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James Erickson Family Partnership LLLP v. Transamerica Life Insurance Co.

United States District Court, D. Arizona

September 25, 2019

James Erickson Family Partnership LLLP, Plaintiff,
v.
Transamerica Life Insurance Company, Defendant.

          ORDER

          DOMINIC W. LANZA UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         Pending before the Court is Defendant Transamerica Life Insurance Company’s (“Transamerica”) motion to dismiss Plaintiff James Erickson Family Partnership LLLP’s (“Erickson”) second amended complaint (“SAC”). (Doc. 24.) For the following reasons, the Court grants in part and denies in part Transamerica’s motion.

         BACKGROUND

         I. Procedural History

         On September 4, 2018, Erickson commenced this action by filing a complaint in Maricopa County Superior Court. (Doc. 7 ¶ 2.) Erickson never served this version of the complaint. (Id.)

         On November 15, 2018, Erickson filed an amended complaint in Maricopa County Superior Court and soon thereafter served Transamerica with the amended complaint. (Id.; Doc. 7-6.) The amended complaint asserted three state-law claims: (1) violation of the Arizona Consumer Fraud Act (“ACFA”), (2) negligent misrepresentation, and (3) breach of contract.

         On December 10, 2018, Transamerica filed a notice of removal in this Court. (Doc. 7.)[1]

         On January 16, 2019, Transamerica filed a motion to dismiss the amended complaint. (Doc. 15.)

         On April 19, 2019, the Court granted in part and denied in part the motion, dismissing without prejudice Erickson’s ACFA and negligent misrepresentation claims. (Doc. 21.) The Court found that “Erickson ha[d] not satisfied the pleading requirements of Rule 9(b) with respect to its ACFA claim” because “[t]he complaint leaves Transamerica and the Court guessing as to the what, when, where, and how of the misconduct alleged.” (Id. at 7.) The Court further found that “[a]s with the ACFA claim, Erickson’s misrepresentation claim fails under Rule 9(b)-Erickson does not identify the particular materials that were misleading or false or explain what exactly was misleading or false about the various materials.” (Id. at 9.)

         On May 2, 2019, Erickson filed the SAC. (Doc. 23.) The SAC asserts the same three state-law claims and adds claims for breach of the implied duty of good faith and fair dealing and rescission.

         On May 16, 2019, Transamerica moved to dismiss the SAC. (Doc. 24.)

         II. Allegations

         In a nutshell, the SAC alleges that Erickson purchased a $1 million life insurance policy from Transamerica in July 2006 to insure the life of James Erickson. (Doc. 23 ¶¶ 1-3, 17; Doc. 23-1.) The SAC generally alleges that Transamerica made various false and misleading representations and omissions in connection with advertising the policy and in the policy itself, both before Erickson purchased the policy and during the life of the policy. The SAC contains allegations relating to several materials provided to Erickson by Transamerica, including “annual illustrations” (Doc. 23 ¶¶ 23-24), “annual updates” (id. ¶ 25), “annualized illustrations” (id. ¶¶ 27, 29), “policy illustrations” (id. ¶¶ 31, 43-45), an “initial policy illustration” (id. ¶ 38), “pricing models” (id. ¶ 71), “accumulated balance value projections” (id.), “annualized premium outlay projections” (id.), a “prospectus” (id. ¶ 74), and “prospective and in force illustrations” (id. ¶ 106). More specifically, the SAC alleges that Erickson relied on the 2006 policy illustration in purchasing the policy and that this illustration was misleading because it failed to indicate the illustrated premiums were “unsustainable” and would ultimately be “exorbitant[ly]” increased. (Id. ¶¶ 39, 90, 95, 101.) The SAC further alleges that annualized premiums remained around $62, 000 from 2006 at least until April 2014 and then increased to $208, 956 in August 2017. (Id. ¶¶ 46-50.) Although the SAC does not allege whether Erickson made the $208, 956 premium payment, it does allege that Erickson paid an increased monthly premium of $16, 000 in November 2018 and has made this same payment monthly thereafter. (Id. ¶¶ 53-54.)

