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Rand v. Midland National Life Insurance

United States District Court, C.D. California

December 26, 2019

GARY RAND; GARY RAND AS TRUSTEE OF THE RAND 1992 IRREVOCABLE TRUST; SUZANNE E. RAND-LEWIS; SUZANNE E. RAND-LEWIS AS TRUSTEE OF THE SUZANNE E. RAND-LEWIS FAMILY TRUST DATED AUGUST 17, 1993; LESLIE B. RAND-LUBY; LESLIE B. RAND-LUBY AS TRUSTEE OF THE LESLIE B. RAND-LUBY LIVING TRUST DATED NOVEMBER 10, 1995, Plaintiffs,
v.
MIDLAND NATIONAL LIFE INSURANCE; MICHAEL L. KELLY; and DOES 1 through 100, Defendants.

          ORDER RE: DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' FAC [45, 46]

          HONORABLE RONALD S.W. LEW SENIOR U.S. DISTRICT JUDGE.

         Currently before the Court is Defendants Midland National Life Insurance (“MNLI”) and Michael L. Kelly's (“Kelly”) (collectively, “Defendants”) Motion to Dismiss (“Motion”) [45, 46] Plaintiffs Gary Rand; Gary Rand as Trustee of the Rand 1992 Irrevocable Trust; Suzanne E. Rand-Lewis; Suzanne E. Rand-Lewis as Trustee of the Suzanne E. Rand-Lewis Family Trust; Leslie B. Rand-Luby; and Leslie B. Rand-Luby as Trustee of the Leslie B. Rand-Luby Living Trust's (collectively, “Plaintiffs”) First Amended Complaint [41]. Having reviewed all papers submitted pertaining to the Motion, the Court NOW FINDS AND RULES AS FOLLOWS: GRANTS Defendants' Motion to Dismiss WITHOUT LEAVE TO AMEND.

         I. BACKGROUND

         A. Factual Background

         Plaintiffs are all residents of Los Angeles, California, and insureds, owners, and beneficiaries of the Policy.[1] FAC. ¶ 1, ECF No. 41. Rand purchased the Policy in the early 1980s. Id. ¶ 35. Defendant MNLI was Plaintiffs' insurer and Defendant Kelly was the former Regional Sales Director at MNLI. Pls.' Mot. to Remand at 3:18-19, ECF No. 27; see also Defs.' Notice of Removal at 3:7-8, ECF No. 1.

         Plaintiffs assert that the Policy had set premium costs, with costs to be calculated monthly by a set formula. FAC. ¶ 42. Plaintiffs allege that rather than using the set formula, Defendant MNLI increased costs based on an undisclosed formula to get Plaintiffs to relinquish the Policy. Id. ¶¶ 42, 44.

         Beginning in April 2012, Rand began asking Defendant MLNI for an accounting and other information concerning the increasing premium costs.[2] See Declaration of Nick Nelson in Support of Removal (“Nelson Decl.”), ECF No. 6; FAC ¶¶ 11-12. In his May 1, 2012 letter to Defendant MLNI, Rand indicated that there was “a major question as to how you have determined premium which is being paid under protest, expenses, interest earned, and policy value.” Nelson Decl., Ex. 7. Then, in a letter to Defendant MLNI on June 6, 2012, Rand noted, among other things, that the “premium paid is excessive and has been.” Id. In his letter to Defendant MLNI on August 22, 2102, Rand demanded that MLNI “immediately rectify the situation by abiding by the terms and conditions” of the Policy, “refund[ing] any and all over-payments, ” and restoring the “cash value to the proper amount.” Id., Ex. 10.

         Three years later, beginning in February 2016, Rand again sent letters to Defendant MLNI, this time eventually threatening litigation. See id., Exs. 12 - 31 (Rand letters from February 26, 2016-December 5, 2016);; id., Ex. 12 (“In fact, the continued policy increases are improper.”); id., Ex. 16, May 24, 2016 Letter (“We will be filing an action for declaratory relief and damages, as I have received no response to numerous requests.”).

         Defendant MNLI provided vague responses to all of Rand's requests. FAC ¶¶ 11-12. Rand was allegedly referred to Defendant Kelly, who was also unhelpful. Id. ¶ 48. Plaintiffs claim Defendant Kelly was their insurance broker. Pls.' Mot. to Remand at 3:18-19. Meanwhile, Defendants assert that Defendant Kelly was never associated with the Policy. Defs.' Notice of Removal ¶ 24; see generally Declaration of Michael L. Kelly in Support of Removal (“Kelly Decl.”), ECF No. 3; Declaration of Kristina Seekings in Support of Removal (“Seekings Decl.”), ECF No. 5; Declaration of Holly Johnson in Support of Removal (“Johnson Decl.”), ECF No. 4; Nelson Decl.

         Subsequently in 2017, Defendant MNLI charged Rand a premium payment of $28, 708.19 to continue the Policy. See FAC. ¶ 44. Rand contested the amount, as he had already allegedly paid over one million dollars in premiums over the life of the Policy. Id. Further, Plaintiffs contend that when Rand offered a different premium payment, Defendant MNLI improperly refused. Id. ¶ 45. Consequently, Defendant MNLI claimed the Policy lapsed. Id. ¶ 53.

         On April 15, 2017, Defendant MNLI terminated the Policy and notified Rand of the termination by letter. Id. Plaintiffs allege that such termination was improper, contending that all owners of the Policy should have been notified.[3] Id. ¶ 24. As a result, Plaintiffs assert that the Policy remains in full effect. Id. ¶ 2.

         Plaintiffs further allege that to reinstate the Policy, Defendants claimed $28, 708.19 and required Rand to provide full medical underwriting, documentation, and release of health information. Id. ¶ 44. Plaintiffs assert that Defendants knew such requirements would prevent Rand from reinstating the Policy. Id. Plaintiffs now bring this Action requesting damages, an accounting, reinstatement of the Policy, and disgorgement of funds. FAC at 43-44.

         B. Procedural Background

         Plaintiffs filed the Complaint [1-1] in the Superior Court of the State of California, County of Los Angeles, on March 13, 2019, alleging breach of contract amongst other related claims.[4] Defendants removed this Action to this Court on April 22, 2019 [1].

         On August 6, 2019, the Court denied Plaintiffs' Motion to Remand [39].[5] Also on August 6, 2019, the Court granted Defendants' Motion to Dismiss.[6]Plaintiffs filed their First Amended Complaint (“FAC”) on August 28, 2019 [41]. On September 20, 2019, Defendant Kelly [45] and Defendant MNLI [46] filed the instant Motion. Plaintiffs opposed on October 22, 2019 [47]. Defendant MNLI timely replied [49], which Defendant Kelly joined [48].

         II. DISCUSSION

         A. Legal Standard

         Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of one or more claims if the pleading fails to state a claim upon which relief can be granted. A complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted). Dismissal is warranted for a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988) (citation omitted).

         In ruling on a 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). The question is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence to support the claims. Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). While a complaint need not contain detailed factual allegations, a plaintiff must provide more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, a complaint “should not be dismissed under Rule 12(b)(6) ‘unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'” Balistreri, 901 F.2d at 699 (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

         B. ...


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