Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 1 of 15 Page ID #:1178

1 O 2 3 4 5 6 7 United States District Court 8 9 Central District of California 10

11 MYRA STEEN, et al., Case № 2:20-cv-11226-ODW (SKx)

12 Plaintiffs, ORDER GRANTING IN PART AND 13 v. DENYING IN PART DEFENDANT’S 14 MOTION TO PARTIALLY DISMISS

AMERICAN NATIONAL INSURANCE PLAINTIFFS’ FIRST AMENDED

15 COMPANY, COMPLAINT [36] 16 Defendant. 17 18 I. INTRODUCTION 19 Plaintiffs Myra Steen and Janet Williams bring this putative class action against 20 Defendant American National Insurance Company, filing the operative First Amended 21 Complaint (“FAC”) on November 24, 2021. (FAC, ECF No. 30.) American National 22 moves, pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6), to dismiss certain 23 claims in Plaintiffs’ FAC. (Mot. Dismiss (“Mot.”), ECF No. 36.) After carefully 24 considering the papers filed in connection with the Motion, the Court deemed the matter 25 appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7- 26 15. For the reasons that follow, Defendant’s Motion is GRANTED IN PART and 27 DENIED IN PART. 28 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 2 of 15 Page ID #:1179

1 II. BACKGROUND 2 For purposes of this Rule 12(b)(6) motion, the Court accepts Plaintiffs’ 3 well-pleaded allegations as true. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 4 2001). 5 American National sells life insurance policies. (FAC ¶ 12.) Plaintiff Steen owns 6 five life insurance policies purchased from American National. (FAC ¶ 24.) Steen is 7 also the beneficiary and successor-in-interest to a policy insuring the life of her daughter 8 Janice Williams, who died on June 20, 2020. (FAC ¶¶ 24, 30.) The total value of 9 Steen’s policies is approximately $90,000. (FAC ¶ 26.) 10 Plaintiff Janet Williams is also Steen’s daughter. She owns four life insurance 11 policies purchased from American National. (FAC ¶ 25.) The value of her policies is 12 between $95,000 to $145,000.1 (FAC ¶¶ 25, 26.) 13 Plaintiffs paid their monthly premiums to American National’s agent, Khalid 14 Ibrahim, who traveled to Plaintiffs’ homes and places of work to collect cash payments. 15 (FAC ¶¶ 24, 28.) At an unspecified time, Plaintiffs heard rumors that American 16 National had terminated Ibrahim’s employment but that he was continuing to collect 17 money from Plaintiffs under the false pretense of collecting insurance premiums. (FAC 18 ¶ 28.) Thereafter, also at an unspecified time, Plaintiffs contacted American National 19 and discovered for the first time that the Policies had lapsed for nonpayment. (Id.) 20 After Steen’s daughter Janice died, Steen submitted a claim to American National 21 for the policy insuring Janice’s life, which American National denied for nonpayment 22 of the premium.2 (FAC ¶ 30.) 23 The Policies provide for a grace period of thirty-one days during which the 24 insurance policy will remain in force despite defaulting on a premium payment.3 25 1 Hereinafter, the Court refers to all policies of both Plaintiffs collectively as the “Policies.” (See, e.g., 26 FAC ¶ 26.) 2 It is not clear from the FAC whether Steen was aware, at the time she submitted her claim for death 27 benefits for Janice, of American National’s position that that policy had lapsed. 28 3 Plaintiffs attached the Policies to, and referenced the Policies throughout, the FAC. Moreover, the Policies form the basis of Plaintiffs’ claims. (FAC Exs. B–J.) Accordingly, the Court may properly

