1 O 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 GARY RAND; GARY RAND AS ) CV 19-3104-RSWL-JEM

TRUSTEE OF THE RAND 1992 )

13 IRREVOCABLE TRUST; SUZANNE )

E. RAND-LEWIS; SUZANNE E. ) ORDER re: Plaintiffs’

14 RAND-LEWIS AS TRUSTEE OF ) Motion to Remand [27]; THE SUZANNE E. RAND-LEWIS ) Defendants’ Motion to 15 FAMILY TRUST DATED AUGUST ) Dismiss [15, 19] 17, 1993; LESLIE B. RAND- ) 16 LUBY; LESLIE B. RAND-LUBY )

AS TRUSTEE OF THE LESLIE B. )

17 RAND-LUBY LIVING TRUST )

DATED NOVEMBER 10, 1995, )

18 ) Plaintiffs, ) 19 ) ) 20 v. ) ) 21 )

MIDLAND NATIONAL LIFE )

22 INSURANCE; MICHAEL L. ) KELLY; and DOES 1 through ) 23 100, ) ) 24 ) Defendants. ) 25 Currently before the Court is Plaintiffs Gary Rand; 26 Gary Rand as Trustee of the Rand 1992 Irrevocable 27 Trust; Suzanne E. Rand-Lewis; Suzanne E. Rand-Lewis as 28 1 Trustee of the Suzanne E. Rand-Lewis Family Trust; 2 Leslie B. Rand-Luby; and Leslie B. Rand-Luby as Trustee 3 of the Leslie B. Rand-Luby Living Trust’s 4 (collectively, “Plaintiffs”) Motion to Remand [27], and 5 Defendants Midland National Life Insurance (“MNLI”) and 6 Michael L. Kelly’s (“Kelly”) (collectively, 7 “Defendants”) Motion to Dismiss [15, 19]. Having 8 reviewed all papers submitted pertaining to the 9 Motions, the Court NOW FINDS AND RULES AS FOLLOWS: the 10 Court DENIES Plaintiffs’ Motion to Remand and GRANTS 11 Defendants’ Motion to Dismiss WITH LEAVE TO AMEND. 12 I. BACKGROUND 13 A. Factual Background 14 Plaintiffs are all residents of Los Angeles, 15 California, and insureds, owners, and beneficiaries of 16 the Policy.1 Compl. ¶ 1, ECF No. 1-1. Rand purchased 17 the Policy in the early 1980s and made his children, 18 the Co-Plaintiffs, Policy owners. Id. ¶ 8. Defendant 19 MNLI was Plaintiffs’ insurer and Defendant Kelly was 20 the former Regional Sales Director at MNLI. Pls.’ Mot. 21 at 3:18-19, ECF No. 27; see also Defs.’ Notice of 22 Removal at 3:7-8, ECF No. 1. 23 Plaintiffs assert that the Policy had set premium 24 costs, with costs to be calculated monthly by a set 25 1 The Complaint was filed on behalf of Rand and his two 26 daughters, Suzanne and Leslie, suing in their individual 27 capacities and as trustees for three family trusts established by the Rand family—the Rand 1992 Irrevocable Trust, the Suzanne E. 28 Rand-Lewis Family Trust Dated August 17, 1993, and the Leslie B. Rand-Luby Living Trust Dated November 10, 1995. Compl. ¶ 1. 1 formula. Compl. ¶ 8. Plaintiffs allege that rather 2 than using the set formula, Defendant MNLI increased 3 costs based on an undisclosed formula to get Plaintiffs 4 to relinquish the Policy. Id. When Rand asked for 5 information regarding the increased costs,2 Defendant 6 MNLI provided a vague response. Id. ¶¶ 11-12. Rand 7 was then allegedly referred to Defendant Kelly, who was 8 also unhelpful. Id. ¶ 11. Plaintiffs claim Defendant 9 Kelly was their insurance broker. Pls.’ Mot. at 3:18- 10 19. Meanwhile, Defendants assert that Defendant Kelly 11 was never associated with the Policy. Defs.’ Notice of 12 Removal ¶ 24. See generally Declaration of Michael L. 13 Kelly in Support of Removal (“Kelly Decl.”), ECF No. 3; 14 Declaration of Kristina Seekings in Support of Removal 15 (“Seekings Decl.”), ECF No. 5; Declaration of Holly 16 Johnson in Support of Removal (“Johnson Decl.”), ECF 17 No. 4; Declaration of Nick Nelson in Support of Removal 18 (“Nelson Decl.”), ECF No. 6. 19 Subsequently in 2017, Defendant MNLI charged Rand a 20 premium payment of $28,708.19 to continue the Policy. 21 See Compl. ¶ 9. Rand contested the amount, as he had 22 already allegedly paid over one million dollars in 23 premiums over the life of the Policy. Id. Further, 24 25 2 Rand asked why charges were taken from the Policy value, what the charges were, for an accounting, for Defendants to state 26 how the charges were calculated, what Defendants’ basis for the 27 Policy value was, for the amount of premiums Defendants were owed, for an accounting of the premiums paid, and for specific 28 facts as to the charges with reference to the Policy provisions. Compl. ¶ 11, ECF No. 1-1. 1 Plaintiffs contend that when Rand offered a different 2 premium payment, Defendant MNLI improperly refused. 3 Id. Consequently, Defendant MNLI claimed the Policy 4 lapsed. Id. ¶ 14. 5 On April 15, 2017, Defendant MNLI terminated the 6 Policy and notified Rand of the termination by letter. 7 Id. Plaintiffs allege that such termination was 8 improper, contending that all owners of the Policy 9 should have been notified.3 Id. As a result, 10 Plaintiffs assert that the Policy remains in full 11 effect. Id. ¶¶ 8, 19. 12 Plaintiffs further allege that to reinstate the 13 Policy, Defendants claimed $28,708.19 and required Rand 14 to provide full medical underwriting, documentation, 15 and release of health information. Id. ¶ 9. 16 Plaintiffs assert that Defendants knew such 17 requirements would prevent Rand from reinstating the 18 Policy. Pls.’ Mot. at 3:24-27, 4:1-2. Plaintiffs now 19 bring this Action requesting damages, an accounting, 20 reinstatement of the Policy, and disgorgement of funds. 21 Compl. at 25-26. 22 /// 23 24 3 The Policy states that MNLI will “mail the Owner notice, 25 at his last known address, of the amount of premium that will be sufficient to continue [the] policy . . . .” Policy at 5, ECF 26 No. 1-2. Plaintiffs contend that termination was not proper 27 under this provision because Plaintiffs Rand 1992 Trust Irrevocable Trust, Trustee Suzanne E. Rand-Lewis, and Trustee 28 Leslie B. Rand-Luby are owners of the Policy who were not notified of its termination. Compl. ¶ 8, ECF No. 1-1. 