Bernier v. Travelers Prop. Cas. Ins. Co., Case No.: 17cv1028-MMA (BLM)

• Decision Date: 29 November 2017
• Docket Number: Case No.: 17cv1028-MMA (BLM)
• Court: U.S. District Court — Southern District of California
• Parties: REJEANNE BERNIER and HANS CROTEAU, Plaintiffs, v. TRAVELERS PROPERTY CASUALTY INSURANCE COMPANY, et al., Defendants.

REJEANNE BERNIER and HANS CROTEAU, Plaintiffs,
v.
TRAVELERS PROPERTY CASUALTY INSURANCE COMPANY, et al., Defendants.

Case No.: 17cv1028-MMA (BLM)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

November 29, 2017

ORDER:

GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS; AND

Doc. No. 3

GRANTING DEFENDANT'S MOTION RE: VEXATIOUS LITIGANTS

Doc. No. 4

On May 18, 2017, Plaintiffs Rejeanne Bernier ("Bernier") and Hans Croteau ("Hans"), proceeding pro se, commenced this action by filing a complaint for breach of contract and breach of the covenant of good faith and fair dealing. Doc. No. 1 ("Compl."). The matters presently before the Court are Defendant Travelers Property Casualty Insurance Company's ("Travelers") "Motion to Dismiss Under FRCP 12(b)(6)" [Doc. No. 3-1 ("MTD")], and "Motion to Require Vexatious Litigant Plaintiffs to Obtain Court's Permission for Further Filing or Post Security" [Doc. No. 4-1 ("Vex. Mtn")].

Page 2

Plaintiffs opposed both motions [Doc. No. 9 ("MTD Oppo."); Doc. No. 7 ("Vex. Oppo.")], and Travelers replied [Doc. No. 8 ("MTD Reply"); Doc. No. 10 ("Vex. Reply")]. The Court took the matters under submission on the papers and without oral argument pursuant to Civil Local Rule 7.1.d.1. Doc. No. 11. For the reasons stated herein, the Court GRANTS IN PART AND DENIES IN PART Travelers' motion to dismiss [Doc. No. 3] and GRANTS Travelers' motion re: vexatious litigants [Doc. No. 4].

JUDICIAL NOTICE

Travelers requests the Court judicially notice 57 documents in support of its vexatious litigant motion and 7 documents in support of its motion to dismiss. See Doc. Nos. 4-3 ("Requests for Judicial Notice"), 3-2. All 7 of the documents in support of the motion to dismiss and 56 of the documents in support of the vexatious litigant motion are court filings. See Requests for Judicial Notice, Exhibits 1-55; Doc No. 3-2, Exhibits 1-7. The remaining documents include a settlement agreement for case no. 37-2011-00091919 ("case 91919") between Jessie Croteau ("Jessie"), ICS Professional Services, Inc. ("ICS"), and Travelers, and correspondence from Hans and Bernier regarding the proposed settlement of case 91919 and demand to act pro se. Requests for Judicial Notice, Exhibits 56-57. Plaintiffs also request the Court judicially notice 30 documents in support of their opposition to the motion to dismiss, which also consists of court filings. See Doc. Nos. 7 at 33-38.

In determining the propriety of a Rule 12(b)(6) dismissal, courts generally may not look beyond the complaint for additional facts. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "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." Id.; see also Fed. R. Evid. 201; Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002). "[E]ven if a document is not attached to

Page 3

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." Ritchie, 342 F.3d at 908 (internal citations omitted). A court "may consider a document the authenticity of which is not contested, and upon which the plaintiff's complaint necessarily relies." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998), superseded by statute on other grounds in Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir. 2006); Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). The Court may also judicially notice court filings in other tribunals and other matters of public record. Fed. R. Evid. 201; Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006); Biggs v. Terhune, 334 F.3d 910, 916 n.3 (9th Cir. 2003).

The complaint relies on and references the settlement agreement in case 91919 (Requests for Judicial Notice, Exhibit 56) and Plaintiffs' correspondence demanding they be permitted to act pro se (Requests for Judicial notice, Exhibit 57). Therefore, they are appropriate for incorporation by reference. See Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1159-61 (9th Cir. 2012). Additionally, the court filings are appropriate for judicial notice. See Reyn's Pasta Bella, LLC, 442 F.3d at 746 n.6; Biggs, 334 F.3d at 916 n.3. However, Travelers requests that the Court judicially notice some of the documents in both its request in support of the vexatious litigant motion and its request in support of the motion to dismiss. Additionally, Plaintiffs request the Court judicially notice some of the same documents as Travelers. Further, Plaintiffs do not attach Exhibits 23 through 30 to either of their oppositions.

