Advanced Risk Managers v. Equinox Mgmt. Grp.

• Decision Date: 10 December 2019
• Docket Number: Case No. 19-cv-03532-DMR
• Court: U.S. District Court — Northern District of California
• Parties: ADVANCED RISK MANAGERS, LLC, Plaintiff, v. EQUINOX MANAGEMENT GROUP, INC., Defendant.

ADVANCED RISK MANAGERS, LLC, Plaintiff,
v.
EQUINOX MANAGEMENT GROUP, INC., Defendant.

Case No. 19-cv-03532-DMR

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

December 10, 2019

ORDER ON DEFENDANT'S MOTION TO DISMISS

Re: Dkt. No. 15

Defendant Equinox Management Group, Inc. ("Equinox") moves to dismiss Plaintiff Advanced Risk Managers, LLC's ("ARM") complaint. [Docket No. 15.] This motion is suitable for determination without oral argument. Civil L.R. 7-1(b). The December 19, 2019 hearing is vacated. Having considered the parties' submissions, Defendant's motion is denied for the following reasons.

I. BACKGROUND

ARM makes the following allegations in the complaint, all of which are taken as true for purposes of this motion.¹ ARM is an insurance consulting firm based in San Francisco. It "reviews and evaluates insurance companies' business processes and audits their claims handling to identify cost savings for those companies." ARM's member is Mimi Choi, a California citizen. Equinox is an insurance company based in New Jersey. Compl. ¶¶ 4, 5, 8, 9.

In September 2015, ARM and Equinox entered into an agreement by which ARM agreed to provide certain consulting services for Equinox (the "agreement"). Id. at ¶ 10, Ex. A

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(Agreement). These services included "manag[ing] certain catastrophic claims notifications, provid[ing] ongoing claims reserves evaluation, and perform[ing] large claims integrity review and negotiation, including identifying overbilling and potential billing errors, to maximize claims saving and cost utilization." Id. at ¶ 11. Under the agreement, Equinox agreed to pay ARM "28% of net claims savings when the review was used to facilitate post-payment adjudication, settlement or resolution of a claim." The parties agreed that ARM would bill Equinox for other services at $195 per hour. Id.

ARM performed the services under the agreement, including auditing 37 claims to identify overbilling and potential billing errors. ARM alleges that its audit "created savings in the amount of $8,812,123.71 for Equinox"; accordingly, "the potential net saving fees that Equinox owes to ARM is $2,467,394.64, which is 28% of the validated savings created by ARM's audit." Id. at ¶ 13. In November 2018, after completing its services under the agreement, "ARM contacted Equinox and requested that it provide the amount of net savings it achieved from using the audit of claims performed by ARM," in order for ARM calculate its fee rate of 28% of net savings and invoice Equinox. However, despite repeated requests, Equinox has refused to provide that information, thereby preventing ARM from calculating the amount it is owed. Id. at ¶¶ 14, 15.

On January 23, 2019, Equinox's attorney sent a letter to ARM's attorney noting Equinox's receipt of ARM's request for information "regarding the 'final outcome' for claims for which ARM provided its consulting services" under the parties' agreement in order for ARM to invoice Equinox. In the letter, counsel for Equinox states its position that ARM released Equinox from all claims that existed as of October 17, 2018, the effective date of a release agreement between Equinox, ARM, and third party Renaissance Reinsurance US Inc. ("Renaissance"). Id. at ¶¶ 16-17, Ex. B (Jan. 23, 2019 Letter). Counsel for Equinox wrote,

[t]he Release Agreement between Equinox, Renaissance, ARM and Mimi Choi, which was effective October 17, 2018, released Equinox from all of ARM's claims that existed as of that date, including any claims of which ARM was unaware. . . . All of the claims on your client's spreadsheet pre-date the Release Agreement, and, thus, they were released and discharged by it. Those claims could not provide a basis for any additional invoices from ARM to Equinox, and ARM has no need for the information it has requested.

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Accordingly, Equinox will not provide any information that it may have.

Jan. 23, 2019 Letter.

ARM disagrees with this assessment. It alleges that the release agreement that counsel cited in the January 23, 2019 letter involved a lawsuit by ARM against Renaissance for breach of an agreement between ARM and Renaissance "and had nothing to do with the Agreement between ARM and Equinox that is the subject of the present lawsuit." Id. at ¶ 18. According to ARM, its "present claims did not exist as of the effective date of the Release Agreement, and the parties did not intend for the Release Agreement to release and discharge any future claims that may arise out of the separate Agreement between ARM and Equinox that is the subject of this lawsuit." Id. at ¶ 18.

ARM filed the complaint on June 19, 2019, alleging four claims for relief against Equinox: 1) breach of the agreement between ARM and Equinox; 2) anticipatory breach of contract; 3) breach of the implied covenant of good faith and fair dealing; and 4) declaratory relief.

Equinox now moves to dismiss. It asks the court to consider certain materials outside the complaint, including the release agreement between Equinox, ARM, and Renaissance, and argues, among other things, that the materials show that ARM's claims in this lawsuit "fall squarely within the broad terms of the" release. Mot. 1.

II. REQUESTS FOR JUDICIAL NOTICE AND INCORPORATION BY REFERENCE

In connection with its motion, Equinox asks the court to consider two documents under the incorporation by reference doctrine and to take judicial notice of eight documents. [Docket No. 14 (Request for Judicial Notice, "RJN").] ARM opposes the request in its entirety. [Docket No. 23.] As an initial matter, the court notes that the parties filed separate briefs regarding Equinox's request for judicial notice. Specifically, ARM filed a four-page opposition to the request along with its ten-page substantive opposition to the motion to dismiss. [Docket Nos. 21, 23.] Equinox filed an eight-page reply to ARM's opposition to the request for judicial notice in addition to its 13-page reply to ARM's opposition to the motion to dismiss. [Docket No. 26, 27.] These briefs violate Civil Local Rule 7-3, which provides that opposition briefs may not exceed 25 pages of text and reply briefs may not exceed 15 pages of text, and that "[a]ny evidentiary and procedural

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objections to the motion [or opposition] must be contained in the brief or memorandum." Civ. L.R. 7-3(a), (c). The court will consider ARM's opposition to the request for judicial notice, because if its opposition brief had contained its objections, it would have stayed within the page limits. It declines to consider Equinox's eight-page reply brief in support of its request for judicial notice, which was filed in addition to a 13-page reply brief and takes Equinox's reply briefing well over the 15-page limit

A. Legal Standard

A district court generally may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion. Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994). If "matters outside the pleading are presented to and not excluded by the court," the court must treat the motion as a Rule 56 motion for summary judgment. See Fed. R. Civ. P. 12(d). "A court may, however, consider certain materials—documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "Both of these procedures permit district courts to consider materials outside a complaint, but each does so for different reasons and in different ways." Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). The Ninth Circuit recently cautioned courts about the appropriate use of judicial notice and the incorporation by reference doctrine when ruling on Rule 12(b)(6) motions:

The overuse and improper application of judicial notice and the incorporation-by-reference doctrine . . . can lead to unintended and harmful results. Defendants face an alluring temptation to pile on numerous documents to their motions to dismiss to undermine the complaint, and hopefully dismiss the case at an early stage. Yet the unscrupulous use of extrinsic documents to resolve competing theories against the complaint risks premature dismissals of plausible claims that may turn out to be valid after discovery. . . . If defendants are permitted to present their own version of the facts at the pleading stage—and district courts accept those facts as uncontroverted and true—it becomes near impossible for even the most aggrieved plaintiff to demonstrate a sufficiently "plausible" claim for relief. Such undermining of the usual pleading

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