1 B. Procedural Background 2 Plaintiffs filed the Complaint [1-1] in the 3 Superior Court of the State of California, County of 4 Los Angeles, on March 13, 2019, alleging breach of 5 contract amongst other related claims.4 Defendants 6 removed this Action to this Court on April 22, 2019 7 [1]. 8 On April 29, 2019, Defendant MNLI filed the instant 9 Motion to Dismiss Plaintiffs’ Complaint [15]. On May 10 7, 2019, Defendant Kelly a Notice of Motion to Dismiss 11 [19] and Joinder [20], adopting Defendant MNLI’s 12 Motion. On May 21, 2019, Plaintiffs’ filed their 13 Opposotion [26]. On May 28, 2019, Defendant MNLI filed 14 its Reply [30], which Defendant Kelly joined as well 15 [29]. 16 Plaintiffs filed the instant Motion to Remand [27] 17 on May 22, 2019. Defendants filed their Opposition 18 [32] on June 4, 2019. Plaintiffs filed their Reply 19 [37] on June 10, 2019. 20 /// 21 22 4 Plaintiffs brought thirteen claims in total. Compl. at 1, ECF No. 1-1. Against Defendant MNLI, Plaintiffs claim: 1) breach 23 of contract, 2) breach of the implied covenant of good faith and fair dealing, 3) violation of California Administrative 24 Regulations Section 2695.7, and 4) unjust enrichment; violation of constructive trust; and an accounting. Id. Against Defendant 25 Kelly, Plaintiffs claim: 5) breach of contract, 6) breach of fiduciary duties, and 7) violation of the Consumer Legal Remedies 26 Act. Id. Against Defendants jointly, Plaintiffs assert: 8) 27 violation of Business & Professions Code Section 17200, 9) intentional infliction of emotional distress, 10) fraud, 11) 28 negligent misrepresentation, 12) concealment, and 13) elder abuse. Id. 1 II. DISCUSSION 2 A. Legal Standard 3 1. Removal 4 Civil actions may be removed from state court if a 5 federal court has original jurisdiction. See Syngenta 6 Crop Prot., Inc. v. Henson, 123 S. Ct. 366, 370 (2002) 7 (“Under the plain terms of § 1441(a), in order properly 8 to remove [an] action pursuant to that 9 provision, . . . original subject-matter jurisdiction 10 [must] lie[] in the federal courts.”). Diversity 11 jurisdiction exists in all civil actions between 12 citizens of different states where the amount in 13 controversy exceeds $75,000, exclusive of interest and 14 costs. 28 U.S.C. § 1332. There must be complete 15 diversity of citizenship, meaning “each of the 16 plaintiffs must be a citizen of a different state than 17 each of the defendants.” Morris v. Princess Cruises, 18 Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (citing 19 Caterpillar Inc. v. Lewis, 117 S. Ct. 467, 472 (1996)). 20 Federal question jurisdiction exists in “all civil 21 actions arising under the Constitution, laws, or 22 treaties of the United States.” 28 U.S.C. § 1331. 23 “The burden of establishing jurisdiction falls on 24 the party invoking the removal statute, which is 25 strictly construed against removal.” Sullivan v. First 26 Affiliated Sec., Inc., 813 F.2d 1368, 1371 (9th Cir. 27 1987) (internal citations omitted). Courts resolve all 28 ambiguities “in favor of remand to state court.” 1 Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th 2 Cir. 2009) (citing Gaus v. Miles, Inc., 980 F.2d 564, 3 566 (9th Cir. 1992)). A removed case must be remanded 4 “[i]f at any time before final judgment it appears that 5 the district court lacks subject matter jurisdiction.” 6 28 U.S.C. § 1447(c). 7 2. Fraudulent Joinder 8 “If [a] plaintiff fails to state a cause of action 9 against a resident defendant, and the failure is 10 obvious according to the settled rules of the state, 11 the joinder of the resident defendant is fraudulent.” 12 McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th 13 Cir. 1987). The fraudulent joinder doctrine requires 14 courts to disregard the citizenship of defendants when 15 no viable cause of action has been stated against them, 16 or when evidence presented by the removing party shows 17 that there is no factual basis for the claims alleged 18 against the defendants. See Morris 236 F.3d at 1067- 19 68. 20 “There is a presumption against finding fraudulent 21 joinder, and defendants who assert that [a] plaintiff 22 has fraudulently joined a party carry a heavy burden of 23 persuasion.” Plute v. Roadway Package Sys., Inc., 141 24 F. Supp. 2d 1005, 1008 (N.D. Cal. 2001). “[T]he 25 defendant must demonstrate that there is no possibility 26 that the plaintiff will be able to establish a cause of 27 action in [s]tate court against the alleged sham 28 defendant.” Good v. Prudential Ins. Co. of Am., 5 F. 1 Supp. 2d 804, 807 (N.D. Cal. 1998) (emphasis added). 2 In determining whether the defendant has met this 3 burden, courts may consider the plaintiff’s complaint 4 and additional “summary judgment type evidence.” 5 Morris, 236 F.3d at 1068. 6 Fraudulent joinder is shown via “1) actual fraud in 7 the pleading of jurisdictional facts, or 2) inability 8 of the plaintiff to establish a cause of action against 9 the non-diverse party in state court.” Hunter v. 10 Philip Morris USA, 582 F.3d 1039, 1044 (9th Cir. 2009) 11 (quoting Smallwood v. Illinois Cent. RR. Co., 385 F.3d 12 568, 573 (5th Cir. 2004)). The latter is shown if a 13 defendant establishes that “individuals joined in the 14 action cannot be liable on any theory.” Ritchey v. 15 Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). 16 However, “if there is a possibility that a state court 17 would find that the complaint states a cause of action 18 against any of the resident defendants, the federal 19 court must find that the joinder was proper and remand 20 the case to the state court.” Hunter, 582 F.3d 1039, 21 1046 (9th Cir. 2009) (quoting Tillman v. R.J. Reynolds 22 Tobacco, 340 F.3d 1277, 1279 (11th Cir. 2003)). 