Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 1 of 14 Page ID #:442 'O' 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CV 21-08840-RSWL-PDx 12 NOSRATOLLAH SATVATI et al., ORDER re: 13

DEFENDANT’S MOTION FOR

Plaintiff, 14 PARTIAL JUDGMENT ON THE

PLEADINGS [26]

v. 15 16 ALLSTATE NORTHBROOK

INDEMNITY COMPANY,

17 Defendant. 18 19 Plaintiffs Nosratollah Satvati and Farideh Satvati 20 (“Plaintiffs”) bring this Action against Allstate 21 Northbrook Indemnity Company (“Defendant”) alleging 22 breach of contract, breach of the implied covenant of 23 good faith and fair dealing, and unfair business 24 practices (pursuant to Bus. & Professions Code §§ 17200, 25 et. seq.).1 Currently before the Court is Defendant’s 26 Motion for Partial Judgment on the Pleadings [26] 27 1 The parties stipulated to dismiss the third claim for 28 unfair business practices on August 3, 2022. 1 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 2 of 14 Page ID #:443

1 (“Motion”) on the breach of contract claim.

2 Having reviewed all papers submitted pertaining to

3 the Motion, the Court NOW FINDS AND RULES AS FOLLOWS: 4 the Court GRANTS Defendant’s Motion for Partial Judgment 5 on the Pleadings on the breach of contract claim WITHOUT 6 LEAVE TO AMEND. 7 I. BACKGROUND 8 A. Factual Background 9 The Complaint alleges: 10 An underinsured motorist (“UIM”) crashed into 11 Plaintiffs’ car causing them injuries that far exceeded 12 the UIM’s $15,000 insurance policy limit. Compl. ¶¶ 7- 13 9, ECF No. 1. Plaintiffs’ insurance policy (“Policy”) 14 with Defendant provided $250,000 each for UIM bodily 15 injuries coverage. Id. ¶¶ 5-6. After both settling for 16 $15,000 against the UIM, Plaintiffs demanded Defendant 17 pay them the UIM Policy limit up to $250,000 each. Id. 18 ¶¶ 9-10. 19 The parties failed to agree to a UIM benefit 20 amount, so pursuant to the Policy, Plaintiffs served 21 Defendant with a formal demand for arbitration. Id. ¶ 22 13. The next day, Defendant accepted Plaintiffs’ 23 demand. Id. Following the acceptance, Defendant 24 subsequently “refused to cooperate in retaining the 25 arbitrator,” “unreasonably delayed commencement of 26 [a]rbitration,” and “refused to comply with . . . 27 discovery requests, including failing to appear at a 28 scheduled deposition.” Id. ¶¶ 14-15. Almost seven 2 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 3 of 14 Page ID #:444

1 months after demanding arbitration, Plaintiffs filed a

2 petition to compel arbitration and appoint a neutral

3 arbitrator. Id. ¶ 16. 4 After negotiating, the parties settled 5 Mr. Satvati’s claim for the maximum Policy limit allowed 6 - $235,000. Id. ¶ 18. Prior to the arbitration 7 hearing, the parties did not settle Mrs. Satvati’s claim 8 because Defendant made several “unreasonably low 9 settlement offers,” with a final low $16,728.99 offer. 10 Id. ¶¶ 19-21. Almost eighteen months after Plaintiffs 11 filed the petition to compel arbitration, the arbitrator 12 issued a $48,873.60 award. Id. ¶ 23. 13 Defendant’s failure to properly investigate 14 Plaintiffs’ claim and issue payment caused increased 15 expert witness fees, attorney’s fees, and other costs 16 and expenses related to litigation and arbitration. Id. 17 ¶ 28. Plaintiffs’ damages include 1) loss of timely use 18 of benefits, 2) interest on monies Plaintiffs should 19 have received promptly, and 3) other costs to be proven 20 at trial. Id. ¶ 37. 21 B. Procedural Background 22 Plaintiffs filed their Complaint [1] in the 23 Superior Court County of Los Angeles on August 20, 2021, 24 and Defendant removed the case on November 10, 2021. 25 Defendant filed the instant Motion [26] on August 9, 26 2022. Plaintiff opposed [27] the Motion on August 16, 27 2022. Defendant replied [28] on August 23, 2022. 28 /// 3 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 4 of 14 Page ID #:445

