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ALLIED NORTH AMERICA INS. BROKERAGE v. WOODRUFF-SAWYER

September 6, 2005.

ALLIED NORTH AMERICA INSURANCE BROKERAGE CORP. OF CALIFORNIA, Plaintiff,
v.
WOODRUFF-SAWYER, et al., Defendants.



The opinion of the court was delivered by: MARTIN JENKINS, District Judge

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO DISMISS DEFENDANTS' COUNTERCLAIM
INTRODUCTION
Before the Court is Plaintiff Allied North America Insurance Brokerage Corporation's ("Plaintiff") Motion to Dismiss the Third, Fourth, Fifth, and Seventh Causes of Action in Defendants Woodruff-Sawyer and Dermond Houweling's ("Defendants") First Amended Counterclaim.

FACTUAL BACKGROUND

  Plaintiff employed Defendant Houweling, a successful and highly regarded executive in the insurance and surety brokerage industry, from June 15, 1998 through June 15, 2004. Houweling and Plaintiff executed a "Producer Agreement" ("the Agreement") which governed the terms and conditions of his employment with Plaintiff. The Agreement allegedly prevented Houweling from engaging in conduct that posed a conflict of interest with his employment with Plaintiff and attempted to restrict him from engaging in similar activities after his employment with Plaintiff ended. On June 15, 2004, Houweling resigned from Plaintiff and accepted employment with Defendant Woodruff-Sawyer.

  Plaintiff filed this suit against Defendants on June 24, 2004. On July 1, 2004, the Court issued a temporary restraining order against Defendants. The Court later modified the order following Defendants' motion for reconsideration on July 24, 2004. Houweling filed a counterclaim and subsequently passed away on November 20, 2004. On January 3, 2004, Houweling's counsel notified Plaintiff of Houweling's death and the appointment of Mary Houweling as the Special Administrator to Houweling's estate. On March 30, 2005, the Estate was substituted in as counterclaimant. The First Amended Counterclaim was filed on June 15, 2005. On June 21, 2005 Plaintiff filed a First Amended Complaint. The Estate moved to strike the complaint, prompting Plaintiff to seek leave of the Court to file its First Amended Complaint.

  LEGAL STANDARD

  A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the claims asserted in the complaint. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337 (9th Cir. 1996). Dismissal of an action pursuant to Rule 12(b)(6) is appropriate only where it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In reviewing such a motion, the Court must assume all factual allegations to be true and must construe them in the light most favorable to the nonmoving party. See N. Star v. Ariz. Corp. Comm., 720 F.2d 578, 580 (9th Cir. 1983). In the context of a motion to dismiss, review is limited to the contents of the complaint. Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 385 (9th Cir. 1995). However, matters properly presented to a court, such as those attached to the complaint and incorporated within its allegations, may be considered as part of the motion to dismiss. See Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1989).

  Motions to dismiss for failure to state a claim "are generally viewed with disfavor." Ramos v. Cal. Comm. of Bar Exam'rs of the State Bar of Cal., 857 F. Supp. 702, 704 (N.D. Cal. 1994). "Each averment of a pleading shall be simple, concise, and direct." FED. R. CIV. P. 8(e)(1). Courts must assume that all general allegations "embrace whatever specific facts might be necessary to support them." Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). If the complaint does not meet the liberal pleading standard, a court must grant leave to amend unless "it is absolutely clear that the deficiencies of the complaint [cannot] be cured by amendment." Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987).

  ANALYSIS

  Plaintiff moves to dismiss Defendants' Third, Fourth, Fifth and Seventh Causes of Action for failure to state a claim under Rule 12(b) of the Federal Rules of Civil Procedure. Since Plaintiff has voluntarily dismissed the Third and Fourth Causes of Action, the Court does not address the merits of these actions.

  A. The Fifth Cause of Action — Declaratory Relief

  Defendants' Fifth Cause of Action seeks declaratory relief based on Plaintiff's actions in restricting Houweling from conducting business with his long-standing clients. This cause of action also seeks attorney's fees and costs based on section 18.10 of the Agreement. Plaintiff argues that Defendants' request for declaratory relief is mooted by Houweling's death. Defendants counter that even though Houweling has died, an actual controversy still exists surrounding the validity and enforceablity of the Agreement's non-interference provision.

  Declaratory relief is appropriate only when there exists an "actual controversy." 28 U.S.C. § 2201. An actual controversy exists when there is a "substantial controversy, between parties, having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of declaratory judgment." Maryland Gas Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). Additionally, if the claim for declaratory relief becomes moot, no actual controversy will exist. U.S. Const., Art. III; see also McQuillon v. Schwarzennegger, 369 F.3d 1091, 1095 (9th Cir. 2004).

  Here, the Court finds that Defendants' declaratory relief claim is appropriate because of the necessity to determine the rights of the Estate under the provisions of the Agreement and to address questions regarding the validity and enforceability of the non-interference provisions. Additionally, the Court is not persuaded that the Estate's right to recover attorney fees is adversely affected by Houweling's death. Therefore, the Court DENIES Plaintiff's motion to dismiss Defendants' Fifth Cause of Action. B. The Seventh Cause of Action — Waiting Time Penalties

  Defendants' Seventh Cause of Action alleges a violation of California Labor Code Section 203 which provides for penalties beyond those provided by contract law. California Labor Code Section 203 states that, "[i]f an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits" then the employee shall receive ...


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