23 3. Motion to Dismiss 24 Federal Rule of Civil Procedure 12(b)(6) allows a 25 party to move for dismissal of one or more claims if 26 the pleading fails to state a claim upon which relief 27 can be granted. A complaint must “contain sufficient 28 factual matter, accepted as true, to state a claim to 1 relief that is plausible on its face.” Ashcroft v. 2 Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted). 3 Dismissal is warranted for a “lack of a cognizable 4 legal theory or the absence of sufficient facts alleged 5 under a cognizable legal theory.” Balistreri v. 6 Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 7 1988) (citation omitted). 8 In ruling on a 12(b)(6) motion, a court may 9 generally consider only allegations contained in the 10 pleadings, exhibits attached to the complaint, and 11 matters properly subject to judicial notice. Swartz v. 12 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court 13 must presume all factual allegations of the complaint 14 to be true and draw all reasonable inferences in favor 15 of the non-moving party. Klarfeld v. United States, 16 944 F.2d 583, 585 (9th Cir. 1991). The question is not 17 whether the plaintiff will ultimately prevail, but 18 whether the plaintiff is entitled to present evidence 19 to support the claims. Jackson v. Birmingham Bd. of 20 Educ., 544 U.S. 167, 184 (2005) (quoting Scheuer v. 21 Rhodes, 416 U.S. 232, 236 (1974)). While a complaint 22 need not contain detailed factual allegations, a 23 plaintiff must provide more than “labels and 24 conclusions” or “a formulaic recitation of the elements 25 of a cause of action.” Bell Atl. Corp. v. Twombly, 550 26 U.S. 544, 555 (2007). However, a complaint “should not 27 be dismissed under Rule 12(b)(6) ‘unless it appears 28 beyond doubt that the plaintiff can prove no set of 1 facts in support of his claim which would entitle him 2 to relief.’” Balistreri, 901 F.2d at 699 (citing 3 Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). 4 B. Discussion 5 1. Motion to Remand 6 Plaintiffs contend that this Court lacks subject 7 matter jurisdiction over this Action. The Court 8 undisputably lacks federal question jurisdiction; 9 therefore, the issue is whether the Court has diversity 10 jurisdiction. 11 a. The Amount in Controversy is Satisfied 12 A district court may consider whether it is 13 facially apparent from the complaint that the 14 jurisdictional amount is satisfied. See Singer v. 15 State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th 16 Cir. 1997). If not, the court may consider facts in 17 the removal petition and require parties to submit 18 summary-judgment-type evidence regarding the amount in 19 controversy. Id. (citation omitted). Further, where 20 the amount in controversy is not facially apparent, the 21 removing party must establish, by a preponderance of 22 evidence, that the jurisdictional amount has been met. 23 See Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 24 404 (9th Cir. 1996) (“[W]here a plaintiff’s state court 25 complaint does not specify a particular amount of 26 damages, the removing defendant bears the burden of 27 establishing, by a preponderance of the evidence, that 28 the amount in controversy exceeds $[75],000.”). 1 In declaratory judgment actions about whether an 2 insurance policy is in effect or not, the policy’s face 3 amount controls the amount in controversy. Elhouty v. 4 Lincoln Benefit Life Co., 886 F.3d 752, 756 (9th Cir. 5 2018). Here, Plaintiffs argue that they are not 6 seeking a declaratory judgment that the Policy is in 7 effect. Pls.’ Mot. at 8:10-12. However, Plaintiffs’ 8 Complaint suggests otherwise. In their Complaint, 9 Plaintiffs seek equitable relief, including a 10 reinstatement of the Policy. Compl. ¶¶ 64, 121 11 (“Plaintiff seeks equitable relief including a full 12 accounting, reinstatement of the Policy and 13 restitution.”). Plaintiffs also assert that the Policy 14 was improperly terminated and thus “remains in full 15 force and effect.” See id. ¶ 4. Thus, at issue is 16 whether the Policy was properly terminated. See 17 Elhouty, 886 F.3d at 756 (“[I]t is long-established 18 that in declaratory judgment actions about whether an 19 insurance policy is in effect or has been terminated, 20 the policy’s face amount is the measure of the amount 21 in controversy.”). Accordingly, “the value of the 22 object of the litigation” is the Policy itself, which 23 provides for a $2.5 million death benefit. Id. at 755; 24 see also Budget Rent-A-Car, Inc. v. Higashiguchi, 109 25 F.3d 1471, 1473 (9th Cir. 1997) (finding that where a 26 policy’s validity is at issue, the policy limit is the 27 amount in controversy). As such, the Policy’s $2.5 28 million face amount is the amount in controversy, 1 satisfying the $75,000 jurisdictional minimum. See 2 Sandstrom v. Protective Life Ins. Co., No. 13-1002-JFW 3 (Opx), 2013 WL 12123308, at *2 (C.D. Cal. Mar. 14, 4 2013) (finding validity of a life insurance policy at 5 issue because the plaintiff alleges that the defendant 6 “improperly canceled the policy”). 7 Because the Policy’s face value satisfies the 8 amount in controversy, the Court need not consider 9 Plaintiffs’ additional requests for damages, attorneys’ 10 fees, and other relief in making its amount in 11 controversy determination. 12 b. There is Complete Diversity Because 13 Defendant Kelly is a Sham Defendant 14 Plaintiffs are California residents, Defendant MNLI 15 is an Iowa corporation, and Defendant Kelly is a 16 California resident. Notice of Removal ¶¶ 6-7. 17 Defendants argue that Defendant Kelly was never 18 Plaintiffs’ agent and that he was solely joined to 19 defeat diversity jurisdiction. Plaintiffs argue that 20 Defendant Kelly was their broker and was properly 21 joined, and as a result, this case should be remanded. 