1 II. DISCUSSION 2 A. Legal Standard

3 Federal Rule of Civil Procedure 12(c) states that 4 “after the pleadings are closed — but early enough not 5 to delay trial — a party may move for judgment on the 6 pleadings.” Fed. R. Civ. P. 12(c). A motion for 7 judgment on the pleadings is “functionally identical” to 8 a Rule 12(b)(6) motion to dismiss for failure to state a 9 claim, meaning the same pleading standards apply. 10 Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 11 (9th Cir. 1989). The non-moving party’s allegations 12 must be accepted as true, and any allegations made by 13 the moving party that have been denied or contradicted 14 are assumed to be false. MacDonald v. Grace Church 15 Seattle, 457 F.3d 1079, 1081 (9th Cir. 2006). Judgment 16 on the pleadings is proper “only if it is clear that no 17 relief could be granted under any set of facts that 18 could be proved consistent with the allegations.” 19 Turner v. Cook, 362 F.3d 1219, 1225 (9th Cir. 2004) 20 (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 21 (2002)). 22 In ruling on a motion for judgment on the 23 pleadings, courts may consider documents attached to the 24 complaint, documents incorporated by reference into the 25 complaint, or matters properly subject to judicial 26 notice. United States v. Ritchie, 342 F.3d 903, 907-08 27 (9th Cir. 2003). “Even if a document is not attached to 28 a complaint, it may be incorporated by reference into a 4 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 5 of 14 Page ID #:446

1 complaint if the plaintiff refers extensively to the

2 document or the document forms the basis of the

3 plaintiff’s claim.” Id. at 908. 4 B. Discussion 5 1. Judicial Notice 6 An adjudicative fact may be judicially noticed when 7 it is “not subject to reasonable dispute because it: (1) 8 is generally known within the trial court’s territorial 9 jurisdiction; or (2) can be accurately and readily 10 determined from sources whose accuracy cannot reasonably 11 be questioned.” Fed. R. Evid. 201(b). When a breach of 12 contract claim relies on an insurance contract’s policy 13 terms, the policy itself is typically appropriate for 14 judicial notice as “unattached evidence on which the 15 complaint necessarily relies.” Khoury Invs. Inc. v. 16 Nationwide Mut. Ins. Co., No. CV 13-05415-MWF (EX), 2013 17 WL 12140449, at *2 (C.D. Cal. Sept. 16, 2013). See also 18 Enger v. Allstate Ins. Co., 682 F. Supp. 2d 1094, 1096 19 (E.D. Cal. 2009) (judicially noticed an insurance policy 20 and letter referenced in the complaint when the 21 plaintiff did not dispute either document’s 22 authenticity). 23 Defendant filed a request to judicially notice 24 three policy insurance documents: (1) the Policy, (2) 25 the Amendment of Policy Provisions (the “Amendment”), 26 and (3) the California Amendatory Endorsement (the 27 “Endorsement”). See generally Defendant’s Req. for 28 Judicial Notice (“RJN”), ECF No. 26-2. As in Enger, 5 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 6 of 14 Page ID #:447

1 Plaintiffs do not dispute the insurance documents’

2 authenticity and instead cite language from them to

3 support their breach of contract claim. See Pls.’ Opp’n 4 to Mot. (“Opp’n”) 8:20-26, ECF No. 27. 5 Therefore, because Plaintiffs’ breach of contract 6 claim necessarily relies on and does not dispute the 7 Policy, the Amendment, and the Endorsement, the Court 8 GRANTS Defendant’s request for judicial notice for all 9 three documents. 10 2. Breach of Contract Claim 11 a. The Alleged Delay Did Not Constitute a 12 Breach of Contract 13 To plead a breach of contract claim a plaintiff 14 must allege (1) a contract existed, (2) plaintiff 15 performed or is excused for nonperformance, (3) 16 defendant breached, and (4) plaintiff was damaged. 17 Walsh v. W. Valley Mission Cmty. Coll. Dist., 66 Cal. 18 App. 4th 1532, 1545 (1998). To survive a motion to 19 dismiss, a plaintiff must identify a specific contract 20 provision breached by the defendant. Misha Consulting 21 Grp., Inc. v. Core Educ. & Consulting Sols., Inc., No. 22 C-13-04262-RMW, 2013 WL 6073362, at *1 (N.D. Cal. Nov. 23 15, 2013). In Mason v. Allstate Insurance Co., a 24 plaintiff wanted to recover arbitration and litigation 25 expenses due to an insurer’s refusal to timely offer the 26 policy limit. No. SACV 13-01521-JVS, 2014 WL 212245, at 27 *3 (C.D. Cal. Jan. 6, 2014). The Mason Court dismissed 28 the claim because the policy clearly indicated that 6 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 7 of 14 Page ID #:448

1 claim valuation disputes were subject to arbitration.