2 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 3 of 15 Page ID #:1180

1 (FAC ¶ 27.) However, Plaintiffs contend they are entitled under California Insurance 2 Code sections 10113.71 and 10113.72 to greater procedural safeguards, including a 3 sixty-day grace period after a missed payment, a thirty-day written notice of pending 4 lapse, and the annual right to designate a third party to receive such notice. (FAC ¶¶ 3, 5 16–17.) These statutory requirements were enacted January 1, 2013. American 6 National took the position that the requirements did not apply to policies executed 7 before January 1, 2013 (as opposed to applying more broadly to all policies in effect as 8 of January 1, 2013). Plaintiffs’ Policies in this case were executed before January 1, 9 2013, and American National accordingly did not adjust its practices to provide a longer 10 grace period and otherwise comply with the requirements of sections 10113.71 and 11 10113.72 with respect to Plaintiffs’ Policies. (FAC ¶¶ 5, 17.) 12 Plaintiffs’ Policies lapsed sometime in 2017, but American National failed to 13 provide Plaintiffs with the required grace period and notice prior to lapse. (FAC ¶¶ 29, 14 31, 32.) Plaintiffs assert that because American National failed to provide the requisite 15 safeguards, “the termination of [t]he Policies was ineffective[,] and [t]he Policies 16 remain in force.” (FAC ¶ 34.) 17 Plaintiffs now seek relief for themselves and for a proposed class of “[a]ll past, 18 present, and future owners or vested beneficiaries of Defendant’s life insurance policies 19 in force on or after January 1, 2013 and governed by [California Insurance Code] 20 [s]ections 10113.71 and/or 10113.72, where Defendant lapsed, terminated, or forced the 21 reinstatement of the policy on the basis of nonpayment of premium[s].” (FAC ¶ 37.) 22 Previously, the Court stayed this case pursuant to the parties’ stipulation to await the 23 California Supreme Court’s decision in McHugh v. Protective Life Ins. Co., 12 Cal. 5th 24 213 (2021) to resolve the question of the applicability of California Insurance Code 25 sections 10113.71 and 10113.72 to policies executed before the enactment of those 26 statutes. After the McHugh decision issued, the parties stipulated to lift the stay on the 27

28 refer to these documents under the doctrine of incorporation by reference. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 2018).

3 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 4 of 15 Page ID #:1181

1 case, and Plaintiffs proceeded to file their FAC, taking into account the decision in 2 McHugh. 3 In the operative FAC, Plaintiffs assert claims for (1) declaratory relief under 4 California law, (2) declaratory relief under federal law, (3) breach of contract, 5 (4) violation of California’s unfair competition law (“UCL”), and (5) conversion. (See 6 FAC ¶¶ 50–96.) American National moves to dismiss claims one, two, four, and five. 7 After fully briefing the Motion, (Opp’n, ECF No. 40; Reply, ECF No. 43), Plaintiffs 8 filed a Notice of Supplemental Authority, (ECF No. 54), and American National filed 9 three additional Notices of Supplemental Authority, (ECF Nos. 53, 55, 56). 10 III. LEGAL STANDARD 11 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 12 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 13 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 14 survive a motion to dismiss, “a complaint generally must satisfy only the minimal notice 15 pleading requirements of Rule 8(a)(2). Rule 8(a)(2) requires only that the complaint 16 include ‘a short and plain statement of the claim showing that the pleader is entitled to 17 relief.’” Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003) (quoting Fed. R. Civ. P. 18 8(a)(2)). Under this standard, the plaintiff’s “[f]actual allegations must be enough to 19 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 20 544, 555 (2007). The “complaint must contain sufficient factual matter, accepted as 21 true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 22 662, 678 (2009) (internal quotation marks omitted). 23 Determining whether a complaint satisfies the plausibility standard is a “context- 24 specific task that requires the reviewing court to draw on its judicial experience and 25 common sense.” Id. at 679. A court is generally limited to the pleadings and must 26 construe all “factual allegations set forth in the complaint . . . as true and . . . in the light 27 most favorable” to the plaintiff. Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 28 2001). However, a court need not blindly accept conclusory allegations, unwarranted