22 “[A] federal court must find that a defendant was 23 properly joined and remand the case . . . if there is a 24 possibility that a state court would find that the 25 complaint states a cause of action against any of the 26 [non-diverse] defendants.” Grancare, LLC v. Thrower by 27 & through Mills, 889 F.3d 543, 549 (9th Cir. 2018) 28 (internal quotations and citation omitted). Because 1 Defendant Kelly’s role regarding the Policy is in 2 dispute, Plaintiffs argue that “all disputed questions 3 of fact and all ambiguities” must be resolved in their 4 favor. Pls.’ Mot. to Remand at 10:22-24. On the 5 contrary, the Court may look beyond Plaintiffs’ 6 Complaint to resolve any factual disputes. See 7 Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. 8 Ct. 736, 745 (2014) (holding that courts may “look 9 behind the pleadings to ensure that parties are not 10 improperly creating or destroying diversity 11 jurisdiction”). Similarly, the Ninth Circuit has 12 upheld rulings where “a defendant presents 13 extraordinarily strong evidence . . . that a plaintiff 14 could not possibly prevail on her claims against the 15 fraudulently joined defendant.” Grancare, 889 F.3d at 16 548 (citation omitted). 17 Here, Defendant Kelly was not a party to any policy 18 on which Plaintiffs could predicate a claim against 19 him. Defendants’ evidence shows that Defendant Kelly 20 had no connection to the Plaintiffs or the Policy 21 whatsoever. In his declaration, Defendant Kelly states 22 that he “never had any responsibility for the 23 Plaintiffs or their Policy,” does not even recognize 24 the names of Plaintiffs, and that he has never served 25 as the agent or broker for any MNLI policy associated 26 with Plaintiffs. Kelly Decl. ¶¶ 4-6. Defendant Kelly 27 further states that it is his business practice to 28 maintain records of any contacts or communications with 1 existing or prospective insurance clients, and these 2 records do not reflect any contact with, or concerning, 3 Plaintiffs. Id. ¶¶ 7-8. Holly Johnson, a current 4 employee of Defendant Kelly, and Kristina Seekings, a 5 former employee who worked for Defendant Kelly during 6 the relevant time period, both maintained and reviewed 7 these business records and confirmed that there was no 8 indication Defendant Kelly ever had contact with or 9 served as the agent for Plaintiffs. See generally 10 Johnson Decl.; Seekings Decl. Nick Nelson, Vice 11 President of Administration for Defendant MNLI, 12 confirms that neither does MNLI have such records, and 13 that “no compensation was ever paid to Kelly relating 14 to the sale or servicing of [the] Policy . . . .” 15 Nelson Decl. ¶ 23. Nelson further states that “no 16 individual servicing agent in the State of California 17 or elsewhere was ever assigned to [the] Policy . . . .”5 18 Nelson Decl. ¶ 19. 19 Plaintiffs have not put forth any competing 20 evidence. As support, Plaintiffs have only offered a 21 declaration by Plaintiffs’ counsel. The declaration 22 5 In their Reply, Plaintiffs argue that even if Defendant 23 Kelly was fraudulently joined, there could never be complete 24 diversity in this Action because Defendant MNLI was required to conduct business in California through a properly licensed 25 California agent. See Pls.’ Reply at 8:24-26. However, Defendant MNLI maintains that no agent was ever assigned to the 26 Policy. Nelson Decl. ¶ 19, ECF No. 6. Even assuming Defendant MNLI did properly abide by this requirement, the issue before the 27 Court is whether Defendant Kelly was fraudulently joined. Whether Defendant MNLI abided by this requirement does not prove 28 that Defendant Kelly was the California agent on this Policy. 1 states in conclusory fashion that “there is not 2 complete diversity between the parties,” that 3 Defendants cannot show the amount in controversy has 4 been met, that Defendant Kelly is not a sham Defendant, 5 and that Defendants have not provided “competent 6 evidence” that Defendant Kelly was fraudulently joined. 7 Declaration of Timothy D. Rand-Lewis (“Rand-Lewis 8 Decl.”) at 2:8-9, 11-13, ECF No. 27-1. This alone is 9 insufficient to rebut the evidence Defendants have put 10 forth. 11 In short, Plaintiffs provide no evidence showing 12 that Defendant Kelly was involved with the Policy or 13 Plaintiffs in any capacity. In reviewing the 14 Complaint, it is readily apparent that all claims 15 asserted against Defendant Kelly are predicated on the 16 Policy between Defendant MNLI and Plaintiffs, and the 17 claimed relationship with Defendant Kelly as the agent.6 18 Under California law, “only a signatory to a contract 19 may be liable for any breach.” See United Computer 20 Systems, Inc. v. AT & T Corp., 298 F.3d 756, 761 (9th 21 Cir. 2002) (citing Clemens v. American Warranty Corp., 22 238 Cal. Rptr. 339 (Cal. Ct. App. 1987)). As such, and 23 in light of the evidence Defendants have put forth that 24 25 6 Against Defendant Kelly, Plaintiffs claim: breach of contract, breach of fiduciary duties, and violation of the 26 Consumer Legal Remedies Act. Compl. at 1. Against Defendants jointly, Plaintiffs assert: violation of Business & Professions 27 Code Section 17200, intentional infliction of emotional distress, fraud, negligent misrepresentation, concealment, and elder abuse. 28 Id. 1 Defendant Kelly was not involved with the Policy, there 2 is no showing that any of Plaintiffs’ claims asserted 3 against Defendant Kelly could be viable. See Spirtos 4 v. Allstate Ins. Co., 173 F. App'x 538, 540 (9th Cir. 5 2006) (finding fraudulent joinder where defendants were 6 not parties to an insurance contract and did not owe 7 fiduciary duties to plaintiffs); see also Henry v. 8 Associated Indem. Corp., 266 Cal. Rptr. 578 (Cal. Ct. 9 App. 1990) (noting that California does not recognize a 10 fiduciary relationship between insured and insurer). 