2 Id. Furthermore, the plaintiff’s complaint did not

3 offer any “factual allegations to support his conclusion 4 that delay in payment constituted a breach of the 5 insurance policy.” Id. 6 Like in Mason, here, the Policy clearly indicates 7 that UIM damages disputes “will be settled by a single 8 neutral arbitrator.” RJN at 31. Plaintiffs do not 9 dispute that Defendant paid Mr. Satvati the Policy limit 10 and Mrs. Satvati the arbitration award. Compl. ¶¶ 18, 11 23. For delay in payment to constitute breach of 12 contract, Defendant’s conduct, or lack of conduct, would 13 need to breach a provision within the Policy. In the 14 Complaint, Plaintiffs fail to identify a Policy 15 provision that Defendant breached. See generally Compl. 16 Thus, Defendant’s delay does not constitute a breach of 17 contract. 18 b. Defendant Did Not Breach the Arbitration 19 Timing Clause 20 In their Opposition, Plaintiffs for the first time 21 allege that Defendant’s delay in commencing arbitration 22 breached a specific Policy term, that arbitration will 23 commence within one year from the date of the accident 24 (the “Provision”).2 Opp’n at 9:1-2. However, the

25 2 When alleging breach, a plaintiff may plead “the legal effect of a contract rather than pleading its precise language.” 26 Constructive Protective Servs., Inc. v. TIG, 57 P.3d 372, 377 (2002). However, “[r]aising a completely new theory of 27 liability, with only attenuated connection to a complaint, in a[n] . . . opposition . . . does not grant Defendant fair notice 28 of Plaintiffs' claim.” Provencio v. Vazquez, 258 F.R.D. 626, 639 7 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 8 of 14 Page ID #:449

1 Endorsement replaced the Provision with the following

2 clause: “no one may pursue arbitration . . . unless the

3 demand for arbitration is made within two years after 4 the date of the accident.” RJN at 44 (emphasis added). 5 The Endorsement replaced the Provision before the 6 accident or claim arose. See RJN at 1-4. Plaintiff had 7 notice of the change through the “Amended auto policy 8 declarations” (“Declarations”). Id. The Declarations 9 referenced the Endorsement in the subsection titled 10 “Your policy documents,” and the date on the documents 11 show the updated Policy was effective prior to the 12 accident. Id. at 10, 13. Therefore, the Provision no 13 longer applies because the Endorsement has superseded 14 it. 15 Defendant also has complied with the Endorsement. 16 The accident occurred after the Endorsement became 17 effective. Compl. ¶ 8. Plaintiffs concede that 18 Defendant accepted a formal demand for arbitration 19 within two days. Id. ¶ 13. The parties complied with 20 the Endorsement’s arbitration demand timing requirement 21 because Defendant accepted Plaintiffs’ demand for 22 (E.D. Cal. 2009); see also Gerritsen v. Warner Bros. Ent. Inc., 23 116 F. Supp. 3d 1104, 1126 (C.D. Cal. 2015) (holding it “improper” for a plaintiff to assert an unpled theory of 24 liability in an opposition to a motion to dismiss). In the Complaint, Plaintiffs’ breach of contract subsection did not 25 address arbitration timing, but rather focused on Defendant’s failure to “timely pay monies due under the contract.” See 26 Compl. ¶ 36. Given that Plaintiffs’ argument regarding the Provision is a completely new theory only attenuated to the 27 Complaint, Defendant was not given fair notice. Therefore, the Court does not consider the new theory when deciding whether to 28 grant or deny the Motion. 8 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 9 of 14 Page ID #:450

