. ___, 129 S. Ct. 365, 374 (2008). 11 showing of harm varies inversely with the required showing of 12 meritoriousness.” 13 543 F.3d 1047, 1049 (9th Cir. 2008) (quoting Rodeo Collection, Ltd. 14 v. W. Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987)). 15 balance of harm ‘tips decidedly toward the plaintiff,’ injunctive 16 relief may be granted if the plaintiff raises questions ‘serious 17 enough to require litigation.’” 18 of the Int’l Ass’n of Machinists & Aerospace Workers, 584 F.2d 308, 19 315 (9th Cir. 1978)). 20 II. 21 “[T]he required Indep. Living Ctr. of S. Cal., Inc. v. Shewry, “When the Id. (quoting Benda v. Grand Lodge Motion to Dismiss for Failure to State a Claim A complaint must contain a “short and plain statement of the 22 claim showing that the pleader is entitled to relief.” 23 Civ. P. 8(a). 24 12(b)(6) for failure to state a claim, dismissal is appropriate 25 only when the complaint does not give the defendant fair notice of 26 a legally cognizable claim and the grounds on which it rests. 27 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). 28 considering whether the complaint is sufficient to state a claim, Fed. R. When considering a motion to dismiss under Rule 5 In 1 the court will take all material allegations as true and construe 2 them in the light most favorable to the plaintiff. 3 v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). 4 principle is inapplicable to legal conclusions; "threadbare 5 recitals of the elements of a cause of action, supported by mere 6 conclusory statements," are not taken as true. 7 ___ U.S. ___, 129 S.Ct. 1937, 1949-50 (2009) (citing Twombly, 550 8 U.S. at 555). United States District Court For the Northern District of California 9 NL Indus., Inc. However, this Ashkcroft v. Iqbal, DISCUSSION 10 Plaintiffs argue that there is a sufficient likelihood that 11 they will succeed on the merits of their constitutional claim to 12 support the grant of a preliminary injunction. 13 that Plaintiffs’ claim is barred by res judicata. 14 Defendants assert Res judicata, also known as claim preclusion, prohibits the 15 re-litigation of any claims that were raised or could have been 16 raised in a prior action. 17 123 F.3d 1189, 1192 (9th Cir. 1997) (citing Federated Dep’t Stores, 18 Inc. v. Moitie, 452 U.S. 394, 398 (1981)). 19 judicata is to “relieve parties of the cost and vexation of 20 multiple law suits, conserve judicial resources, and, by preventing 21 inconsistent decisions, encourage reliance on adjudication.” 22 v. HEW, Health Care Fin. Agency, 769 F.2d 590, 594 (9th Cir. 1985) 23 (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)). 24 operates where there is “1) an identity of claims, 2) a final 25 judgment on the merits, and 3) identity or privity between 26 parties.” 27 v. Univ. of Ill. Found., 402 U.S. 313, 323-24 (1971)). 28 determine the preclusive effect of a state court judgment, the W. Radio Servs. Co., Inc. v. Glickman, The purpose of res Marin Res judicata W. Radio, 123 F.3d at 1192 (citing Blonder-Tongue Labs. 6 To 1 court looks to state law. 2 San Jose, 420 F.3d 1022, 1031 (9th Cir. 2005). United States District Court For the Northern District of California 3 Manufactured Home Cmtys. Inc. v. City of Plaintiffs do not dispute that the parties in the two actions 4 are identical. 5 court’s decision, which “conclude[d] that [Plaintiffs] cannot 6 establish that [Defendant’s] conditional reinstatement offer 7 resulted in a deprivation of a constitutional right,” constitutes a 8 final state court judgment. 9 required to invoke the preclusive bar of res judicata is not Plaintiffs first dispute that the state appellate RJN, Exh. 25 at 47. The “finality 10 achieved until an appeal from the trial court judgment has been 11 exhausted or the time to appeal has expired.” 12 v. 7-Eleven Owners, 85 Cal. App. 4th 1168, 1174 (2000). 13 assert that, because other causes of action were remanded back to 14 the trial court and those causes of action are currently on appeal, 15 the judgment is not final. 16 Franklin & Franklin Plaintiffs Plaintiffs rely on Fury v. City of Sacramento, 780 F.2d 1448, 17 1452 (9th Cir. 1986), for support. 18 which Fury claimed that a re-designation of his land as open space 19 constituted a taking for which he should be compensated. 20 initially filed complaints in both federal and state court. 21 federal court abstained from hearing the case until the state court 22 resolved the state constitutional claims, but reserved jurisdiction 23 to determine any issues of federal constitutional law, if 24 necessary. 25 (1979). 26 dismissed the action. 27 affirmed the dismissal with respect to two of the plaintiff’s 28 takings theories, but reversed and remanded with respect to the Fury was a takings case in Fury The Furey v. City of Sacramento, 24 Cal. 3d 862, 870 The state trial court sustained Defendant’s demurrer and On appeal, the California Supreme Court 7 United States District Court For the Northern District of California 1 third theory. 2 final judgment on the third takings theory. 3 Supreme Court handed down its decision, the plaintiff did not 4 further pursue his state court action. 5 reactivated his federal action by filing an amended complaint, 6 which asserted only a federal constitutional claim. 