As such, the Court GRANTS Travelers' request to judicially notice Exhibits 1-12, 14, and 16-57 attached in support of Travelers' vexatious litigant motion and Exhibits 2, 4, and 7 attached in support of Travelers' motion to dismiss, and DENIES AS MOOT Exhibits 13 and 15 attached in support of Travelers' vexatious litigant motion and Exhibits 1, 3, and 5-6 attached in support of Travelers' motion to dismiss. Additionally, the Court GRANTS Plaintiffs' request to judicially notice Exhibits 2-5, 7-8, 11-12, 15-

Page 4

19, and 21-22, DENIES AS MOOT Exhibits 1, 6, 9-10, 13-14, and 20, and DENIES Exhibits 23-30.

MOTION TO DISMISS

Travelers moves to dismiss portions of Plaintiffs' complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 8(a).¹ See MTD. Travelers argues that some of Plaintiffs' claims are barred by res judicata and that one claim fails to state a claim. See id. Plaintiffs oppose the motion. See MTD Oppo.

1. Relevant Background²

In 2004, Travelers issued a homeowners insurance policy ("Policy") to Bernier, which Travelers renewed annually until it cancelled the policy in 2011. Compl. ¶ 8. Hans resided in Bernier's home and was a beneficiary of the Policy. Id.

On August 26, 2007, Bernier filed a claim with Travelers for damage to her home caused by an unexpected rainstorm that struck after Jessie and ICS (Jessie's construction company) removed the roof. Compl. ¶ 31. Travelers' claim notes state that it needed to investigate conflicting claims between Jessie and Bernier, but Bernier alleges that Travelers instead closed her insurance claim without compensating her or defending her against Jessie and ICS in a related construction lawsuit. Id.

On May 26, 2011, Attorney Patrick Howe, on behalf of Jessie and ICS, filed a lawsuit against Plaintiffs for malicious prosecution in case 91919. Compl. ¶¶ 9, 31. Pursuant to the Policy, Travelers defended Plaintiffs under a complete reservation of rights, but did not indemnify Plaintiffs against the malicious prosecution claim. Compl. ¶¶ 10, 33.

Page 5

In September 2012, Bernier filed for bankruptcy, which stayed case 91919. Compl. ¶ 11. Unbeknownst to Plaintiffs, Travelers negotiated a $325,000 settlement with Jessie, ICS, and their attorney in October 2012. Compl. ¶12. When Plaintiffs learned of the settlement, they informed Travelers a conflict had arisen and demanded to substitute Travelers' appointed attorneys so that Plaintiffs could proceed pro se. Compl. ¶ 13. Travelers denied Plaintiffs' requests to proceed pro se and claimed that the Policy permitted Travelers to settle any claim it deemed appropriate. Compl. ¶ 14.

Jessie and ICS subsequently moved for relief from Bernier's bankruptcy stay to consummate the settlement with Travelers. Compl. ¶ 16. The bankruptcy court granted their relief and gave Bernier notice of her right to file suit regarding the negotiation and execution of the settlement in state court. Id. Bernier appealed the bankruptcy court's order to the Ninth Circuit Bankruptcy Appellate Panel. Id. While the appeal was pending on December 24, 2012, Travelers executed the settlement, which listed Plaintiffs as third party beneficiaries. Compl. ¶¶ 17, 18. Thereafter, the Ninth Circuit Bankruptcy Appellate Panel dismissed Bernier's appeal as moot. Compl. ¶ 18.

On July 22, 2013, Plaintiffs filed a complaint for breach of contract, bad faith, and declaratory relief through their attorneys, Glenn Rosen and the Rosen Law Firm, against Travelers in state court, case no. 37-2013-58680-CU-BC-CTL ("case 58680"), seeking damages caused by Travelers' refusal to relinquish control of Plaintiffs' defenses and execution of the settlement in case 91919. Compl. ¶¶ 19, 41. On May 20, 2015, the state court dismissed case 58680 with prejudice for Plaintiffs' failure to each post $50,000 in order to maintain their lawsuit. Compl. ¶ 20. Plaintiffs appealed the state court's dismissal order and the appellate court dismissed the appeal. Compl. ¶ 21.

On February 16, 2017, Plaintiffs were each served with deposition subpoenas in San Diego Superior Court case no. 37-2015-38886-CU-NP-CTL ("case 38886"), a malicious prosecution case filed by Jessie and ICS against Plaintiffs' attorneys for their representation of Plaintiffs in case 58680 and case 91919. Compl. ¶ 22. Jessie and ICS

Page 6

allege they successfully sued Plaintiffs in case 91919. Compl. ¶ 23. Plaintiffs allege case 38886 violates case 91919's settlement. Compl. ¶ 23.

Plaintiffs filed a claim with Travelers for an attorney and for damages from Mr. Howe's deposition subpoenas in case 38886. Compl. ¶ 24. Travelers denied the claim on the grounds that Plaintiffs were not named directly in the lawsuit and because the allegations were filed after Travelers cancelled the Policy in 2011. Id. Additionally, Travelers did not respond to Plaintiffs' claim of damages caused by violating case 91919's settlement. Id.

On April 14, 2017, Plaintiffs lodged with Travelers "voluminous documents" Plaintiffs had filed in case 38886 and requested Travelers review the documents and protect Plaintiffs' rights. Compl. ¶ 25. On...