11 Separate from the allegation that Defendant Kelly was 12 Plaintiffs’ agent, the Complaint lacks any allegations 13 demonstrating liability or wrongdoing on the part of 14 Defendant Kelly himself. Without a showing by 15 Plaintiffs of how Defendant Kelly is involved, the 16 Court is left to conclude that Defendant Kelly is a 17 sham defendant. This is especially so in light of the 18 statements made by Defendant Kelly himself, two of his 19 employees, and Defendant MNLI’s Vice President, that 20 Defendant Kelly never served as Plaintiffs’ agent. 21 Because the Court finds that Defendant Kelly is a 22 sham defendant, his citizenship is not relevant for the 23 purposes of diversity jurisdiction. As such, the Court 24 has diversity jurisdiction as both the amount in 25 controversy has been met and complete diversity exists. 26 Accordingly, the Court DENIES Plaintiffs’ Motion to 27 Remand based upon the information before the Court at 28 this time. 1 2. Defendants’ Motion to Dismiss 2 a. 7-3 Conference 3 As a preliminary matter, Plaintiffs argue that 4 Defendants’ Motion to Dismiss should be denied for 5 failure to meet and confer, as required by Local Rule 6 7-3. The parties do not dispute that a 7-3 conference 7 never occurred. According to Defendant MNLI, it 8 invited Plaintiffs’ counsel to meet and confer in 9 person or by telephone no fewer than four times, 10 followed by a fifth and final attempt on the day 11 Defendant MNLI filed its Motion to Dismiss. 12 Declaration of Edith S. Shea (“Shea Decl.”) ¶¶ 2-3, ECF 13 No 31. Defendants argue that Plaintiffs declined each 14 of these invitations, and point to a series of emails 15 between Defendant MNLI’s counsel and Plaintiffs’ 16 counsel. Id. ¶3; see id., Exs. 3, 5, 7. However, upon 17 review of these emails, it appears that parties’ 18 counsel were discussing meeting and conferring 19 regarding issues pertaining to Plaintiffs’ Motion to 20 Remand, and issues regarding redactions, with no 21 mention of meeting regarding the instant Motion to 22 Dismiss. See id., Exs. 1-8. While it is unclear 23 whether true efforts were made to meet and confer prior 24 to the filing the Motions to Dismiss, Plaintiffs have 25 not explained how this has prejudiced them in any way. 26 See Carmax Auto Superstores Cal. LLC v. Hernandez, 94 27 F. Supp. 3d 1078, 1088 (C.D. Cal. 2015) (“Failure to 28 comply with the Local Rules does not automatically 1 require the denial of a party’s motion, however, 2 particularly where the non-moving party has suffered no 3 apparent prejudice as a result of the failure to 4 comply.”). In light of this, and “based on the law’s 5 strong preference to determine cases on their merits,” 6 Summer v. Berryhill, No. 16-cv-01872-BLF, 2017 U.S. 7 Dist. LEXIS 109841, at *9 (N.D. Cal. July 14, 2017), 8 the Court will exercise its discretion to consider the 9 merits of the Motions. 10 b. Defendant Kelly’s Joinder 11 Plaintiffs argue that Defendants’ Motion to Dismiss 12 should be denied because Defendant Kelly did not timely 13 file his Motion, and that his Motion does not abide by 14 the requirements of Local Rule 7-5. First, Defendant 15 Kelly filed his Motion on May 7, 2019, which Plaintiffs 16 argue is untimely under Fed. R. Civ. P. 81(c) because 17 Defendant Kelly was required to respond to the 18 Complaint no later than seven days after removal—April 19 29, 2019. While the Court agrees with Plaintiffs, 20 there is no indication that Defendant Kelly’s late 21 filing has prejudiced Plaintiffs. For the same reasons 22 discussed above as to the lack of a 7-3 conference, the 23 Court declines to dismiss Defendants’ Motion on this 24 reason alone. 25 Next, pursuant to Local Rule 7-5, a “brief but 26 complete memorandum in support thereof and the points 27 and authorities” are to be filed with the notice of a 28 motion. Plaintiffs argue that Defendant Kelly’s Motion 1 fails to include an adequate notice or memorandum of 2 points and authorities. Defendant Kelly filed a Notice 3 of Joinder in which he joined and adopted the arguments 4 and authorities submitted by Defendant MNLI in its 5 Motion to Dismiss [20]. However, as Plaintiffs point 6 out, Defendant Kelly’s Motion fails to address the 7 third, fourth, and tenth causes of action asserted 8 against Defendant Kelly only. Defendants argue that 9 Defendant MNLI’s Motion does address all thirteen 10 claims, because it is premised upon the statute of 11 limitations, the failure to plead fraud with 12 particularity, and Complaint’s reliance upon MNLI’s 13 conduct expressly permitted by the Policy—which apply 14 to all thirteen claims. As discussed in further detail 15 below, the Court only analyzes the statute of 16 limitations issue at this juncture, and does not reach 17 the remainder of the arguments briefed. Because 18 Defendant MNLI’s arguments regarding the statute of 19 limitations applies equally to the individual claims 20 against Defendant Kelly, there is no prejudice against 21 Plaintiffs in considering Defendants’ Motion, despite 22 Defendant Kelly’s failure to address the claims brought 23 specifically against him. As such, the Court will 24 exercise its discretion to consider the merits of 25 Defendants’ Motion.7 See C.D. Cal. L.R. 7-4 (“The Court 26 27 7 Had the Court reached the substantive claims, Defendant Kelly’s Motion would be insufficient under Local Rule 7-5, 28 providing the Court proper grounds to deny his Motion altogether. 1 may decline to consider a motion unless it meets the 2 requirements of L.R. 7-3 through 7-8”) (emphasis 3 added). 