4 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 5 of 15 Page ID #:1182

1 deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 2 266 F.3d 979, 988 (9th Cir. 2001). Ultimately, there must be “sufficient allegations of 3 underlying facts to give fair notice and to enable the opposing party to defend itself 4 effectively,” and the “factual allegations that are taken as true must plausibly suggest 5 an entitlement to relief, such that it is not unfair to require the opposing party to be 6 subjected to the expense of discovery and continued litigation.” Starr v. Baca, 652 F.3d 7 1202, 1216 (9th Cir. 2011). 8 When a district court grants a motion to dismiss, it should generally provide leave 9 to amend unless it is clear the complaint could not be saved by any amendment. See 10 Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 11 1034 (9th Cir. 2008). Leave to amend may be denied when “the court determines that 12 the allegation of other facts consistent with the challenged pleading could not possibly 13 cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 14 1401 (9th Cir. 1986); Carrico v. City & County of San Francisco, 656 F.3d 1002, 1008 15 (9th Cir. 2011) (noting leave to amend “is properly denied . . . if amendment would be 16 futile”). 17 IV. DISCUSSION 18 Plaintiffs’ claims in this case are grounded in the California Supreme Court’s 19 recent decision in McHugh. There, the court concluded that the protections afforded 20 under Insurance Code sections 10113.71 and 10113.72 extend to policies in effect as of 21 January 1, 2013, even if executed and issued before that date. 12 Cal. 5th at 246. More 22 recently, in an unpublished opinion, the Ninth Circuit, relying on McHugh, affirmed a 23 trial court’s decision granting a beneficiary’s motion for summary judgment for breach 24 of contract against an insurer, finding the policies at issue had not lapsed because the 25 insurer failed to comply with sections 10113.71 and 10113.72. Thomas v. State Farm 26 Life Ins. Co., No. 20-55231, 2021 WL 459686, at *1 (9th Cir. Oct. 6, 2021). 27 American National’s Motion is not based on the law embodied in McHugh—and 28 unsurprisingly so, given that the McHugh decision favors Plaintiffs and insureds in

5 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 6 of 15 Page ID #:1183

1 general. Instead, American National argues that, for various other reasons, Plaintiffs 2 fail to state claims for declaratory relief, UCL violations, and conversion. 3 A. First and Second Claim: Declaratory Relief 4 By way of their first and second claims, Plaintiffs seek a declaration that 5 California Insurance Code “[s]ections 10113.71 and 10113.72 applied as of January 1, 6 2013, to American National’s California policies in force as of or at any time after 7 January 1, 2013,” and that American National’s “attempts to repudiate the policies or 8 treat them as terminated or lapsed, were and are ineffective.” (FAC ¶¶ 58, 64.) 9 Plaintiffs allege that a judicial declaration is necessary to determine: (1) the rights and 10 duties under class members’ policies, (2) the terms and conditions of restoration of class 11 members’ policies, (3) “whether [the] policies were legally in force at the time of deaths 12 of insureds,” and (4) “whether beneficiaries were wrongfully denied payments of 13 benefits under their policies or will be wrongfully denied benefits should benefits 14 become due in the future and before Defendant starts properly applying the Statutes.” 15 (FAC ¶¶ 59, 65.) 16 The federal Declaratory Judgment Act permits district courts, “[i]n a case of 17 actual controversy,” to “declare the rights and other legal relations of any interested 18 party seeking such declaration, whether or not further relief is sought or could be 19 sought.” 28 U.S.C. § 2201. Under California’s parallel act, courts “may make a binding 20 declaration of . . . rights or duties, whether or not further relief is or could be claimed at 21 the time.” Cal. Civ. Proc. Code § 1060. Courts in the Ninth Circuit have observed that 22 the “two statutes are broadly equivalent.” In re Adobe Sys. Privacy Litig., 66 F. Supp. 23 3d 1197, 1219 (N.D. Cal. 2014) (acknowledging federal Declaratory Judgment Act 24 governs analysis of claims seeking declaratory relief even if brought under California 25 Declaratory Relief Act). Declaratory relief “is appropriate ‘(1) when the judgment will 26 serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when 27 it will terminate and afford relief from the uncertainty, insecurity, and controversy 28 giving rise to the proceeding.’” Molde-Duque v. HH Riverside Prop. LLC, No. EDCV