1 arbitration within two years from the date of the

2 accident. Id. Therefore, the Provision was superseded,

3 and Defendant has complied with the Endorsement. 4 C. Plaintiffs Have Not Alleged Cognizable 5 Damages 6 Even if Defendant breached the Provision, 7 Plaintiffs still must allege contract damages to avoid a 8 motion for judgment on the pleadings. Breach of 9 contract damages include direct damages, which 10 compensate for the value of the promised performance, 11 and consequential damages, which compensate for 12 additional losses incurred because of the breach. 13 Speirs v. BlueFire Ethanol Fuels, Inc., 243 Cal. App. 14 4th 969, 989 (2015). 15 i. Plaintiffs Cannot Claim Direct Damages 16 California courts measure direct damages by what 17 will compensate the aggrieved party for all the 18 detriment caused by the breaching party. Cal. Civ. Code 19 § 3300. Direct damages cannot exceed the value of the 20 breaching party’s promised performance. Becerra v. 21 Allstate Northbrook Indem. Co., No. 22-CV-00202-BAS-MSB, 22 2022 WL 2392456, at *6 (S.D. Cal. July 1, 2022). The 23 Becerra Court ruled as a matter of law that a plaintiff 24 could not claim direct damages because she received the 25 policy limit. Id. Additionally, a plaintiff cannot 26 claim direct damages as a matter of law where the 27 insured pays an arbitration award pursuant to the 28 policy. Paulson v. State Farm Mut. Auto. Ins. Co., 867 9 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 10 of 14 Page ID #:451

1 F. Supp. 911, 917 (C.D. Cal. 1994). 2 Here, Mr. Satvati settled his claim for the Policy

3 limit. Compl. ¶ 18. Like in Becerra, Mr. Satvati has 4 already recovered the maximum direct damages he can 5 receive for his breach of contract claim. Moreover, 6 like in Paulson, Plaintiffs concede they demanded 7 arbitration pursuant to the Policy, and the Arbitrator 8 issued a final $48,873.60 award for Mrs. Satvati’s 9 claim. Compl. ¶ 13, 23. Giving any more direct damages 10 to Plaintiffs would exceed the value of Defendant’s 11 promised performance of paying the Policy limit and 12 arbitration award. Thus, both Plaintiffs cannot claim 13 direct breach of contract damages as a matter of law. 14 ii. Plaintiffs Are Not Entitled to 15 Arbitration Costs 16 California Code of Civil Procedure Section 1284.2 17 states: 18 Unless the arbitration agreement otherwise 19 provides or the parties to the arbitration 20 otherwise agree, each party to the arbitration 21 shall pay his pro rata share of the expenses 22 and fees of the neutral arbitrator, together 23 with other expenses of the arbitration incurred 24 or approved by the neutral arbitrator, not 25 including counsel fees or witness fees or other 26 expenses incurred by a party for his own 27 benefit. 28 Cal. Civ. Proc. Code § 1284.2 (West 2007). 10 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 11 of 14 Page ID #:452

1 California courts have interpreted this statute to

2 mean that insured parties are “not entitled to . . .

3 costs . . . incurred in arbitration” absent a provision 4 in their insurance policy providing otherwise. Becerra, 5 2022 WL 2392456, at *8. 6 In Becerra, the plaintiff sought to recover 7 arbitration-related expenses, but the insurance policy 8 at issue provided “[a]ll expenses of arbitration will be 9 shared equally” and “attorney fees and fees paid to 10 medical or other expert witnesses are . . . to be paid 11 by the party incurring them.” Id. Therefore, the 12 Becerra court held such attorney’s fees and arbitration 13 expenses did not constitute cognizable consequential 14 damages. Id.; see also Mason v. Allstate Ins. Co. No. 15 SACV 13-01521-JVS, 2014 WL 212245, at *2 (C.D. Cal. Jan. 16 6, 2014) (finding that a plaintiff had not alleged 17 cognizable damages under a breach of contract theory 18 because the policy specifically stated that arbitration 19 expenses should be borne by each party equally). 20 Here, the Policy at issue employs the same language 21 as the Becerra policy. See RJN at 31. The Policy 22 contains no provisions that entitle Plaintiffs to costs 23 incurred in arbitration. See generally RJN. Therefore, 24 as in both Becerra and Mason, the Plaintiffs are 25 precluded by both California Code of Civil Procedure 26 Section 1284.2 and the specific Policy language from 27 recovering costs incurred in arbitration. 28 /// 11 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 12 of 14 Page ID #:453