4 c. Statute of Limitations 5 “A claim may be dismissed as untimely pursuant to a 6 12(b)(6) motion ‘only when the running of the statute 7 [of limitations] is apparent on the face of the 8 complaint.’” United States ex rel. Air Control Techs. 9 v. Pre Con Indus., 720 F.3d 1174, 1178 (9th Cir. 2013) 10 (quotation omitted). “In fact, a complaint cannot be 11 dismissed unless it appears beyond doubt that the 12 plaintiff can prove no set of facts that would 13 establish the timeliness of the claim.” Supermail 14 Cargo, Inc. v. United States, 68 F.3d 1204, 1207 (9th 15 Cir. 1995). 16 i. Discovery Rule 17 A federal court sitting in diversity applies the 18 substantive law of the state, including the state's 19 statute of limitations.” Albano v. Shea Homes Ltd. 20 P'ship, 634 F.3d 524, 530 (9th Cir. 2011) (citation 21 omitted). “[O]rdinarily, the statute of limitations 22 runs from ‘the occurrence of the last element essential 23 to the cause of action.’” Aryeh v. Canon Bus. 24 Solutions, Inc., 55 Cal. 4th 1185, 1191 (2013) 25 (citation omitted). “An important exception to the 26 general rule of accrual is the ‘discovery rule,’ which 27 28 1 postpones accrual of a cause of action until the 2 plaintiff discovers, or has reason to discover, the 3 cause of action.” Fox v. Ethicon Endo-Surgery, Inc., 4 35 Cal. 4th 797, 806 (2005). 5 “A plaintiff has reason to discover a cause of 6 action when he or she ‘has reason at least to suspect a 7 factual basis for its elements.’” Fox, 35 Cal. 4th at 8 807 (citation omitted). “[T]o rely on the discovery 9 rule for delayed accrual of a cause of action, ‘[a] 10 plaintiff whose complaint shows on its face that his 11 claim would be barred without the benefit of the 12 discovery rule must specifically plead facts to show 13 (1) the time and manner of discovery and (2) the 14 inability to have made earlier discovery despite 15 reasonable diligence.’” Id. at 808 (second alteration 16 and emphasis in original) (citation omitted). 17 Here, Defendants argue that all thirteen of 18 Plaintiffs’ claims are barred by their respective 19 statute of limitations. Of all claims asserted, the 20 longest applicable statute of limitations is four 21 years.8 All of Plaintiffs’ claims stem from the same 22 23 8 The applicable statute of limitations for the claims 24 asserted by Plaintiffs are detailed as follows. Four years: breach of contract, Cal. Civ. Proc. Code § 337; violations of 25 Cal. Bus. & Prof. Code § 17200; elder abuse, Cal. Welfare and Institutions Code § 15610.7; and breach of fiduciary duty 26 premised upon alleged fraud, Cal. Civ. Proc. Code §§ 340.6(a). Three years: claims for fraud, negligent misrepresentation, and 27 concealment, Cal. Civ. Proc. Code § 338(d); and claims for violations of Consumer Legal Remedies Act § 1750, Cal. Civ. Code 28 § 1783. Two years: intentional infliction of emotional distress, 1 underlying theory that Defendants wrongfully raised 2 premium costs as an effort to ultimately force a lapse 3 of the Policy. This began by a series of 4 communications between Rand and Defendant MNLI leading 5 up to termination of the Policy on April 15, 2017, in 6 which Plaintiffs allege that Rand demanded an 7 accounting and justification of premium costs that 8 Defendant MNLI never provided. Compl. ¶¶ 11-15. 9 Plaintiffs did not attach any such letters as exhibits 10 to the Complaint, but Defendants now point to the 11 letters that were provided as exhibits to the 12 Declaration of Nick Nelson re Defendant MNLI’s Notice 13 of Removal [6]. Ordinarily, a court may look only at 14 the face of the complaint to decide a motion to 15 dismiss.” Van Buskirk v. Cable News Network, Inc., 284 16 F.3d 977, 980 (9th Cir. 2002). However, “[a] court may 17 consider evidence on which the complaint ‘necessarily 18 relies’ if: (1) the complaint refers to the document; 19 (2) the document is central to the plaintiff's claim; 20 and (3) no party questions the authenticity of the copy 21 attached to the 12(b)(6) motion.” Marder v. Lopez, 450 22 F.3d 445, 448 (9th Cir. 2006) (internal citations 23 omitted). The court may treat such a document as “part 24 of the complaint, and thus may assume that its contents 25 are true for purposes of a motion to dismiss under Rule 26 12(b)(6).” Id. (citing United States v. Ritchie, 342 27 Cal. Civ. Proc. Code § 335.1; and alleged breach of an oral or 28 implied contract, Cal. Civ. Proc. Code § 339(1). 1 F.3d 903, 908 (9th Cir. 2003)). Here, Plaintiffs do 2 not contest the authenticity of the letters between 3 Rand and Defendant MNLI, and Plaintiffs’ Complaint does 4 “necessarily rely” on the content of these letters, as 5 it directly references and quotes portions of the 6 several demands Rand made to MNLI regarding the 7 increased premiums. Compl. ¶ 12. Thus, the Court may 8 appropriately consider the letters. 9 Defendants argue that the letters demonstrate 10 Rand’s expressed conviction that he had been harmed by 11 Defendants’ alleged wrongdoing, and was aware of his 12 right to file suit, as early as 2012.9 On May 1, 2012, 13 Rand sent a letter to Defendant MNLI asserting that 14 there was a “major question as to how [MNLI] ha[s] 15 determined [the] premium which is being paid under 16 protest,” and demanding a “full and complete 17 accounting.” Declaration of Nick Nelson re Removal 18 (“Nelson Decl.”) ¶ 12, Ex. 7, May 1, 2012 Letter, ECF 19 No. 6-7. Defendant MNLI sent a premium payment history 20 in response, and on June 6, 2012, Rand replied that 21 this was “grossly insufficient,” asserting the same 22 complaints as before. See id. Rand next followed up 23 24 9 Although the Rand 1992 Irrevocable Trust is the current 25 owner of the Policy, it had appointed Rand as its agent and instructed Defendant MNLI to direct Policy communications to 26 Rand’s mailing address, thus imputing any knowledge by Rand to the Plaintiffs—the Trust, Rand-Lewis, and Rand-Luby as trustees. 