6 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 7 of 15 Page ID #:1184

1 20-2678 JGB (SPx), 2021 WL 2791612, at *4 (C.D. Cal. Apr. 2, 2021) (quoting 2 McGraw-Edison Co. v. Preformed Line Prods. Co., 362 F.2d 339, 342 (9th Cir. 1966)). 3 American National moves to dismiss Plaintiffs’ declaratory relief claims on the 4 grounds that these claims are “derivative and duplicative” of the breach of contract 5 claim. (Mot. 6.) American National argues that the “question of whether the Policies 6 should have remained in force despite Plaintiffs’ non-payment of premiums will be 7 determined via Plaintiffs’ breach of contract claim.” (Mot. 7.) 8 These arguments are flawed. Strictly speaking, the declaratory relief claims are 9 not duplicative of the breach of contract claim, in that the former raises legal issues that 10 the latter does not necessarily raise. On a basic level, a breach of contract claim provides 11 relief for violation of a contract term, not a statute; by contrast, the declaratory relief 12 claims are a natural vehicle by which to bring before the Court the question of American 13 National’s ongoing and future statutory duties to the class. 14 Although there may be some overlap, American National’s argument ignores the 15 alleged future uncertainty that declaratory judgment would remedy that would not be 16 remedied by damages for breach of contract. The court in Siino v. Foresters Life Ins. 17 & Annuity Co., No. 20-cv-02904 JST, 2020 WL 8410449 (E.D. Cal. Sept. 1, 2020), 18 rejected a similar attempt by a defendant to obtain dismissal of declaratory relief claims. 19 Id. at *7. There, the court reasoned that a breach of contract claim allows a party to 20 obtain damages as a remedy to redress past wrongs, but a “declaration of rights and 21 duties is forward-looking, intended to determine [the defendant’s] continuing duties to 22 the class.” Id.; see also StreamCast Networks, Inc. v. IBIS LLC, Case No. CV 05-04239 23 MMM, 2006 WL 5720345, at *3 (C.D. Cal. May 2, 2006) (“Declaratory relief is 24 designed to resolve uncertainties or disputes that may result in future litigation.”). Here, 25 as alleged, to the extent American National continues to refuse to comply with the lapse 26 and notice requirements as to all policies executed before January 1, 2013, declaratory 27 relief is necessary to resolve the question of the insureds’ current rights before the 28 controversy leads to any future harm. (See FAC ¶¶ 59, 65.)

7 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 8 of 15 Page ID #:1185

1 Moreover, some members of the class have had their policies reinstated with less 2 favorable terms than those of the policies they held before the lapse. (FAC ¶ 72.) Some 3 of these reinstated policies are still in effect, and declaratory relief is appropriate to 4 resolve the ongoing controversy and the potential harm that may continue to accrue. 5 Accordingly, the Court DENIES American National’s Motion with respect to 6 Plaintiffs’ first and second claims. 7 B. Fourth Claim: Violations of the UCL 8 In their fourth claim for relief, Plaintiffs allege violations of California’s UCL. 9 (FAC ¶¶ 75–86.) The UCL prohibits “any unlawful, unfair, or fraudulent business act 10 or practice.” Cal. Bus. & Prof. Code § 17200. The “unlawful” prong prohibits 11 “anything that can properly be called a business practice and that at the same time is 12 forbidden by law.” Herskowitz v. Apple Inc., 940 F. Supp. 2d 1131, 1145 (N.D. Cal. 13 2013) (quoting Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 14 (1999)). The “unfair” prong “creates a cause of action for a business practice that is 15 unfair even if not proscribed by some other law.” In re Adobe Sys. Privacy Litig., 66 F. 16 Supp. 3d at 1226. 17 Plaintiffs assert that American National committed and continues to commit 18 several unlawful and unfair acts. (See FAC ¶¶ 77–80.) Specifically, Plaintiffs allege 19 that American National is in violation of the California Insurance Code and “continues 20 to conceal and mislead the policyholders and beneficiaries [regarding] the existence of 21 continuing coverage or benefits, . . . a right to a 30-day lapse warning, a right to a 22 60-day grace period, [and] a right to an annual designation.” (FAC ¶ 79.) Plaintiffs 23 also allege that American National retained and continues to retain premiums and 24 unpaid policy benefits and that American National committed “deceptive acts by 25 affirmatively and erroneously telling class members . . . that their policies had grace 26 periods of less than 60 days” or “that their policies have lapsed or terminated.” (FAC 27 ¶ 80.) 28