1 iii. Plaintiffs Have Not Pled Sufficient

2 Factual Information to Plausibly Infer

3 Other Consequential Damages 4 An unreasonable delay in paying policy benefits 5 does not in itself establish economic loss to the 6 plaintiff. Maxwell v. Fire Ins. Exch., 60 Cal. App. 4th 7 1446, 1450 (1998). A plaintiff must plead damages that 8 are a reasonably foreseeable result of the purported 9 breach of contract. Mattson v. United Servs. Auto. 10 Ass'n, No. 18CV222 JM (KSC), 2019 WL 2330087, at *8 11 (S.D. Cal. May 31, 2019). Thus, to survive a 12(b)(6) 12 or 12(c) motion, plaintiffs must plead sufficient 13 factual information to enable the court to decipher what 14 consequential damages occurred as a result of the 15 purported breach. See Becerra, 2022 WL 2392456, at *7 16 (finding a complaint alleging delay-induced “costs and 17 expenses” “devoid of any factual information” that would 18 enable the court to draw a plausible inference in 19 plaintiff’s favor); cf. Mattson, 2019 WL 2330087 20 (denying a motion for summary judgment because a 21 plaintiff hair stylist specifically alleged arbitration 22 cancellations lost her client fees). 23 As in Becerra, in which the plaintiff failed to 24 adequately specify damages other than statutorily 25 precluded fees, here, Plaintiffs have only alleged the 26 “loss of timely use of benefits;” “consequential damages 27 including interest on monies;” and “other fees, 28 expenses, and costs to be proven at trial.” Compl. ¶ 12 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 13 of 14 Page ID #:454

1 37. This conclusory language is analogous to the delay- 2 induced “costs and expenses” the Becerra court found

3 insufficient. Accordingly, the Plaintiffs have not 4 plead sufficient factual information for the Court to 5 plausibly infer that the delay in arbitration caused 6 cognizable breach of contract damages. 7 Therefore, the Court GRANTS Defendant’s Motion for 8 Partial Judgment on the Pleadings on the breach of 9 contract claim. 10 3. Leave to Amend 11 Although Rule 12(c) does not mention amendments, 12 courts have discretion to grant a Rule 12(c) motion with 13 leave to amend. Lonberg v. City of Riverside, 300 F. 14 Supp. 2d 942, 945 (C.D. Cal. 2004). “The court should 15 give leave [to amend] freely when justice so requires.” 16 Fed. R. Civ. P. 15(a)(2). In the Ninth Circuit, “Rule 17 15’s policy of favoring amendments to pleadings should 18 be applied with extreme liberality.” United States v. 19 Webb, 655 F.2d 977, 979 (9th Cir. 1981). Against this 20 extremely liberal standard, the Court may consider “the 21 presence of any of four factors: bad faith, undue delay, 22 prejudice to the opposing party, and/or futility.” 23 Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 24 712 (9th Cir. 2001). 25 Here, Plaintiffs’ Complaint cannot be cured because 26 Plaintiffs can neither identify a contractual provision 27 that has been breached nor allege cognizable contract 28 damages. Given that the Endorsement superseded the 13 Case 2:21-cv-08840-RSWL-PD Document 32 Filed 10/06/22 Page 14 of 14 Page ID #:455

1 Provision, even under an extreme liberal standard, no

2 additional facts could sustain a breach of contract.

3 Because the defective breach of contract claim cannot be 4 cured through amendment, leave to amend would be futile. 5 See Nat’l Funding, Inc. v. Com. Credit Counseling 6 Servs., Inc., 817 F. App’x 380, 385 (9th Cir. 2020) 7 (affirming district court’s denial of leave to amend 8 where no additional facts are available that would 9 support plaintiff’s claim to cure its deficiencies). 10 Therefore, the Court GRANTS Defendant’s Motion for 11 Partial Judgment on the Pleadings on the breach of 12 contract claim WITHOUT LEAVE TO AMEND. 13 III. CONCLUSION 14 Based on the foregoing, the Court GRANTS 15 Defendant’s Motion for Partial Judgment on the Pleadings 16 on the breach of contract claim WITHOUT LEAVE TO AMEND. 17 IT IS SO ORDERED. 18 19 20 DATED: October 6, 2022 /s/Ronald S.W. Lew

HONORABLE RONALD S.W. LEW

21 Senior U.S. District Judge 22 23 24 25 26 27 28 14