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Travelers Property Casualty Company of America v. Mountain Movers Engineering Co., Inc.

United States District Court, S.D. California

June 23, 2017

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut corporation, Plaintiff,
v.
MOUNTAIN MOVERS ENGINEERING COMPANY, INC., a California corporation;, Defendants.

          ORDER: (1) GRANTING, IN PART, AND DENYING, IN PART, PLAINTIFF'S MOTION TO DISMISS (DOC. NO. 50) (2) DENYING PLAINTIFF'S MOTION TO STRIKE (DOC. NO. 51)

          Hon. Marilyn L. Huff United States District Judge.

         On April 3, 2017, Defendants Old Republic General Insurance Corporation (“ORGENCO”) and Pacific Building Group (“PBG”) (collectively, “Defendants”), filed a motion for leave to file counterclaims. (Doc. No. 41.) Plaintiff Travelers Property Casualty Company of America (“Plaintiff”) opposed Defendants' motion, arguing the motion should be denied as futile. (Doc. No. 43.) On May 4, 2017, the Court granted Defendants' motion in part, allowing them to file nine of their counterclaims. (Doc. No. 46.)

         On May 11, 2017, Defendants filed their counterclaims. (Doc. No. 47.) On May 25, 2017, Plaintiff filed a motion to dismiss two of Defendants' claims and their prayer for punitive damages. (Doc. No. 50.) On the same day, Plaintiff also moved to strike allegedly privileged material from Defendants' counterclaims. (Doc. No. 51.) Defendants filed their oppositions on June 1, 2017. (Doc. Nos. 53, 54.) Plaintiff filed a reply on June 16, 2017. (Doc. No. 57.)

         BACKGROUND

         The following facts are taken from the allegations in Defendants' counterclaims. (Doc. No. 47.) Defendant PBG was the general contractor hired to complete an improvement of real property located in Carlsbad, California (the “Carlsbad Property”). (Id. ¶ 11.) PBG subsequently contracted Mountain Movers Engineering Company, Inc. (“Mountain”) to perform work in connection with the improvement. (Id. ¶ 13.) As part of the agreement between PBG and Mountain, Mountain agreed to indemnify PBG for any claims arising from Mountain's performance. (Id. ¶ 14.) Mountain also agreed to reimburse PBG for any loss, including extra expenses and attorneys' fees, related to Mountain's failure to perform. (Id. ¶ 15.) As part of its contractual obligations, Mountain obtained a commercial general liability insurance policy, No. DTE-CO-9323B76 (the “Traveler's Policy”), from Plaintiff. (Id. ¶ 16.)

         On September 8, 2012, while working at the Carlsbad Property, Mountain damaged a sewer cleanout, causing a sewer backup and flooding an adjacent building. (Id. ¶¶ 17-18.) Plaintiff was notified promptly of the damage but did not participate in, or fund, the repairs. (Id. ¶ 20.) The total cost of the damage was $141, 880.61, of which ORGENCO paid $131, 880.61 (representing the cost minus a $10, 000 deductible). (Id. ¶ 22.) Mountain agreed to reimburse PBG for the $10, 000 deductible. (Id. ¶ 23.)

         On October 8, 2012, Plaintiff informed Mountain that the Traveler's Policy did not cover the September 8, 2012 damage because the policy included a Pollution Exclusion, as well as a Bacteria/Fungi Exclusion. (Id. ¶ 24.) On October 19, 2012, Defendants submitted a claim to Plaintiff for the costs they incurred and were told that Plaintiff was in the process of investigating the claim. (Id. ¶¶ 25-26.) On December 11, 2012, Plaintiff informed Defendants the Pollution Exclusion precluded coverage under the Traveler's Policy because the accident involved sewage. (Id. ¶ 27.)

         Following the denial of coverage, Defendants filed suit in state court, seeking indemnification and reimbursement from Plaintiff and Mountain. (Id. ¶ 28.) Mountain retained The Law Offices of Gregory Hout to defend it and, although Plaintiff agreed to pay for Mountain's defense, Plaintiff's payments were late and sporadic. (Id. ¶ 31.) Throughout the course of the litigation, Plaintiff repeatedly claimed that the September 8, 2012 incident was excluded from coverage and refused Defendants' settlement offers. (Id. ¶¶ 36-41.)

         On May 31, 2016, Defendants offered to settle with Mountain for a stipulated judgment of $372, 000 against Mountain in exchange for a covenant not to execute the judgment against Mountain. (Id. ¶ 46.) Mountain reviewed the settlement offer and forwarded it to Plaintiff. (Id. ¶¶ 47-48.) Plaintiff refused to fund the settlement offer and threatened to sue Mountain if it settled with Defendants. (Id. ¶ 49.) On August 2, 2016, Mountain entered into the Settlement Agreement with Defendants. (Doc. No. 48-2 at 4-14.) As part of the Agreement, Mountain also assigned all of its claims against Plaintiff to ORGENCO. (Id. at 10.)

         Defendants now seek to assert Mountain's assigned claims, as well as their own claim as judgment creditor, against Plaintiff. Plaintiff moves to (1) dismiss certain claims and relief and (2) to strike confidential information in the counterclaims.

         DISCUSSION

         I. MOTION TO DISMISS

         A. LEGAL STANDARD

         A motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), tests the legal sufficiency of the pleadings and allows a court to dismiss a complaint if the claimant has failed to state a claim upon which relief can be granted. Conservation Force v. Salazar, 646 F.3d 1240, 1241 (9th Cir. 2011). A complaint will survive a motion to dismiss if it contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the 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). The pleadings must go beyond “labels and conclusions” and the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. A “formulaic recitation of the elements” is not enough. Id.; accord Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”).

         When reviewing a motion to dismiss, a district court must accept as true all facts alleged in the complaint, and draw all reasonable inferences in favor of the claimant. Retail Prop. Trust v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014). The court need not, however, accept “legal conclusions” as true. Iqbal, 556 U.S. at 678. Thus, pleadings unsupported by factual allegations are not entitled to a presumption of truth. Id. ...


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