8 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 9 of 15 Page ID #:1186

1 American National argues Plaintiffs cannot maintain a claim under the UCL 2 because they fail to allege facts to support either restitution or injunctive relief—the 3 only two remedies available under the UCL statute—and therefore lack standing to 4 bring this claim. (Mot. 9–14.) American National also argues that Plaintiffs fail to 5 allege they lack an adequate remedy at law. (Id. at 9, 11–12.) As set forth below, both 6 these arguments are unavailing. Accordingly, the Court denies American National’s 7 motion as to the UCL claim without reaching whether Plaintiffs are also entitled to 8 restitution.4 9 1. Standing to Seek UCL Injunction 10 American National argues that Plaintiffs lack standing to seek injunctive relief 11 because they have not alleged a “realistic threat that they will be subjected to repeated 12 violations of the UCL[.]” (Mot. 13.) This argument is unavailing; Plaintiffs have 13 standing to seek injunctive relief. 14 To establish standing under Article III of the United States Constitution, a 15 plaintiff must have “(1) suffered an injury in fact, (2) that is fairly traceable to the 16 challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable 17 judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016) (citing Lujan v. 18 Defenders of Wildlife, 50 U.S. 555, 560–61 (1992)). To establish standing to seek 19 injunctive relief, a plaintiff must “demonstrate that [they have] suffered or [are] 20 threatened with a ‘concrete and particularized’ legal harm, coupled with a ‘sufficient 21 likelihood that [they] will again be wronged in a similar way.’” Joslin v. Clif Bar & 22 Co., Case No. 18-cv-04941-JSW, 2019 WL 5690632, at *2 (N.D. Cal. Aug. 26, 2019) 23 (quoting Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007)). “In a 24 4 Although the Notice of Motion makes clear that this is a “Partial Motion to Dismiss” in that it is 25 directed toward some but not all of Plaintiffs’ claims, the Notice of Motion does not indicate that American National seeks partial, or piecemeal, dismissal of the UCL claim (or any other individual 26 claim). (Notice Mot. 2, ECF No. 36.) In the portion of its Memorandum opposing the UCL claim, American National argues against both injunctive relief and restitution without arguing for or 27 suggesting piecemeal dismissal of the UCL claim. The Court will not grant piecemeal dismissal of 28 the UCL claim without clear notice to the nonmoving party and a more fulsome treatment of the propriety of piecemeal dismissal.