27 See Nelson Decl., Ex. 2, Policy at 17 (designating address “same as insured” in reference to Rand and instructing billing notices, 28 including premium notices, to be sent to Rand), ECF No. 6. 1 with an August 22, 2012 letter repeating that all 2 payments made are in protest, and demanding that 3 Defendant MNLI “rectify the situation by abiding by the 4 terms and conditions” of the Policy, “refund[ing] any 5 and all over-payments,” and restoring the “cash value 6 to the proper amount.” See id., Ex. 10, August 22, 7 2012 Letter, ECF No. 6-10. Three years later, Rand 8 sent letters to Defendant MNLI in February of 2016 9 repeatedly threatening to file suit. See id., Exs. 12- 10 31 (Rand letters from February 26, 2016-December 5, 11 2016); Ex. 16, May 24, 2016 Letter (“We will be filing 12 an action for declaratory relief and damages, as I have 13 received no response to numerous requests.”) Thus, 14 Defendants argue that going off of the longest 15 applicable period of four years, Plaintiffs had to file 16 this suit by May 1, 2016, and because Plaintiffs filed 17 this Complaint on March 13, 2019, their claims are 18 barred. 19 Indeed, once Plaintiffs had reason to at least 20 suspect Defendant MNLI’s allegedly wrongful conduct of 21 increasing the premiums, Plaintiffs were “required to 22 conduct a reasonable investigation” and are “charged 23 with knowledge of the information that would have been 24 revealed by such an investigation.” Fox, 35 Cal. 4th 25 at 808. At first, it appears that Rand properly 26 requested an accounting from Defendant MNLI and 27 demanded a refund of over-payments in his August 22, 28 2012 letter, suggesting that he was aware he had been 1 injured through means of over-charged premiums. 2 However, Rand did not send another letter to Defendant 3 MNLI that the Court is aware of until three years 4 later. The Complaint does not otherwise allege any 5 sort of investigation by Rand or the other Plaintiffs 6 during those three years. See Adams v. United of Omaha 7 Life Ins. Co., No. SACV 12-969-JST (JPRx), 2013 WL 8 12113225, at *4-6 (C.D. Cal. Jan. 10, 2013) (dismissing 9 complaint for fraudulent claims related to a life 10 insurance policy as barred by statute of limitations in 11 part because plaintiff requested an accounting of 12 insurance premiums, but after never receiving it, did 13 nothing to further investigate for two years, failing 14 to show that “despite diligent investigation of the 15 circumstances of the injury, he . . . could not have 16 reasonably discovered facts supporting [his] cause[s] 17 of action within the applicable statute of limitations 18 period’”) (citing Fox, 35 Cal. 4th at 808). 19 Plaintiffs argue that regardless of these initial 20 communications, the date on which the Policy was 21 “terminated”—April 15, 2017—is the date that controls. 22 As such, Plaintiffs contend that this Action is timely 23 because Plaintiffs filed their Complaint in state court 24 on March 13, 2019, within two years of the termination 25 date. Additionally, Plaintiffs argue that part of 26 their claims against Defendant MNLI include its failure 27 to properly notify the Plaintiff policy owners of 28 premiums due and the Policy’s termination in 2017. 1 Plaintiffs further argue that they had been unaware, 2 and are still unaware of, the undisclosed “formula” 3 Defendant MNLI used to raise premiums, and thus require 4 the accounting still to determine damages. 5 The Court finds Plaintiffs’ arguments unpersuasive. 6 As the Complaint stands now, the crux of Plaintiffs’ 7 allegations rest on Defendant MNLI’s practice of 8 raising premiums from as early as 2012 to “try to force 9 a policy lapse.” Compl. ¶¶ 4, 12. The focus of this 10 analysis is on when Plaintiffs first suspected the 11 wrongdoing—that is, when they first suspected improper 12 premium increases. See Fox, 35 Cal. 4th at 807 13 (“Rather than examining whether [a] plaintiff[ ] 14 suspect[s] facts supporting each specific legal element 15 of a particular cause of action, [courts] look to 16 whether [a] plaintiff[ ] [has] reason to at least 17 suspect that a type of wrongdoing has injured [him].”). 18 Although the Court declines to make explicit findings 19 at this early stage, the allegations in the Complaint 20 lend towards the conclusion that Plaintiffs seemingly 21 knew of the raised premiums and suspected wrongdoing 22 since as early as 2012. The fact that Plaintiffs 23 ultimately suffered damages from Defendant MNLI’s 24 method of increasing premiums in the form of the Policy 25 lapse, regardless of its motivation, would thus not 26 extend the applicable statute of limitations. It is 27 the origin of the allegedly wrongful conduct—raising 28 the premiums—and not the ill effects from such conduct 1 that controls. See Rae v. Bank of Am., N.A., No. CV 2 16-8932 PA (Ssx), 2017 WL 447306, at *3 (C.D. Cal. Feb. 3 1, 2017) (“That [p]laintiff may continue to suffer the 4 ill effects from [defendant’s] allegedly tortious 5 conduct does not toll or extend the applicable statutes 6 of limitations.”); see also Davis v. Krasna, 121 Cal. 7 Rptr. 705, 713 (Cal. Ct. App. 1975) (“To delay the 8 running of the period of limitation only until 9 defendant's acts furnished plaintiff with a more 10 certain proof of damages would contravene the principle 11 that victims of legal wrong should make reasonable 12 efforts to avoid incurring further damages.”). 13 Without more alleged by Plaintiffs as to their 14 investigation into the wrongdoing following the initial 15 communications in 2012, and why they waited until 2019 16 to file suit, the Court concludes at this point that 17 accrual of Plaintiffs’ claims began in 2012. 