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Market Lofts Community Association v. National Union Fire Insurance Co. of Pittsburgh, Pa

United States District Court, C.D. California

July 30, 2015

MARKET LOFTS COMMUNITY ASSOCIATION,
v.
NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA

CIVIL MINUTES - GENERAL

R. GARY KLAUSNER, District Judge.

I. INTRODUCTION

On April 4, 2014, Market Lofts Community Association (the "Association") filed a Complaint against its insurer, National Union Fire Insurance Company of Pittsburgh, PA ("Defendant"), seeking coverage for claims brought against the Association's members in California state court. The Complaint lists claims for: (1) declaratory relief; (2) breach of contract; and (3) breach of the covenant of good faith and fair dealing.

Presently before the Court are (1) Defendant's Motion to Dismiss pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6); and (2) the Association's Motion for Partial Summary Judgment (the "Association's MSJ") as to the declaratory relief claim. For the following reasons, the Court DENIES Defendant's Motion to Dismiss, and GRANTS the Association's MSJ.

II. FACTUAL BACKGROUND

The parties do not dispute the pertinent facts.

The Association is a non-profit mutual-benefit corporation formed for the benefit of condominium owners (the "Association Members") at a mixed-use development in downtown Los Angeles.

Defendant issued a Directors' & Officers' Liability Policy (the "Policy") to the Association, effective from June 22, 2011 to April 8, 2012. (Compl. ¶ 9, Ex. 1 ("Policy").) The Policy provides liability coverage for the Association and for "Individual Insureds, " which include past, present, and future members of its Board of Directors (the "Association's Board").

On November 2, 2011, the Association sued 9th Street Market Lofts, LLC (the "Developer"), CIM 830 S. Flower, Inc. (the "Garage Owner"), and others, including three former members of the Association's Board (the "Former Board Members") in the Superior Court for the County of Los Angeles (the "Underlying Action"). (Compl. ¶ 12; Snook Decl., Ex. 6.) The Association alleged that the Developer had charged the Association Members a monthly parking fee in violation of its agreement to grant parking rights to the Association at no cost. (Compl. ¶¶ 13, 15; Snook Decl., Ex. 6.)

On January 16, 2012, the Former Board Members, who qualify as Individual Insureds under the Policy, gave Defendant notice of the Underlying Action. (Compl. ¶ 26, Ex. 3.) Defendant denied coverage to the Former Board Members, who then brought suit against Defendant. See Jeffrey Lee v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., CV 14-2396 GHK (MRWx) (C.D. Cal. July 9, 2014) (ECF No. 28). The court upheld Defendant's denial of coverage on the ground that the Policy excluded coverage for claims brought by the Association against Individual Insureds. Id.

On August 22, 2012, the Association filed a second amended complaint in the Underlying Action. The Association alleged claims for declaratory relief, breach of fiduciary duty, breach of a parking license agreement, concealment, unfair business practices, and rescission of a parking sublicense agreement. The Developer filed a demurrer to the second amended complaint, which the trial court sustained without leave to amend on the ground that the Association lacked standing to sue. The California Court of Appeals reversed the trial court's judgment, holding that the Association had standing (1) as the real party in interest as to its contract claims; and (2) as a representative of the Association Members as to its other claims. Mkt. Lofts Cmty. Ass'n v. 9th Street Mkt. Lofts, LLC, 222 Cal.App.4th 924, 927 (2014), as modified on denial of reh'g (Feb. 4, 2014), review denied (Apr. 23, 2014).

On September 25, 2014, the Developer and the Garage Owner (collectively, "Cross-Complainants") filed a cross-complaint (the "Cross-Complaint") naming approximately 300 Association Members as defendants. (Compl. ¶ 14, Ex. 2 ("Cross-Compl.").) The Cross-Complaint lists claims for: (1) declaratory relief as to the real party in interest; (2) declaratory relief as to rights under a parking license agreement; (3) unjust enrichment with respect to the Developer; (4) unjust enrichment with respect to the Garage Owner; and (5) promissory estoppel. (Cross-Compl. ¶¶ 27-57.)

Cross-Complainants allege that the Developer and the Association executed a sublicense agreement under which the Association agreed to pay a fee in exchange for parking rights. (Cross-Compl. ¶¶ 13-15.) Cross-Complainants further allege that: (1) each Association Member or original purchaser entered into written purchase agreements with the Developer; (2) in the written purchase agreements, each Association Member or original purchaser acknowledged restrictions set forth in the Association's covenants, conditions and restrictions ("CC & R's"); and (3) the CC & R's "specifically referenced" the obligation to pay parking costs outlined in the sublicense agreement. (Cross-Compl. ¶¶ 18, 21.)

On October 3, 2014, the Association's insurance broker sent an email to Defendant. (Compl., Ex. 4.) The email included a copy of the Cross-Complaint, and stated, "This matter is still alive and I'd like to request that you take a look at the attached documents and see if there is any change in your coverage opinion now that every unit owner in [the Association] has been named in a cross complaint." (Compl., Ex. 4.)

On December 2, 2014, Defendant sent a letter to the Former Board Members. (Compl., Ex. 5.) In that letter, Defendant stated that the Policy does not provide coverage for the Cross-Complaint because: (1) the Cross-Complaint does not assert any causes of action against the Former Board Members; and (2) the Association Members are not Insureds under the Policy. (Compl., Ex. 5 at 2-3.) The Association's insurance broker was copied on that letter. (Compl., Ex. 5.)

III. JUDICIAL STANDARD

A. Motion to Dismiss Pursuant to Rule 12(b)(6)

"A pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Under Rule 12(b)(6), a party may move to dismiss for failure to state a claim upon which relief can be granted. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2004)). A court deciding a 12(b)(6) motion must accept as true all factual allegations in the complaint, but need not accept mere legal conclusions or bare recitations of the elements of a claim. Twombly, 550 U.S. at 555. A claim is facially plausible when there are sufficient factual allegations, viewed in the light most favorable to the plaintiff, to draw a reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 678; Barker v. Riverside Cnty. Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009).

B. Motion for Summary Judgment

Pursuant to Federal Rule of Civil Procedure 56(a), summary judgment is proper only upon a showing that "there is no genuine issue as to any material fact and that the [moving party] is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Upon such showing, the court may grant summary judgment "on all or part of the claim." Id.

To prevail on a summary judgment motion, the moving party must show that there are no triable issues of material fact as to matters upon which it has the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). On issues where the moving party does not have the burden of proof at trial, the moving party is required only to ...


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