9 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 10 of 15 Page ID #:1187

1 class action, standing is satisfied if at least one named plaintiff meets the requirements.” 2 Bates, 511 F.3d at 985. 3 Plaintiffs allege that they are entitled to injunctive relief “against Defendant’s 4 ongoing business practices, as well as a mandatory injunction requiring Defendant to 5 pay all benefits owed at the time they are owed.” (FAC ¶ 83, Prayer for Relief ¶ 3.) In 6 response, American National reads the FAC as Plaintiffs “conced[ing] that their Policies 7 have lapsed” and correspondingly implying that they cannot establish a threat of 8 repeated violations because “the Policies cannot lapse again.” (Mot. 13.) This is a 9 narrow, inaccurate, and somewhat sophistic reading of the FAC. To the contrary, as 10 alleged in detail, Plaintiffs purchased Policies insuring their own lives and the lives of 11 others, most of whom are still living, and, even though American National did not 12 provide Plaintiffs with the required notices or grace periods, it continues to treat the 13 Policies as lapsed. (See FAC ¶¶ 24, 25, 29.) Under McHugh and Thomas, the 14 allegations go, American National’s “cancellation of thousands of California policies 15 was and is now completely ineffective” and American National “wrongfully denied 16 righteous claims for benefits on in-force policies, as it did Plaintiffs.” (FAC ¶¶ 5, 21; 17 see id. ¶ 20 (alleging American National continues to “disavow[] scores of policies” 18 without first complying with the statutes).) Under a fair reading of Plaintiffs’ FAC, the 19 Policies remain in force, which in turn supports the plausible inference that Plaintiffs 20 could find themselves in the same situation again upon the death of a different insured, 21 should American National continue to disavow and repudiate policies without first 22 complying with the statutes. 23 In its Motion, American National relies on cases that predate the California 24 Supreme Court’s holding in McHugh and the Ninth Circuit’s holding in Thomas. (See 25 Mot. 13–14.) To the extent McHugh did not overrule these cases, the Court nevertheless 26 finds them unpersuasive, as they are based on policy lapses not factually analogous to 27 the lapses in the present case. American National’s supplemental authorities are also 28 distinguishable on the facts. For example, in Small v. Allianz Life Ins. Co., No. CV 20-

10 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 11 of 15 Page ID #:1188

1 01944 TJH (KESx) (C.D. Cal. Mar. 29, 2022), the court found the plaintiff lacked 2 standing for injunctive relief in part because she “did not allege that she has another . . . 3 life insurance policy that could be at risk of termination for non-payment of premiums.” 4 (Notice Suppl. Authority (Small) Ex. A at 2–3, ECF No. 53.) Here, obviously, that is 5 not the case, as Plaintiffs allege they have active, unlapsed Policies currently insuring 6 the lives of living individuals. Similarly, in Grundstrom v. Wilco Life Insurance Co., 7 No. 20-cv-03445-MMC, 2022 U.S. Dist. LEXIS 69944 (N.D. Cal. Apr. 15, 2022), the 8 court dismissed a claim for a UCL injunction because, although the plaintiff alleged 9 continuing harm to the class, there was no indication the plaintiff individually had other 10 insurance policies or “any future relationship” with the defendant to support a realistic 11 threat of repeated wrongful conduct. (Notice Suppl. Authority (Grundstrom) Ex. A at 3, 12 ECF No. 55.) Grundstrom does not apply here for the same reason Small does not apply 13 here: Plaintiffs allege that they both have other life insurance policies; that under the 14 California Insurance Code, they both remain as beneficiaries of in-force life insurance 15 policies provided by American National; and that, accordingly, both their relationships 16 with American National continue to the present day. 17 A plausible inference of Article III standing arises from the FAC, and the Court 18 will not grant the Motion on this basis. 19 2. Adequate Remedy at Law 20 In Sonner v. Premier Nutrition Corp., the Ninth Circuit held that a plaintiff “must 21 establish that she lacks an adequate remedy at law before securing equitable restitution 22 for past harm under the UCL[.]” 971 F.3d 834, 844 (9th Cir. 2020). Following Sonner, 23 this Court in Haas v. Travelex Insurance Services Inc., 555 F. Supp. 3d 970, 976 (C.D. 24 Cal. 2021) had occasion to consider the effect of Sonner on pleading UCL claims in a 25 different context. This Court noted that the presence of injunctive relief 26 “distinguishe[d] the case from” the Ninth Circuit’s holding in Sonner. See Haas, 555 F. 27 Supp. 3d at 976. The reason was that injunctive relief is itself a remedy not available at 28 law, and, as long as the injunctive relief sought is not completely duplicative of the

