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Hernandez v. State Farm Fire & Casualty Co.

United States District Court, S.D. California

March 9, 2017

FELIX HERNANDEZ, et al., Plaintiffs,



         In their first amended complaint (“FAC”), Felix and Maria Emma Hernandez on their own behalf and on behalf of a putative class bring fraud, unfair competition, and related claims in connection with water mitigation claims under their insurance policy.

         Plaintiffs own a condominium in Santa Ana, California that was damaged by water, leaving it uninhabitable. They allege State Farm discouraged them from using any mitigation company other than ServiceMaster or Servpro, and falsely claimed that those two companies were independent. They allege they contacted ServiceMaster, whose local franchise failed to carry out the mitigation services competently, which resulted in further losses. After they complained about ServiceMaster's work, they say State Farm steered them to Servpro, whose local franchise also did a bad job.

         Plaintiffs allege that by arrangement among Defendants, insureds receive significantly less in the way of mitigation services than they have been led to expect, and that as a result Defendants profit unfairly. They also make allegations of financial harm and damage to their home and class members' homes.

         Plaintiffs are bringing claims against State Farm Fire and Casualty Company (“SFFCC”); State Farm General Insurance Company (“SFGIC”); The ServiceMaster Company, LLC (“ServiceMaster”); Servpro Industries, Inc. (“Servpro”); Douglas D. Dehart, Inc. dba ServiceMaster Absolute Water and Fire Damage Service (“ServiceMaster Local”); and Servpro of Santa Ana South (“Servpro Local”). The FAC refers to SFFCC and SFGIC collectively as “State Farm”. Plaintiffs are suing for breach of contract and intentional interference with contractual relations; claims against all Defendants for breach of the implied covenant of good faith and fair dealing; and claims under various California statutes against all Defendants for various unfair business practices. The FAC brought claims against several individual Defendants as well, but those were voluntarily dismissed.

         Defendants' motions ask the Court to dismiss the FAC for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), to strike class claims pursuant to Fed.R.Civ.P. 12(f), and to dismiss fraud claims that are not pled to the standard required by Fed.R.Civ.P. 9(b).


         Jurisdiction has been a question in this case from the start. When the Court issued an order requiring Plaintiffs to show cause regarding jurisdiction, it was not only the Plaintiffs who responded. Two Defendants also spontaneously filed briefs (Docket nos. 8 and 9) conceding that the Court had subject matter jurisdiction under the Class Action Fairness Act (CAFA). Of course, subject matter jurisdiction can never be waived, even by consent, and the Court is obligated to raise the issue sua sponte even if the parties concede it. Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006). The Supreme Court has made clear that presumption must be presumed to be lacking, until it is affirmatively shown. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). Furthermore, the Court must confirm its jurisdiction before proceeding to the merits, even if the jurisdiction is complex and the merits question is relatively straightforward. Steel Co. v. Citizens for a Better Environ., 523 U.S. 83, 94 (1998). If jurisdiction is lacking, the Court must announce that fact and dismiss. Id.

         If the Court has jurisdiction at all, it must be under CAFA. Neither the original complaint nor the FAC raises a federal question, and no basis for a federal claim is apparent. Ordinary diversity jurisdiction is unavailable because the parties are not completely diverse. Plaintiffs are California citizens, as are at least two Defendant, Douglas D. DeHart, Inc. and Servpro Santa Ana South.[1] But other Defendants are non-California citizens. Because CAFA only requires minimal diversity - i.e., one plaintiff and one defendant who are citizens of different states - this requirement is satisfied. See 28 U.S.C. § 1332(d)(2)(C). Because facts to satisfy other requirements are properly alleged, the Court can exercise CAFA jurisdiction.

         In their motions to dismiss, Defendants are asking the Court to strike class action allegations. Doing so would deprive the Court of jurisdiction to reach the merits. The Court will therefore address requests to strike before requests for dismissal.

         The multiple sets of briefing have thoroughly covered most of the important issues. Of course, the Court must address any jurisdictional defects, even if not raised. This is particularly important here, where Defendants challenge the putative class members' standing. It is also relevant with regard to Plaintiffs' and the class's standing to seek injunctive relief.

         Legal Standards

         Under Fed.R.Civ.P. 12(f), the Court can strike from a pleading any “redundant, immaterial, impertinent, or scandalous matter, ” either sua sponte or in response to a motion. In general, the appropriateness of proceeding as a class action is not tested at the pleading stage, but there is no rule preventing this. As the Supreme Court has explained, most of the time determining whether a case can proceed as a class action involves deciding factual and legal questions that are closely tied up with the cause of action itself. Gen'l Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160 (1982). In their opposition, Plaintiffs rely on the fact that a motion to strike usually is an inappropriate way to test class claims.

         That being said, “[s]ometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff's claim.” Id. See also Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011) (construing Falcon as holding that it may sometimes be necessary to look beyond the pleadings to determine whether class treatment was appropriate). When it is clear from the complaint that class actions cannot be maintained, the Court may grant a motion to strike them. Sanders v. Apple, Inc., 672 F.Supp.2d 978, 990-91 (N.D. Cal. 2009). This Court, too, has treated motions to strike as an appropriate means of ...

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