7 constitutional claim pursued was based on the same takings theory 8 that the California Supreme Court allowed him to pursue. 9 reviewing the plaintiff’s federal claims, the Ninth Circuit noted 10 that res judicata did not apply because the plaintiff’s “claim in 11 this action raises only issues of federal constitutional law.” 12 Furey, 780 F.2d at 1453 n.3. 13 federal court “explicitly retained jurisdiction over the federal 14 issues” and “the state court action was not pursued to final 15 judgment.” 16 Thus, the California Supreme Court did not issue a After the California Instead, the plaintiff The federal When The Ninth Circuit stated that the Id. (internal citations omitted). Furey does not establish that an interim decision of the 17 California Court of Appeal lacks preclusive effect. 18 Furey is distinguishable. 19 decision is final as to Plaintiff’s constitutional claim. 20 the court of appeal issued its decision, Plaintiffs filed a timely 21 petition for rehearing on the constitutional claim, which was 22 denied. 23 finalized the court of appeal’s decision. 24 a petition for review with the California Supreme Court. 25 Moreover, In the present case, the court of appeal After Thereafter, the court of appeal issued a remittitur, which Plaintiffs did not file The remittitur terminates the court of appeal’s jurisdiction 26 over the case and re-vests jurisdiction in the trial court subject 27 to the limitations set forth in the opinion. 28 Cal. App. 4th 1359, 1366 (2006). People v. Dutra, 145 Because the trial court had 8 1 jurisdiction only over the two remaining causes of action, and not 2 the constitutional claim, the court of appeal’s judgment is final 3 as to the constitutional claim. 4 5 the same claim as the prior cause of action that was dismissed. 6 To determine the likeness of the claims, California utilizes the 7 primary right theory. 8 888, 904 (2002). 9 10 United States District Court For the Northern District of California Plaintiffs also dispute that the 2009 complaint is based on 11 12 13 14 15 16 Mycogen Corp. v. Monsanto Co., 28 Cal. 4th Under this theory, a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. . . . [T]he primary right is simply the plaintiff’s right to be free from the particular injury suffered. It must therefore be distinguished from the legal theory on which liability for that injury is premised . . . The primary right must also be distinguished from the remedy sought: The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other. [T]he harm suffered is the significant factor in defining a primary right. 17 Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers 18 Cas. & Sur. Co. of America, 133 Cal. App. 4th 1319, 1327 (2005) 19 (internal citations and quotations omitted). 20 that Defendant’s 2009 rejection of Plaintiffs’ brokerage 21 application and Defendant’s 2004 rejection involve separate and 22 distinct facts and, therefore, are not identical. 23 rejections occurred five years apart, the “harm suffered” by 24 Plaintiffs has not changed over the years. 25 Plaintiffs allege the same wrong -- Defendant’s conditioning the 26 opportunity to do business with it on the dismissal of the same 27 ongoing litigation. 28 Plaintiffs’ broker applications is nothing more than a reiteration Plaintiffs allege Although the In both cases Defendant’s March, 2009 rejection of 9 1 of the same act that constituted the alleged constitutional 2 violation in the previous case. 3 alleged any new facts to avoid the preclusive effect of res 4 judicata. United States District Court For the Northern District of California 5 Therefore, Plaintiffs have not Plaintiffs argue that res judicata should not apply because 6 the court of appeal’s decision did not rule on his claim of an 7 unconstitutional condition. 8 appeal “mischaracterized Cumbre’s Section 1983 claim as ‘impairment 9 of access to the courts’.” 10 This argument has no merit. 11 claim as one of access to the courts under the petition clause of 12 the First Amendment. 13 Plaintiffs’ “claim[] that State Fund violated its First Amendment 14 right by impeding its access to the courts.” 15 After discussing whether Plaintiffs had an adequate remedy 16 available in state court, the court held, “We conclude that Cumbre 17 cannot establish that State Fund’s conditional reinstatement offer 18 resulted in a deprivation of a constitutional right.” 19 Further, Plaintiffs raised this issue in their petition for 20 rehearing, which was denied. 21 22 23 24 Plaintiffs assert that the court of Motion for Preliminary Inj. at 13. Plaintiffs characterized their own The appellate court specifically addressed RJN Ex. 25 at 41. Id. at 47. Accordingly, the Court concludes that res judicata bars Plaintiffs’ claim. CONCLUSION For the foregoing reasons, the Court denies Plaintiffs’ motion 25 for a preliminary injunction (Docket No. 8) and grants Defendant’s 26 motion to dismiss (Docket No. 14). 27 futile, the Court dismisses Plaintiffs’ complaint with prejudice. 28 The Clerk shall enter judgment and close the file. 10 Because amendment would be Defendant shall 1 2 recover its costs from Plaintiffs. IT IS SO ORDERED. 3 4 Dated: September 22, 2009 CLAUDIA WILKEN United States District Judge 5 6 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11
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