United States District Court, C.D. California
BRIGHTON TRUSTEES, ET AL.
TRANSAMERICA LIFE INSURANCE COMPANY
Attorneys Present for Plaintiffs: Khai LeQuang David Gomez
Attorneys Present for Defendants: Hutson Smelley
Present: The Honorable CHRISTINA A. SNYDER Judge
CIVIL MINUTES - GENERAL
DEFENDANT'S MOTION TO DISMISS SECOND AMENDED COMPLAINT
(Dkt. [ 42 ], filed September 25, 2019)
INTRODUCTION AND BACKGROUND
Court previously set out the factual and procedural
background of this case in its August 28, 2019 order.
Accordingly, the Court only recites the background that gives
rise to the present motion to dismiss.
Brighton Trustees, LLC ("Brighton"), Cook Street
Master Trust ("Cook Street"), Diamond LS Trust
("Diamond LS"), and Bank of Utah filed this action
against defendant Transamerica Life Insurance Company
("Transamerica") on May 15, 2019. Dkt. 1. On June
10, 2019, Brighton, Cook Street, Diamond LS, Bank of Utah,
and additional plaintiffs. Cook Street Master Trust III and
Wilmington Trust, National Association, filed a first amended
complaint against Transamerica. Dkt. 14 ("FAC").
The FAC asserts claims for: (1) breach of contract; (2)
contractual breach of the implied covenant of good faith and
fair dealing: (3) tortious breach of the implied covenant of
good faith and fair dealing; and (4) declaratory relief.
moved to dismiss the FAC on July 10, 2019. Dkt. 28. On August
28, 2019, the Court granted, in part, and denied, in part,
Transamerica's motion to dismiss. Dkt. 37. The Court
denied Transamerica's motion to dismiss for lack of
personal jurisdiction and for lack of standing. Id.
The Court dismissed, without prejudice.
express breach of contract claim to the extent that it relied
on an allegation that Transamerica breached plaintiffs'
policies "by increasing the Monthly Deduction Rates in
an attempt to circumvent the guaranteed minimum interest
rate." Id. at 16 (internal punctuation omitted)
(citing FAC ¶ 76(b)). The Court also dismissed, without
prejudice, plaintiffs' claim for tortious breach of the
implied covenant. Dkt. 37 at 21-23. The Court first noted
that plaintiffs' claims were premised on allegations that
"Transamerica's MDR increases deprived policyholders
and owners [of] benefits in the form of the Accumulation
Value and monthly accrual of guaranteed interest."
Id. at 22. The Court concluded that
Transamerica's deprivation of these benefits relates to
the savings component of Transamerica's
universal life insurance policies, rather than the
insurance component, and therefore "do[es] not
implicate the 'special relationship' between insureds
and insurer that animate[s] the narrow exception providing a
tort claim in the insurance context." Id.
(citing EFG Bank AG. Cayman Branch v. AXA Equitable Life
Ins. Co., 309 F.Supp.3d 89, 96 (S.D.N.Y. 2018)). To the
extent that plaintiffs' claim for tortious breach of the
implied covenant depended on allegations that
"Transamerica breached the policies' terms when
increasing the MDRs and that Transamerica increased the MDRs
to cause policy lapses or surrenders before death benefits
became due," the Court distinguished the plaintiffs in
this case from the elderly insured plaintiffs to whom the
Court extended the tort remedy in another case, Thompson
v. Transamerica Life Ins. Co., No.
2:18-cv-05422-CAS-GJS, 2018 WL 6790561, (CD. Cal. Dec. 26,
2018). Dkt. 37 at 23.
September 11, 2019, Brighton Trustees, Cook Street Master
Trust, Diamond LS Trust, and Bank of Utah (collectively,
"plaintiffs") filed the operative second amended
complaint against Transamerica. Dkt. 40 ("SAC"). The
SAC asserts claims against Transamerica for: (1) breach of
contract; (2) contractual breach of the implied covenant of
good faith and fair dealing; (3) tortious breach of the
implied covenant of good faith and fair dealing; (4)
conversion; and (5) declaratory relief. Id.
moved to dismiss the SAC on September 25, 2019. Dkt. 42-1
("Mot."). Plaintiffs filed an opposition on October
11, 2019. Dkt. 43 ("Opp."). Transamerica filed a
reply on October 21, 2019. Dkt. 44 ("Reply").
Court held a hearing on November 4, 2019. Having carefully
considered the parties' arguments, the Court finds and
concludes as follows.
motion pursuant to Federal Rule of Civil Procedure 12(b)(6)
tests the legal sufficiency of the claims asserted in a
complaint. Under this Rule, a district court properly
dismisses a claim if "there is a 'lack of a
cognizable legal theory or the absence of sufficient facts
alleged under a cognizable legal theory.'"
