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Gidding v. Zurich American Insurance Co.

United States District Court, N.D. California

August 2, 2016




         Before the Court are the motions to dismiss filed by Defendant Glendonbrook Pty Ltd. (“Glendonbrook”), Dkt. No. 81, and Defendant Zurich American Insurance Company (“Zurich”), Dkt. No. 83. Glendonbrook and Zurich (together, “Defendants”) move to dismiss the amended complaint filed by Plaintiff John Gidding (“Plaintiff”), Dkt. No. 80 (“Am. Compl.”), for failure to state a claim upon which relief can be granted. Plaintiff has filed an opposition to each motion, Dkt. Nos. 85 & 87, and Defendants have each filed a reply, Dkt. Nos. 89 & 91.

         For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Zurich’s motion to dismiss and GRANTS Glendonbrook’s motion to dismiss. Because no set of amended factual allegations can cure the defects in the dismissed claims, they are DISMISSED WITH PREJUDICE. Because one claim survives dismissal, the Court SETS a case management conference for August 16, 2016, at 2:00pm to discuss scheduling in this matter.

         I. BACKGROUND

         The Court previously granted Defendants’ motion to dismiss and special motion to strike Plaintiff’s initial complaint and dismissed his claims in part with prejudice and in part without prejudice. See Gidding v. Zurich Am. Ins. Co., No. 15-cv-01176, 2015 WL 6871990 (N.D. Cal. Nov. 9, 2015) (Dkt. No. 77). Plaintiff was granted leave to amend with respect to several of his claims against Zurich, Dkt. No. 77 at 16-17, but he amended his complaint only as to his claims for (1) filing a false and fraudulent information return under 26 U.S.C. § 7434 and (2) intentional interference with contractual relations. Am. Compl. ¶¶ 40-73. Plaintiff also asserts a breach of contract claim against Glendonbrook without leave to do so. Id. ¶¶ 74-80.

         The basic premise of Plaintiff’s complaint remains unchanged. After Plaintiff lost a large jury verdict to Glendonbrook in January 2010, [1] Plaintiff sued the attorneys who represented him for malpractice. Id. ¶¶ 10-14. One of his attorneys and his firm were insured by a subsidiary of Zurich, which began negotiating a settlement with Plaintiff on their behalf. Dkt. No. 83 at 3; see also Am. Compl. ¶¶ 16, 36. On or about September 7, 2011, Plaintiff and Zurich reached an agreement in principle to settle the malpractice action for $100, 000. Id. ¶ 16.

         On or about September 15, 2011, Zurich “issued” a $100, 000 settlement check that was made payable to Plaintiff and his business, Midshore Marketing LP. Id. ¶ 17. Zurich informed Glendonbrook, which placed a judgment lien on the anticipated settlement proceeds. Id. ¶ 21. On October 30, 2011, Plaintiff renounced the settlement before he received a final signature page and the check. Id. ¶ 22. On November 6, 2011, Zurich sought to enforce the settlement agreement in the state court hearing the malpractice action. Id. ¶ 24. On December 19, 2011, the court found the agreement unenforceable. Id. ¶ 25. On January 10, 2012, Zurich moved for reconsideration. Id. ¶ 27. “On or after January 15, 2012, ” Zurich filed an information return with the IRS stating that it had paid Plaintiff $100, 000 in 2011. Id. ¶ 28. And, according to Plaintiff, on May 25, 2012, the state court reversed itself and found the settlement agreement enforceable. Id. ¶ 29.

         Based on these allegations, Plaintiff again asserts a claim for filing a false and fraudulent information return under 26 U.S.C. § 7434 against Zurich. Plaintiff appears to allege that Zurich knew the information return it filed with the IRS, which stated that it paid him $100, 000 in 2011, was false because at the time it was filed the state court had ruled that the settlement agreement awarding that money was unenforceable. Id. ¶¶ 40-58. Plaintiff also reasserts a claim under California law for intentional interference with contractual relations against Zurich and a John Doe defendant, based on Zurich’s failure to inform him that his settlement proceeds would inure to Glendonbrook under the judgment lien. Id. ¶¶ 59-73. And Plaintiff asserts a breach of contract claim against Glendonbrook for failing to inform him who would receive the proceeds of the jury verdict against him, which was reduced to an amended judgment by stipulation. Id. ¶¶ 13, 74-80.

         Zurich again moves to dismiss for failure to state a claim. Glendonbrook moves to dismiss the contract claim asserted against it on the grounds that it was already dismissed with prejudice.


         A. Federal Rule of Civil Procedure 12(b)(6)

         Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief[.]” A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 540, 570 (2007). A claim is facially plausible when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         In reviewing the plausibility of a complaint, courts “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, Courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). And even where facts are accepted as true, “a plaintiff may plead [him]self out of court” if he “plead[s] facts which establish that he cannot prevail on his . . . claim.” Weisbuch v. Cnty. of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 1997) (quotation marks and citation omitted).

         “Pleadings must be construed so as to do justice.” Fed.R.Civ.P. 8(e). For that reason, “a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (internal quotations marks and citations omitted). If dismissal is still appropriate, a court “should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (quotation marks and citation omitted). Where leave to amend is appropriate, “before dismissing a pro se complaint the district court must provide the litigant with notice of the deficiencies in his complaint in order to ensure that the litigant uses the opportunity to amend effectively.” Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th Cir. 1992).

         B. Federal Rule of Civil Procedure 9(b)

         Federal Rule of Civil Procedure 9(b) heightens these pleading requirements for all claims that “sound in fraud” or are “grounded in fraud.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (citation omitted); Fed.R.Civ.P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”). “[The Ninth Circuit] has interpreted Rule 9(b) to require that allegations of fraud are specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993) (internal quotation marks and citation omitted).

         In short, a fraud claim must state “the who, what, when, where, and how” of the alleged conduct, Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997), and “set forth an explanation as to why [a] statement or omission complained of was false and misleading, ” In re GlenFed, Inc. Secs. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in Ronconi v. Larkin, 252 F.3d 423, 429 & n.6 (9th Cir. 2001). “Malice, intent, knowledge and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). And where multiple defendants are accused of fraudulent conduct, the plaintiff must identify the role of each defendant in the fraud. See Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007) (“Rule 9(b) does not allow a complaint to merely lump multiple defendants together but require[s] plaintiffs to differentiate their allegations when suing more than one defendant and inform each defendant separately of the allegations surrounding his alleged participation in the fraud.”).


         Before turning to the substance of Defendants’ motions, the Court addresses Zurich’s three requests for judicial notice. These materials include orders from several state court actions that Plaintiff filed, as well as a document associated with the information return Zurich filed with the IRS that Plaintiff attached to a declaration filed in support of his opposition. Dkt. Nos. 84, 86 & 90. Zurich contends that the state court materials are noticeable ...

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