United States District Court, D. Arizona
ORDER
G.
MURRY SNOW, CHIEF UNITED STATES DISTRICT JUDGE
Pending
before the Court is Defendant State Farm Fire and Casualty
Company's (“Defendant's”) Motion to
Dismiss Counts III and IV of Plaintiffs' First Amended
Class Action Complaint. (Doc. 7.) The Motion is
denied.[1]
BACKGROUND
The
facts alleged in the complaint are as follows. Defendant is
an Illinois corporation engaged in the business of insurance
in Arizona. Defendant contracts with Xactware, a company that
sells a structural damage estimate program, to adjust
residential and commercial property loss claims.
Xactware's estimating tool has two different databases: a
restoration database and a new construction database. The new
construction database is used when property damage is so
extensive that a ground up rebuild is required, while the
restoration database is used when property damage requires
renovation or repairs, but not a ground up reconstruction.
Because it includes efficiencies in labor cost associated
with ground up construction, the new construction database
produces a lower cost estimate than the restoration data base
would produce for the same scope of work. Defendant selects
which of the two databases to use when adjusting a claim.
On
December 6, 2015, a fire occurred at the home of Plaintiffs
Anderson and Jasmine Phillips (“Plaintiffs”),
causing considerable damage to the home and Plaintiffs'
personal property. Plaintiffs timely submitted a claim to
Defendant for their loss and performed their obligations and
responsibilities under their insurance policy with respect to
the claim. On December 14, 2015, Defendant inspected
Plaintiffs' home and personal property. Defendant
subsequently estimated Plaintiffs' repair costs at $153,
759.64. Plaintiffs also retained the services of a public
adjuster, Skipton & Associates, Inc. (“SAI”).
SAI inspected Plaintiffs' home and personal property on
December 28, 2015 and submitted a repair cost estimate of
$203, 114.69. Defendant refused to pay the higher amount
estimated by SAI.
Plaintiffs
filed suit in Maricopa County Superior Court on September 30,
2016 alleging breach of insurance contract and tortious bad
faith. While that complaint did not assert a class action
theory, it alleged that Defendant had underpaid
Plaintiffs' claim by approximately $50, 000. On June 3,
2019, after the court granted leave over Defendant's
opposition, Plaintiffs filed their amended complaint,
asserting a class action and adding claims for unjust
enrichment (Count III) and statutory insurance fraud under
A.R.S. § 20-443 (Count IV). Plaintiffs allege Defendant
used Xactware's new construction database on claims that
did not require a ground up rebuild, including
Plaintiffs' claim. Plaintiff further alleges that as a
result, Defendant knowingly and intentionally underpaid on
replacement cost claims to the detriment of Plaintiffs and
other insured parties. Pursuant to the Class Action Fairness
Act and 28 U.S.C. §§ 1332(d), 1441, 1446, and
1453(a)-(b), Defendant removed the case to this Court on July
1, 2019. On July 8, 2019, Defendant filed this Motion to
Dismiss.
DISCUSSION
I.
Legal Standard
To
survive dismissal for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6), a complaint must
contain factual allegations sufficient to “raise the
right of relief above the speculative level.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). While
“a complaint need not contain detailed factual
allegations . . . it must plead ‘enough facts to state
a claim to relief that is plausible on its face.'”
Clemens v. DaimlerChrysler Corp., 534 F.3d 1017,
1022 (9th Cir. 2008) (quoting Twombly, 550 U.S. at
570). When analyzing a complaint for failure to state a
claim, “allegations of material fact are taken as true
and construed in the light most favorable to the non-moving
party.” Smith v. Jackson, 84 F.3d 1213, 1217
(9th Cir. 1996). However, “the tenet that a court must
accept a complaint's allegations as true is inapplicable
to threadbare recitals of a cause of action's elements,
supported by mere conclusory statements.”
Iqbal, 556 U.S. at 678. Legal conclusions couched as
factual allegations are not given a presumption of
truthfulness, and “conclusory allegations of law and
unwarranted inferences are not sufficient to defeat a motion
to dismiss.” Pareto v. F.D.I.C., 139 F.3d 696,
699 (9th Cir. 1998).
II.
Analysis
A.
Count III: Unjust Enrichment
Plaintiffs
argue that they and each member of the putative class
conferred a direct benefit on Defendant through payments for
property insurance, and that Defendant unjustly enriched
itself by using new construction costs to calculate
renovation losses. Defendant argues that this claim must be
dismissed because the parties' dispute is governed by
contract (insurance policies) and Counts I and II of the
complaint already allege claims arising out of the alleged
breach of that contract.
To
state a claim for unjust enrichment in Arizona, a plaintiff
must prove, among other elements, the absence of a remedy at
law.[2]
Stratton v. Am. Med. Sec., Inc., 266 F.R.D. 340,
353-54 (D. Ariz. 2009). Defendant therefore argues that
Plaintiffs cannot recover on an unjust enrichment claim
because they have “a relationship with the defendant []
governed by a valid express contract, ” Sutter Home
Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401,
408 (9th Cir. 1992), and can recover through breach of
contract remedies. Plaintiffs do not dispute that they and
all putative class members have valid commercial or
residential property insurance policies with Defendant.
However, they argue that their unjust enrichment claim should
proceed regardless under the theory of opportunistic breach
described in Restatement (Third) of Restitution and Unjust
Enrichment, § 39. Opportunistic breach provides that
where “a deliberate breach of contract results in
profit to the defaulting promisor and the available damage
remedy affords inadequate protection to the promisee's
contractual entitlement, the promisee has a claim to
restitution of the profit realized by the promisor as a
result of the breach.” Restatement (Third) of
Restitution and Unjust Enrichment, § 39, 2011.
Plaintiffs fail to cite a single case in which an Arizona
court has adopted this section of the Third Restatement. Nor
has the Supreme Court “[]ever before relied on §
39 nor adopted its proposed theory of disgorgement.”
Kansas v. Nebraska, 574 U.S. 445, 135 (2015)
(Thomas, J, concurring in part and dissenting in part)
(describing § 39 as a “novel extension” of
restitution principles that “lacks support in the
law” upon which “few courts have ever
relied”). “The sheer novelty of this proposed
remedy counsels against applying it here, ”
id., and Plaintiffs cannot rely on this theory to
support their claim.
Plaintiffs
next argue that the “mere existence of a contract
governing the dispute does not automatically invalidate an
unjust enrichment alternative theory of recovery, ”
Adelman v. Christy, 90 F.Supp.2d 1034, 1045 (D.
Ariz. 2000), because a “theory of unjust enrichment is
unavailable only if a plaintiff has already received the
benefit of her contractual bargain, ” In re Banner
Health Data Breach Litig., No. CV-16-02696-PHX-SRB, 2017
WL 6763548, at *6 (D. Ariz. Dec. 20, 2017). Plaintiffs assert
that unjust enrichment is applicable here because they did
not receive the benefits promised in their contract with
Defendant: “Plaintiffs (and the other ...