Conservation Force v. Salazar, 646 F.3d 1240, 1242
(9th Cir. 2011) (quoting Balisteri v. Pacifica Police
Dep't., 901 F.2d 696, 699 (9th Cir. 1988)).
"While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, a
plaintiffs 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." Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (internal citations
omitted). "Factual allegations must be enough to raise a
right to relief above the speculative level."
Id. (internal citations omitted).
considering a motion pursuant to Rule 12(b)(6), a court must
accept as true all material allegations in the complaint, as
well as all reasonable inferences to be drawn from them.
Pareto v. FDIC 139 F.3d 696, 699 (9th Cir. 1998).
The complaint must be read in the light most favorable to the
nonmoving party. Sprewell v. Golden State Warriors,
266 F.3d 979, 988 (9th Cir. 2001). However, "a court
considering a motion to dismiss can choose to begin by
identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a
complaint, they must be supported by factual
allegations." Ashcroft v. Iqbal, 556 U.S. 662,
679 (2009); see Moss v. United States Secret
Service. 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or
a complaint to survive a motion to dismiss, the
non-conclusory 'factual content,' and reasonable
inferences from that content, must be plausibly suggestive of
a claim entitling the plaintiff to relief"). Ultimately,
"[determining whether a complaint states a plausible
claim for relief will... be a context-specific task that
requires the reviewing court to draw on its judicial
experience and common sense." Iqbal, 556 U.S.
general rule, leave to amend a complaint which has been
dismissed should be freely granted. Fed.R.Civ.P. 15(a).
However, leave to amend may be denied when "the court
determines that the allegation of other facts consistent with
the challenged pleading could not possibly cure the
deficiency." Schreiber Distrib. Co. v. Serv-Well
Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see
Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
Breach of Contract Claim
allege that Transamerica breached plaintiffs' policies in
four material respects. See SAC ¶ 84(a)-(d).
Transamerica moves to dismiss, in part, plaintiffs'
breach of contract claim to the extent it is premised on
plaintiffs' allegation that Transamerica breached
plaintiffs' policies "[b]y increasing the Monthly
Deduction Rates in an attempt to circumvent the guaranteed
minimum interest rate[.]" Mot. at 6; SAC ¶ 84(b).
Court previously dismissed plaintiffs' breach of contract
claim to the extent that the claim was premised on an
identical allegation in the FAC. Dkt. 37 at 16. Here, the SAC
alleges that "any change in the Monthly Deduction Rates
must be based on changes to Transamerica's expectations
as to future cost factors, such as mortality, expenses,
interest, persistency, and . . . taxes." SAC
¶ 13 (emphasis added). The two representative policies
that plaintiffs attach to the SAC also include language
expressly permitting Transamerica to consider
"interest" when setting MDRs. See Dkt.
40-2, Exhibit 2 ("Diamond Doe Policy") at 58
("Any Change in the Monthly Deduction Rates will be
prospective and will be subject to our expectations as to
future cost factors. Such cost factors may include, but are
not limited to: mortality; expenses; interest
persistency; and any applicable federal, state and local
taxes.") (emphasis added); Dkt 40-4, Exhibit 4
("Cook Street Doe Policy") at 95 (same). As the
Court indicated in its previous order dismissing this claim,
the Court has already determined, in other cases involving
Transamerica's MDR increases, that this contractual
language cannot give rise to a breach of contract claim
because the language provides that Transamerica can
consider its interest obligations while setting MDRs. See
Dkt. 37 at 16-17; Thompson, 2018 WL 6790561, at *8
(finding that plaintiff "has failed to state a claim for
liability [for breach of contract] based upon
Transamerica's alleged considerations of its interest
obligations in setting an MDR."); accord EFG Bank
AG, Cayman Branch v. Transamerica Life Ins. Co., No.
2:16-cv-08104-CAS-AJW, 2017 WL 3017596, at *7 (CD. Cal. July
10, 2017); Feller v. Transamerica Life Ins. Co., No.
2:16-cv-01378- CAS-AJW, 2016 WL 6602561, at *10 (CD. Cal.
Nov. 8, 2016). At least one other court has reached the same
conclusion. LSH CO v. Transamerica Life Ins.
Co., No. 2:18-cv-09711-SJO-KS, 2019 WL 3064422, at *8
(CD. Cal. Mar. 20, 2019) (finding that policy owners could
not state claim for breach of contract against Transamerica
based on Transamerica's alleged consideration of interest
in setting MDRs because the policies "are not reasonably
susceptible to [the policy owners'] interpretation of the
concede they have not included any additional allegations in
the SAC in support of this claim that differ from those in
the FAC. See Opp. at 3 n.1 ("Plaintiffs
realleged their claim that Transamerica breached the express
terms of the Policies by increasing MDRs in an attempt to
circumvent the guaranteed minimum interest rate to preserve
the claim for appeal."). Accordingly, the Court