Bosa Development California, Inc. et al v. Liberty Mutual Fire Insurance Company et al, No. 3:2017cv00945 - Document 18 (S.D. Cal. 2017)
Court Description: ORDER Denying Motion to Dismiss (Doc. No. 4 ). Signed by Judge M. James Lorenz on October 26, 2017. (dsn)
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 BOSA DEVELOPMENT CALIFORNIA, INC., et al., ORDER DENYING DEFENDANT'S MOTION [Doc. 4] TO DISMISS Plaintiffs, 13 14 Case No.: 3:17-cv-00945-L-BGS v. 15 LIBERTY MUTUAL FIRE INSURANCE COMPANY, 16 Defendant. 17 18 Pending before the Court is Defendant Liberty Mutual Life Insurance Company’s 19 20 motion to dismiss Plaintiffs’ complaint. Pursuant to Civil Local Rule 7.1(d)(1), the Court 21 decides the matter on the papers submitted and without oral argument. For the foregoing 22 reasons, the Court DENIES Defendant’s motion to dismiss. 23 // 24 // 25 // 26 // 27 // 28 1 3:17-cv-00945-L-BGS 1 2 I. BACKGROUND This case arises out of an insurance dispute. Plaintiffs Bosa Development 3 California I (“Bosa 1”) and Bosa Development California II (“Bosa II”, collectively, 4 “Plaintiffs”) are real estate developers and general contractors. Using the labor of 5 subcontractors, Plaintiffs built three high rise residential towers in downtown San Diego 6 and one in Irvine (“the Projects). Plaintiffs then sold all of the individual residential units 7 in the Projects to purchasers and created homeowners’ associations that assumed 8 ownership over common areas. 9 In connection with the Projects, Plaintiffs obtained three liability insurance policies 10 from Defendant Liberty Mutual Fire Insurance Company (“Defendant”). Under these 11 policies, Defendant insured Plaintiffs and any other enrolled contractors or subcontractors 12 against certain losses incurred in connection with the development and construction of 13 the Projects. Each policy provided for a $500,000 deductible, which was to apply on a 14 “per occurrence” basis to both defense and indemnity expenditures. The parties also 15 executed a “Deductible Collateral Agreement”, which provided that Plaintiffs pay 16 $4,620,000 into a “Cash Collateral Fund.” The Cash Collateral Fund is managed by 17 Defendant, who holds the money in trust for Plaintiffs. Under the Deductible Collateral 18 Agreement, Defendant was entitled to “draw down” the Cash Collateral Fund to cover 19 deductible expenses and “claims handling expense charges” of $2,085, on a “per claim” 20 basis. The Deductible Collateral Agreement obligates Defendant to return to Plaintiffs 21 any residual balance left in the Cash Collateral Fund as soon as practicable upon the 22 expiration of risk of the need to pay further policy deductibles. 23 Each of the homeowners’ associations has sued Plaintiffs for construction defects 24 resulting from alleged negligent development and/or construction. Defendant defended 25 and indemnified Plaintiffs against these suits. In the process, Defendant drew down the 26 Cash Collateral Fund a total of $2,008,340, encompassing a $500,000 deductible and a 27 $2,085 claims handling expense charge for each of the four lawsuits. About twenty three 28 Individual homeowners and insurers of individual homeowners have also filed claims 2 3:17-cv-00945-L-BGS 1 against Plaintiffs complaining of construction defects stemming from the negligent 2 development and construction of each Project. 3 The insurance policies define the term “occurrence” to include “continuous and 4 repeated exposure to the same general harmful conditions.” Given this policy provided 5 definition, Plaintiffs allege that California law provides there can only be four 6 occurrences at issue here: the negligent development and construction of each of the four 7 Projects. If only four occurrences are at issue, it would follow that Plaintiffs needed only 8 pay four separate deductibles. However, Plaintiffs allege that Defendant has 9 implemented a “Multiple Occurrences Policy” pursuant to which “(1) each separate 10 defect category in a given construction defect case constitutes a separate occurrence; (2) 11 defects arising out of construction work performed by a separate subcontractor 12 constitutes a separate occurrence; and (3) each separate lawsuit or claim arising out of the 13 same construction project constitutes a separate occurrence.” (Compl. ¶ 112.) As a result 14 of this policy, Plaintiffs allege Defendant has wrongfully collected more than the 15 $2,000,0001 in deductible fees to which it is entitled. 16 On April 3, 2013, Defendant filed a declaratory relief action against Plaintiffs and 17 others arising out of the same transactions as the present case. Liberty Life Fire Ins. Co. 18 v. Bosa Dev. California II, Inc., 3:17-cv-00666-L-BGS. On the same day, Plaintiffs filed 19 the present action against Defendant in state court. Plaintiffs’ complaint alleges (1) 20 breach of contract; (2) a right to declaratory relief; (3) breach of the implied covenant of 21 good faith and fair dealing; (4) fraud; (5) conversion; (6) civil theft; (7) violation of 22 California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. (“UCL”); 23 (8) a right to an accounting; and (10) a right to money had and received. (Compl. [Doc. 24 1-2].) Defendant removed to Federal Court and, pursuant to the low number rule, the 25 Clerk of Court transferred the removed action to the same docket as Defendant’s earlier 26 27 28 1 4 occurrences times $500,000 deductibles. 