The opinion of the court was delivered by: Oliver W. Wanger United States District Judge
MEMORANDUM DECISION ON DEFENDANT'S MOTION TO DISMISS
On January 27, 2010, the Raisin Bargaining Association ("RBA"), Glen S. Goto, and Monte Schutz ("Plaintiffs") filed a complaint in the Superior Court of California, County of Fresno, against Hartford Casualty Insurance Company ("Defendant") alleging various state causes of action. (Doc. 1, Ex. B). Defendant removed Plaintiffs' action pursuant to 28 U.S.C. § 1441(b) on the basis of diversity jurisdiction. (Doc. 1).
Defendant filed a motion to dismiss Plaintiffs' complaint on March 5, 2010. (Docs. 7, 8).*fn1 Plaintiffs filed opposition to Defendant's motion to dismiss on April 30, 2010. (Doc. 10).
Plaintiff RBA is a nonprofit California cooperative association. (Complaint at 1). Plaintiffs Glen Goto and Monte Schutz are and were, at all times relevant to this action, members of the Board of Directors of RBA. (Complaint at 2).
Plaintiffs entered into contracts for insurance with Defendant whereby Defendant agreed to insure Plaintiffs against various claims brought against Plaintiffs for actions taken in RBA's business capacity. (Complaint at 1, 3). The insurance policies relevant to this action encompass coverage periods from at least 2005 to the present and obligate Defendant to provide defense and indemnity for covered claims made against RBA. (Complaint at 1-3).
Beginning in or about January 2007, Richard Garabedian ("Garabedian"), through counsel, sent several letters threatening litigation and demanding almost $900,000.00 to settle a dispute between RBA, Goto, and Schutz concerning the RBA Board of Director's decision not to recommend Garabedian to the Secretary of the U.S. Department of Agriculture ("USDA") for appointment to the RBA's reserved seats on the Raisin Administrative Committee of the USDA. (Complaint at 3). On or about March 2, 2007, Garabedian filed a complaint against Plaintiffs alleging defamation, slander, and breach of the common law Fair Procedure Doctrine in Fresno County Superior Court. (Complaint at 3).
In response to the Garabendian complaint, on or about April 4, 2007, Plaintiff's filed an Anti-SLAPP motion against Garabedian. (Complaint at 4). On November 8, 2007, the Superior Court granted Plaintiffs' Anti-SLAPP motion and struck Garabedian's entire complaint. (Complaint at 5).
The complaint alleges that upon receipt of Garabedian's complaint in March 2007, Plaintiffs immediately tendered the complaint to Defendant. (Complaint at 5). On or about March 19, 2007, Plaintiffs received a letter from Defendant agreeing, without any reservations, to defend and provide indemnity to Plaintiffs. (Complaint at 5). Plaintiffs met with Defendant's counsel, attorneys Gordon Park and Mohammed Mandegary, who "suggested/recommended" to Defendant that Plaintiff's counsel, the law firm of Campagne, Campagne, & Lerner, remain working on defending against the Garabedian complaint until resolution of an Anti-SLAPP motion. (Complaint at 5). The complaint alleges that Park and Mandegary promised they would recommend to Defendant that it should reimburse Plaintiffs for the fees incurred in defending the Garabedian complaint. (Complaint at 5). Plaintiffs allege that they "performed all of the Anti-SLAPP work and expected to be reimbursed" by Defendant. (Complaint at 5). D e f e n d a n t p a i d Plaintiffs' invoices from March 2007 through September 2007 after taking additional write downs at the expense of Plaintiffs. (Complaint at 5). Defendant reimbursed Plaintiffs $38,891.42. (Complaint at 5).
On or about November 12, 2009, Defendant sent Plaintiffs a document entitled "Case Summary." (Complaint at 6). The Case Summary refused full payment of legal fees incurred by Plaintiffs. (Complaint at 6). Plaintiffs allege that the Case Summary set forth an incorrect account of the defense provided in connection with the Garabedian complaint. (Complaint at 6). The Case Summary asserts that Defendant paid a total of $69,366.48 in legal fees.
(Complaint at 6). The Case Summary also indicated that Defendant intended to collect the attorneys' fees awarded by the Superior Court in connection with Plaintiffs successful Anti-SLAPP motion. (Complaint at 6). Plaintiffs sent Defendant a written response to Defendant's Case Summary on December 16, 2009. (Complaint at 7). Upon receipt of Plaintiff's response, Defendant asked Plaintiff to forward a copy of the Case Summary. (Complaint at 8).
The total amount of fees and costs for work performed by Plaintiffs' counsel from January 2007 through September 2007 was $77,056.81. (Complaint at 5). According to the FAC, none of the work performed by Plaintiffs' counsel was duplicative of the work performed by Defendant's counsel. (Complaint at 6). Plaintiffs allege that Defendant's actions were taken in bad faith, and that Defendant had actual knowledge that its conduct constituted bad faith. (Complaint at 7).
Plaintiffs allege they have incurred costs and attorney's fees as a result of Defendant's actions. (Complaint at 7). Plaintiffs also contend they have suffered great emotional distress as a result fo Defendant's conduct. (Complaint at 7). Plaintiffs contend that Defendant owes Plaintiffs $38,165.33, plus 10% APR as well as punitive damages and attorneys' fees incurred in the prosecution of the instant law suit. (Complaint at 5).
Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1990). To sufficiently state a claim to relief and survive a 12(b) (6) motion, the pleading "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action will not do." Id. Rather, there must be "enough facts to state a claim to relief that is plausible on its face." Id. at 570. In other words, the "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted).
The Ninth Circuit has summarized the governing standard, in light of Twombly and Iqbal, as follows: "In sum, for a complaint to survive a motion to dismiss, the nonconclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009) (internal quotation marks omitted). Apart from factual insufficiency, a complaint is also subject to dismissal under Rule 12(b)(6) where it lacks a cognizable legal theory, Balistreri, 901 F.2d at 699, or where the allegations on their face "show that relief is barred" for some legal reason, Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007).
In deciding whether to grant a motion to dismiss, the court must accept as true all "well-pleaded factual allegations" in the pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not, however, "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001). "When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers evidence outside the pleadings, it must normally convert the 12(b)(6) motion into a Rule 56 motion for summary judgment, and it must give the nonmoving party an opportunity to respond." United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). "A court may, however, consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment." Id. at 908.
A. Plaintiffs' Breach of Contract Claim
A claim for breach of contract under California law requires:
1) the existence of the contract; 2) plaintiff's performance or excuse for nonperformance of the contract; 3) defendant's breach of the contract; and 4) resulting damages. E.g. Armstrong Petrol. Corp. V. Tri Valley Oil & Gas Co., 116 Cal. App. 4th 1375, 1391 n. 6 (Cal. Ct. App. 2004). In order to determine whether a plaintiff has stated a claim for breach of contract, a court must compare the allegations of the complaint with the terms of the contract. See, e.g., Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 5 (Cal. 1995).
Interpretation of an insurance policy is a question of law. Id. As the California Supreme Court stated in Waller,
The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the "mutual intention" of the parties."Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the contract. The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage', controls judicial interpretation. " A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. But language ...