United States District Court, D. Arizona
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 ...