11 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 12 of 15 Page ID #:1189

1 plaintiff’s legal claims, Sonner does not apply, and the plaintiff is not prohibited from 2 pleading in the alternative. Id. at 980. 3 Here, Plaintiffs’ claim for a UCL injunction is not completely duplicative of their 4 legal claims, for largely the same reason their request for declaratory relief is also not 5 duplicative of their legal claims. Plaintiffs seek prospective injunctive relief requiring 6 American National to (1) acknowledge that their policies remain in force, (2) stop 7 wrongfully terminating policies in violation of the California Insurance Code, and 8 (3) pay benefits when they become due. (FAC ¶¶ 77, 83–84.) Plaintiffs will not be 9 made whole even if they succeed on their breach of contract claim because contract 10 damages would remedy past alleged harm without addressing the threat of continuing 11 harm. (FAC ¶¶ 20, 23, 57, 83); cf. Zeiger v. WellPet LLC, 526 F. Supp. 3d 652, 686– 12 87 (N.D. Cal. 2021) (finding “that monetary damages for past harm are an inadequate 13 remedy for the future harm [at which] an injunction under California consumer 14 protection law is aimed”). 15 Therefore, the Court DENIES American National’s Motion as to the UCL claim. 16 C. Fifth Claim: Conversion 17 Plaintiffs’ fifth claim for relief is for conversion. (FAC ¶¶ 87–96.) Under 18 California law, conversion is “the unwarranted interference by defendant with the 19 dominion over the property of the plaintiff from which injury to the latter results.” 20 Snyder & Assocs. Acquisitions LLC v. United States, 859 F.3d 1152, 1161 (9th Cir. 21 2017) (quoting Welco Elecs., Inc. v. Mora, 223 Cal. App. 4th 202, 208 (2014)), as 22 amended on reh’g, 868 F.3d 1048 (9th Cir. 2017). The elements of a conversion claim 23 are: “(a) plaintiff’s ownership or right to possession of personal property, 24 (b) defendant’s disposition of property in a manner inconsistent with plaintiff’s property 25 rights, and (c) resulting damages.” Voris v. Lampert, 7 Cal. 5th 1141, 1150 (2019). 26 Generally, “money cannot be the subject of an action for conversion unless a specific 27 sum capable of identification is involved.” Id. at 1151; see Ross v. U.S. Bank Nat’l 28 Ass’n, 542 F. Supp. 2d 1014, 1024 (N.D. Cal. 2008) (“[W]hen the money is not

12 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 13 of 15 Page ID #:1190

1 identified and not specific, the action is to be considered as one upon contract or for 2 debt and not for conversion.” (internal citations omitted)). 3 Here, Plaintiffs’ conversion claim rests on two theories, neither of which supports 4 a plausible claim for conversion. 5 Plaintiffs’ first theory is that American National converted the Policies’ benefits 6 after the death of an insured and after Plaintiffs demanded those benefits. (FAC ¶¶ 90– 7 91.) This theory fails because in order to state a claim for conversion, a plaintiff “must 8 allege . . . entitle[ment] to immediate possession at the time of conversion.” See United 9 Energy Trading, LLC v. Pac. Gas & Elec. Co., 177 F. Supp. 3d 1183, 1194 (N.D. Cal. 10 2016). “[A] mere contractual right of payment, without more, will not suffice.” Id. 11 (quoting Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 452 (1997)). Here, any 12 right to benefits arises from the Policies themselves. Plaintiffs have not alleged 13 anything indicating that their right to benefits is anything more than “a mere contractual 14 right of payment,” Zerin, 53 Cal.App.4th at 452, and they therefore have no claim for 15 conversion under this theory. 16 Plaintiffs’ second theory is based not on death benefits but instead on the 17 premiums they paid to American National; they argue that these premiums are money 18 or property American National allegedly converted. Plaintiffs assert that the California 19 Insurance Code requires that premiums paid to insurance companies “be held in trust or 20 reserve by the insurance company, at least in part, in segregated and restricted reserve 21 accounts” and that by terminating the Policies, American National had “cover to then 22 transfer the specific trust and reserve funds properly belonging to Plaintiffs and class 23 members, out of these reserve accounts, and into Defendant’s own general accounts.” 24 (FAC ¶ 92.) Plaintiffs additionally argue that American National converted the Policies 25 themselves, when American National “wrongfully lapsed, terminated, or repudiated 26 them.” (FAC ¶ 89.) 27 However, Plaintiffs fail to allege entitlement to immediate possession of the 28 alleged premiums paid at the time of the conversion. See United Energy Trading, LLC