18 Consequently, the relevant limitations periods bar all 19 of Plaintiffs’ claims. 20 ii. Estoppel Against Limitations 21 In their Opposition, Plaintiffs briefly put forth 22 an estoppel against limitations defense. “An estoppel 23 against limitations defense usually ‘arises as a result 24 of some conduct by the defendant, relied on by the 25 plaintiff, which induces the belated filing of the 26 action.” Spray, Gould & Bowers v. Associated Int’l 27 Ins. Co., 84 Cal. Rptr. 2d 552, 556 (Cal. Ct. App. 28 1999) (citation omitted). “Four elements must 1 ordinarily be proved to establish an equitable 2 estoppel: (1) The party to be estopped must know the 3 facts; (2) he must intend that his conduct shall be 4 acted upon, or must so act that the party asserting the 5 estoppel had the right to believe that it was so 6 intended; (3) the party asserting the estoppel must be 7 ignorant of the true state of facts; and, (4) he must 8 rely upon the conduct to his injury.” Id. However, 9 Plaintiffs only point to one allegation in the 10 Complaint, which states in conclusory fashion that 11 Defendants “are estopped from asserting any exclusions 12 under the Policy which may exist and have waived any 13 exclusions under the Policy which may exist.” Opp’n at 14 9:2-10; Compl. ¶ 29. This alone is insufficient to 15 meet the pleading requirements for estoppel. 16 Moreover, “[a]pplication of equitable estoppel 17 against the assertion of a limitations defense 18 typically arises through some misleading affirmative 19 conduct on the part of a defendant.” Spray, 84 Cal. 20 Rptr. 2d at 556. Here, Plaintiffs do not allege any 21 sort of misrepresentation by Defendants that would 22 induce Rand to wait, to his detriment, to bring suit. 23 Cf. Black v. Jackson National Life Ins. Co., No. 5:15- 24 cv-1429-CAS (DTBx), 2016 WL 3452486, at *4-5 (C.D. Cal. 25 June 20, 2016) (finding triable issue as to estoppel 26 because defendant insurance company “represent[ed] that 27 the Policy did not contain a disability premium waiver, 28 [defendant] should have anticipated that plaintiff 1 would act . . . on that information and fail to submit 2 a claim for a premium waiver”). 3 Plaintiffs argue that estoppel applies because the 4 Complaint alleges that Defendants specifically misled 5 Rand and refused to explain the premiums calculations 6 up to and including the date the Policy was terminated 7 on April 15, 2017. Yet, nowhere in the Complaint do 8 Plaintiffs allege facts supporting any of the four 9 elements required for estoppel. Further, Defendants 10 argue that Defendant MNLI’s response to Rand’s May 1, 11 2012 letter should have prompted Plaintiffs to file 12 suit, rather than inducing them to delay filing an 13 action. The Court agrees with Defendants. Plaintiffs 14 allege that this response was “vague”, “contrary to the 15 actual Policy provisions”, “did not state how the 16 actual deduction had been calculated”, and upon Rand’s 17 demand for a specific response, Defendant MNLI “failed 18 to respond” and continued to raise the premium costs 19 with no explanation. Compl. ¶ 12. Nothing in these 20 allegations suggest that Defendant MNLI induced Rand to 21 belatedly file suit, but rather, that Rand was on 22 further notice of the alleged wrongdoing with no 23 promise or misrepresentation from Defendant MNLI. Rand 24 later threatened litigation as a result of the lack 25 information Defendants provided in response to his 26 requests for an accounting, but still waited to bring 27 suit without any indication that Defendant MNLI induced 28 him to do so. In short, Plaintiffs do not allege any 1 misrepresentations by Defendants since first raising 2 premiums in 2012 that would induce waiting to file 3 suit. Accordingly, the Court finds that Plaintiffs’ 4 estoppel against limitations argument fails. 5 Because the Court finds that Plaintiffs’ claims are 6 time-barred, and that Plaintiffs have not alleged 7 sufficient facts justifying delay or estoppel, the 8 Court GRANTS Defendants’ Motion to Dismiss. 9 d. Leave to Amend 10 A party may amend the complaint once “as a matter 11 of course” before a responsive pleading is served. 12 Fed. R. Civ. P. 15(a). After that, the “party may 13 amend the party's pleading only by leave of court or by 14 written consent of the adverse party and leave shall be 15 freely given when justice so requires.” Id. Leave to 16 amend lies “within the sound discretion of the trial 17 court.” United States v. Webb, 655 F.2d 977, 979 (9th 18 Cir. 1981). The Ninth Circuit has noted “on several 19 occasions . . . that the ‘Supreme Court has instructed 20 the lower federal courts to heed carefully the command 21 of Rule 15(a), F[ed]. R. Civ. P., by freely granting 22 leave to amend when justice so requires.’” Gabrielson 23 v. Montgomery Ward & Co., 785 F.2d 762, 765 (9th Cir. 24 1986)(quoting Howey v. United States, 481 F.2d 1187, 25 1190 (9th Cir. 1973)). Here, Plaintiffs have yet to 26 file an amended complaint. It is possible that 27 Plaintiffs could plead additional facts justifying 28 their delay in filing suit or explaining further 1 investigation conducted. As such, the Court GRANTS 2 leave to amend only as to allegations regarding the 3 application of the discovery rule and/or estoppel 4 against limitations. 5 III. CONCLUSION 6 Based on the foregoing, the Court DENIES 7 Plaintiffs’ Motion to Remand and GRANTS Defendants’ 8 Motion to Dismiss WITH LEAVE TO AMEND. Plaintiffs are 9 to file a First Amended Complaint within 21 days from 10 the date of this order. 11 12 13 IT IS SO ORDERED. 14 15 DATED: August 6, 2019 /S/RONALD S.W. LEW 16 HONORABLE RONALD S.W. LEW Senior U.S. District Judge 17 18 19 20 21 22 23 24 25 26 27 28