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Regents of the University of California v. Stidham Trucking Inc.

United States District Court, E.D. California

August 31, 2017




         In this suit, Plaintiff the Regents of the University of California, on behalf of the UC Davis Medical Center, seeks payment for medical services provided to non-party patient Jack Franklin.[1] Plaintiff alleges that Defendants unlawfully denied Franklin his rights to enroll in health insurance pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), 29 U.S.C. §§ 1161-1168. Defendants are Franklin's former employer, Stidham Trucking Inc. (“Stidham”); Stidham's insurance broker, Craig C. Hansen Insurance Services, Inc. (“Hansen”); Stidham's COBRA administrator, Worthington Olson, Inc., dba CobraHelp (“CobraHelp”); and Stidham's insurance provider, Anthem, Inc. (“Anthem”). Stidham, CobraHelp, and Anthem now move to dismiss the claims against them. ECF Nos. 8, 18, 19. CobraHelp has also moved for sanctions against Plaintiff, ECF No. 9, and Plaintiff has moved for sanctions against CobraHelp for filing that motion, ECF No. 25. For the following reasons, the motions to dismiss (“MTDs”) and CobraHelp's motion for sanctions are GRANTED, and Plaintiff's motion for sanctions is DENIED.[2]


         Jack Franklin voluntarily terminated his employment with Stidham on September 26, 2014. At that time, he received notice that he had 60 days to elect to continue his health benefits under COBRA. Toward the end of those 60 days, he was in an accident and received treatment at the UC Davis Medical Center for 10 days. Plaintiff alleges that Franklin was incapacitated for all 10 days he received treatment.

         Plaintiff further alleges that Franklin assigned it all his insurance rights upon admission to the UC Davis Medical Center, and that his 10-day incapacitation is grounds for equitable tolling of the 60-day election period provided by COBRA. Plaintiff contends that equitable tolling required the issuance of a new COBRA notice from the COBRA administrator that would create a new 60-day election period. On July 11, 2016, Plaintiff's attorney represented to CobraHelp-i.e., the COBRA administrator-that Stidham and Anthem-i.e., the employer and insurance provider-agreed that Franklin was entitled to a new election period. Decl. of Kristina Baker, ECF No. 9-3, ¶ 8. Relying on that representation, CobraHelp sent a new COBRA notice via email, to be followed with a mailed hardcopy. Id.

         About three hours after CobraHelp sent the new notice by email, CobraHelp emailed Plaintiff's attorney that the unusual nature of the situation led them to decide not to send a hardcopy. Decl. of Heather Underwood, ECF No. 9-4, Ex. 8, at 1. CobraHelp also instructed Plaintiff's attorney to disregard the previous email that contained the new COBRA notice. Id. Plaintiff's attorney then made a number of unsuccessful attempts to convince CobraHelp to mail a new notice. See, e.g., id. Ex. 13, at 1.

         Despite the instruction to disregard the emailed notice, Plaintiff completed the election form and returned it to CobraHelp on August 18, 2016. Plaintiff also sent a premium payment on September 30, 2016, to CobraHelp. CobraHelp returned the check uncashed.

         Plaintiff then filed the instant suit on December 1, 2016, alleging various state causes of action as well as violation of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461.[4] Hansen (Stidham's insurance broker) filed an answer, while the other three defendants filed motions to dismiss for failure to state a claim. CobraHelp accompanied its motion to dismiss with a motion for sanctions under Federal Rule of Civil Procedure 11(b)(2), alleging that allegations in Plaintiff's complaint are directly contradicted by email evidence in Plaintiff's possession. In response, Plaintiff filed its own motion for sanctions, alleging that CobraHelp's Rule 11 motion was baseless and intended only to harass. /// /// /// ///


         A. Motions to Dismiss for Failure to State a Claim

         On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. (citation omitted). A court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than “a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”)).

         Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket assertion, of entitlement to relief.” Id. at 555 n.3 (citation omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only ‘fair notice' of the nature of the claim, but also ‘grounds' on which the claim rests.” Id. (citing Wright & Miller, supra, at 94-95). A pleading must contain “only enough facts to state a claim to relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed.” Id. However, “[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

         A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be “freely given” where there is no “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Not all of these factors merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that “the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Grp., Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) (“Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility . . . .”)).

         B. Sanctions Under Rule 11

          Federal Rule of Civil Procedure 11 provides, in relevant part:

By presenting to the court a pleading, written motion, or other paper . . . an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; [and] (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery . . . .

Fed. R. Civ. P. 11. “If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule . . . .” Id.

         Rule 11 “is designed to deter attorneys and unrepresented parties from violating their certification that any pleading, motion[, ] or other paper presented to the court is supported by an objectively reasonable legal and factual basis; no showing of bad faith or subjective intent is required.” Truesdell v. S. Cal. Permanente Med. Grp., 209 F.R.D. 169, 173-74 (C.D. Cal. 2002). Rather, Rule 11 is governed by an objective standard of reasonableness. See, e.g., Conn v. COS Borjorquez, 967 F.2d 1418, 1420 (9th Cir. 1992). Thus, where a party “pursues causes of action for which there is no legal basis whatsoever, ” sanctions may be warranted. Bhambra v. True, No. 09-cv-4685-CRB, 2010 WL 1758895, at *3 (N.D. Cal. Apr. 20, 2010).

         “[T]he central purpose of Rule 11 is to deter baseless filings.” United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 254 (9th Cir. 1992) (alteration in original) (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 392 (1990)). “Under the plain language of the rule, when one party files a motion for sanctions, the court must determine whether any provisions of subdivision (b) have been violated.” Warren v. Guelker, 29 F.3d 1386, 1390 (9th Cir. 1994). If Rule 11(b) was violated, the court ...

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