         LEGAL STANDARDS

         I. Rule 12(b)(6)

         “[T]o survive a motion to dismiss, a party must allege ‘sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” In re Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “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.” Id. (quoting Iqbal, 556 U.S. at 678). “[A]ll well-pleaded allegations of material fact in the complaint are accepted as true and are construed in the light most favorable to the non-moving party.” Id. at 1144-45 (citation omitted). However, the court need not accept legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 679-80. Moreover, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 679. The court also may dismiss due to “a lack of a cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) (citation omitted).

         II. Rule 9(b)

         Transamerica asserts, and Erickson does not seem to dispute, that claims under the ACFA and for negligent misrepresentation are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). See, e.g., In re Banner Health Data Breach Litig., 2017 WL 6763548, *6 (D. Ariz. 2017) (“Claims arising under the ACFA pertain to fraud and are thus subject to the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure.”); Estrada v. Capella Univ., Inc., 2018 WL 1428155, *2 (D. Ariz. 2018) (“Claims for negligent misrepresentation must meet the particularity requirements of Rule 9(b).”) (citation and internal quotation marks omitted). See also Sweeney v. Darricarrere, 2009 WL 2132696, *12 n.109 (D. Ariz. 2009) (“Although the Ninth Circuit has suggested that negligent misrepresentation may be a non-fraudulent averment, [m]ost district courts within the Ninth Circuit have held that a [negligent misrepresentation claim is subject to the] heightened pleading requirements of Rule 9(b).”) (citations and internal quotation marks omitted).

         Rule 9(b) requires a plaintiff to “state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “To satisfy Rule 9(b), a pleading must identify ‘the who, what, when, where, and how of the misconduct charged, ’ as well as ‘what is false or misleading about [the purportedly fraudulent] statement, and why it is false.’” United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (citation omitted); see also Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986) (noting that under Rule 9(b), the plaintiff “must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation”). “[T]he circumstances constituting the alleged fraud [must] be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citations and internal quotation marks omitted). Importantly, however, “[a] plaintiff in a fraud-by-omission suit faces a slightly more relaxed burden, due to the fraud-by-omission plaintiff’s inherent inability to specify the time, place, and specific content of an omission in quite as precise a manner.” In re Banner Health Data Breach Litig., 2017 WL 6763548 at *7 (citations omitted).

         III. Evidence Outside the Pleadings

         Ordinarily, if a district court considers evidence outside the pleadings in ruling on a motion to dismiss, it must convert the motion into a motion for summary judgment and give the nonmovant an opportunity to respond. United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). A district court may, however, consider “[c]ertain written instruments attached to pleadings” in ruling on a motion to dismiss. Id. at 908. Additionally, “[e]ven if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff’s claim.” Id. The plaintiff need “not explicitly allege the contents of that document in the complaint” for the court to consider it, as long as the “plaintiff’s claim depends on the contents of [the] document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). “[T]he district court may treat such a document as part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6).” Ritchie, 342 F.3d at 908.

         A. Erickson’s Exhibits

         Erickson attached twelve exhibits to its SAC. The Court may consider these exhibits in ruling on the motion to dismiss.

         B. Transamerica’s Exhibits

         Transamerica argues the Court should consider two exhibits it attached to its motion to dismiss. Transamerica also attached a declaration of a Transamerica “LifePro Customer Care Supervisor” authenticating the two exhibits. (Doc. 24-1.) Exhibit A (Doc. 24-2) is a “complete version” of the sale illustration Erickson attached as Exhibit 2 (Doc. 23-2) to the SAC (Doc. 24 at 6 n.1). Exhibit B (Doc. 24-3) seems to be a complete version of the annual statement Erickson attached as Exhibit 9 (Doc. 23-9) to the SAC (Doc. 24 at 9). Because Erickson does not dispute the authenticity of the two exhibits, and they appear to be what Transamerica claims they are-more complete versions of documents Erickson attached to the SAC-the Court may consider Transamerica’s exhibits in ruling on the motion.

         ANALYSIS

         I. ACFA

         Transamerica moves to dismiss the ACFA claim on four grounds: (1) “[Erickson] expressly sues only for conduct beginning in 2015”; (2) “the alleged increase never happened”; (3) the claim “is time-barred”; and (4) the claim “was not pleaded ...


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