3 3:17-cv-00945-L-BGS 1 filed declaratory action. Defendant now moves to dismiss the Complaint as to the UCL 2 cause of action only. (MTD [Doc. 4].) Plaintiffs oppose. (Opp’n [Doc. 14].) 3 4 II. LEGAL STANDARD A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the complaint’s 5 6 sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n., 720 F.2d 578, 581 (9th Cir. 1983). 7 In ruling on a Rule 12(b)(6) motion, the court must assume the truth of all factual 8 allegations and “construe them in the light most favorable to [the nonmoving party].” 9 Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). “While a complaint attacked 10 by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a 11 plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more 12 than labels and conclusions, and a formulaic recitation of the elements of a cause of 13 action will not do.” Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (internal 14 citations and quotation marks omitted). Instead, the allegations in the complaint “must be 15 enough to raise a right to relief above the speculative level.” Id. at 1965. A complaint 16 may be dismissed as a matter of law either for lack of a cognizable legal theory or for 17 insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 18 749 F.2d 530, 534 (9th Cir. 1984). 19 As a general matter, courts may not consider material outside the complaint when 20 ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 21 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, courts may consider documents 22 specifically identified in the complaint whose authenticity is not questioned by the 23 parties. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995) (superseded by 24 statutes on other grounds). Moreover, courts may consider the full text of those 25 documents, even when the complaint quotes only selected portions. Id. The court may 26 also consider material properly subject to judicial notice without converting the motion 27 into one for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). 28 // 4 3:17-cv-00945-L-BGS 1 2 III. DISCUSSION Defendant argues that the Court should dismiss Plaintiffs’ UCL Claim because (1) 3 Plaintiffs have not properly alleged Defendant engaged in unfair competition and (2) 4 even if Defendant engaged in unfair competition, Plaintiffs are not entitled to any of the 5 remedies provided by the UCL. Neither argument is persuasive. 6 The UCL broadly prohibits “unfair competition”, which consists of any unlawful, 7 unfair, or fraudulent business act or practice. Cal. Bus. & Prof. Code § 17200. A 8 plaintiff need only allege one of the three proscribed types of unfair completion to sustain 9 a UCL Claim. Davis v. HSBC Bank Nevada, 691 F.3d 1152, 1168 (9th Cir. 2012). As to 10 the unlawful prong, the UCL is a derivative claim that borrows other laws and provides 11 distinct remedies for their violation. “Virtually any state, federal, or local law can serve 12 as the predicate for” a UCL claim. People ex rel. Bill Lockyer v. Fremont Life Ins. Co, 13 104 Cal. App. 4th 508, 515 (2002). 14 Here, Plaintiffs allege, among other things, that Defendant’s practice of 15 overcharging deductible fees under its Multiple Occurrences Policy violates California’s 16 common law prohibiting conversion and civil theft. In their motion to dismiss, 17 Defendant presents no argument suggesting Plaintiffs have not properly stated these 18 claims. Accordingly, the Court finds Defendant has failed to demonstrate that Plaintiffs 19 have not properly alleged a predicate act of unfair completion. 20 Next, Defendant argues that, even if Plaintiffs have properly alleged a predicate act 21 of unfair completion, the UCL claim must nevertheless fail because Plaintiffs are not 22 entitled to any UCL provided remedy. Generally speaking, a prevailing UCL plaintiff is 23 only entitled to injunctive relief and/or restitution, but not damages or attorneys’ fees. 24 Zhang v. Superior Court, 57 Cal. App. 4th 364, 371 (2013). As to restitution, the UCL 25 provides that a court may return to a plaintiff any money that a defendant wrongfully 26 took from the plaintiff through a predicate act of unfair competition. Cal. Bus. & Prof. 27 Code § 17203. Here, Plaintiffs allege that, through conversion and civil theft, Defendant 28 has taken more money from them than the parties’ agreements permit. If Plaintiffs 5 3:17-cv-00945-L-BGS 1 prevail, it seems likely that they would be entitled to recover these funds as restitution. 2 Accordingly, the Court finds Defendant has failed to establish as a matter of law that 3 Plaintiff could not feasibly obtain any relief available under the UCL. 4 5 IV. CONCLUSION & ORDER 6 For the foregoing reasons, the Court DENIES Defendant’s motion to dismiss. 7 Furthermore, no later than fourteen days after the entry of this order, the parties shall 8 either file a non-opposition to the consolidation of the present action and Defendant’s 9 earlier filed complaint seeking declaratory relief (3:17-cv-00945-L-BGS) or show cause 10 as to why the Court should not consolidate the two cases. 11 IT IS SO ORDERED. 12 Dated: October 26, 2017 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 3:17-cv-00945-L-BGS
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