13 Case 2:20-cv-11226-ODW-SK Document 59 Filed 06/30/22 Page 14 of 15 Page ID #:1191

1 v. Pac. Gas & Elec. Co., 177 F. Supp. 3d 1183, 1194 (N.D. Cal. 2016). Even if the 2 Court accepts Plaintiffs’ rather far-afield allegations regarding American National’s 3 obligation to hold premiums in a reserve or trust, Plaintiffs nevertheless fail to allege a 4 right to immediately possess premiums paid as consideration for continuing life 5 insurance coverage. Rather, the conversion claim amounts to no more than one for 6 reimbursement of premiums after a wrongful repudiation, and case law makes clear that 7 a mere right of reimbursement is insufficient to constitute a tangible property right to 8 support a conversion claim. See Zerin, 53 Cal. App. 4th at 452; see Saroya v. Univ. of 9 the Pac., 503 F. Supp. 3d 986, 999 (N.D. Cal. 2020) (“An obligation to pay money, like 10 Plaintiff’s claim for partial tuition reimbursement, is insufficiently tangible to qualify 11 as property under these facts.”); see also Nguyen v. Stephens Inst., 529 F. Supp. 3d 12 1047, 1058 (N.D Cal. 2021) (finding no claim for conversion “for breach of duties that 13 merely restate . . . contractual obligations,” where student sought partial refund from 14 college for not providing in-person education during COVID-19). 15 Pushing back, Plaintiffs argue that “continuing coverage under the policy where 16 the insured is alive” itself constitutes converted property. (Opp’n 29.) However, 17 Plaintiffs fail to plausibly allege they had a right to immediately possess the cash value 18 of the Policies when American National terminated them. Plaintiffs further fail to 19 demonstrate that “continuing coverage” under the Policies is a property interest that is 20 specific and identifiable, as opposed a mere contractual right to payment of benefits in 21 the future. See Sullivan v. Transamerica Life Ins. Co., No. 21-CV-00645, 2021 WL 22 2000301, at *7 (C.D. Cal. May 17, 2021) (finding plaintiffs failed to state a claim for 23 conversion under both Kentucky and California law because “plaintiffs never had a 24 possessory interest in the initial face amounts [of the insurance policies]—rather, they 25 had a contractual right to that amount at the death of the insureds”). 26 For these reasons, the Court GRANTS the Motion as to the conversion claim. 27 Out of an abundance of caution, the Court will provide Plaintiffs with leave to amend 28 this claim to address the above-discussed deficiencies. See Manzarek, 519 F.3d at

14 □□□□□□□□□□□□□□□□□□□□□□□□□ Document 59 Filed 06/30/22 Page 15o0f15 Page ID #:1192

1 || 1034-35. That said, the Court expects both parties to fully participate in meet-and- 2|| confer efforts and endeavor to avoid the need for further motion practice on what 3 || appears to be an issue tangential to the gravamen of the case. 4 Vv. CONCLUSION 5 For these reasons discussed above, Defendant’s Motion to Partially Dismiss is 6 || GRANTED IN PART and DENIED IN PART. (ECF No. 36.) The conversion claim 7| is DISMISSED with leave to amend. The remainder of Defendant’s Motion is 8 | DENIED. 9 If Plaintiffs choose to amend, their Second Amended Complaint is due no later 10 || than twenty-one (21) days from the date of this Order. If Plaintiffs do not amend, then 11 | (1) Defendant’s Answer is due fourteen (14) days from the date the Second Amended 12 | Complaint would have been due, and (2) the dismissal of the conversion claim shall be 13 || deemed a dismissal with prejudice as of the lapse of Plaintiffs’ deadline to amend. 14 15 IT IS SO ORDERED. 16 17 June 30, 2022 N . 18 19 Lidia: 0 OTIS D. HT, II □ UNITED STATES DISTRICT JUDGE

22 23 24 25 26 27 28

15