Height St. Skilled Care v. Liberty Mut. Ins. Co.

• Docket Number: 1:21-cv-01247-JLT-BAK (BAM)
• Decision Date: 24 May 2022
• Parties: HEIGHT STREET SKILLED CARE, LLC, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts corporation; YOUNG & ASSOCIATES, INC., a California corporation; and DOES 1 to 20, inclusive, Defendants.
• Court: U.S. District Court — Eastern District of California

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HEIGHT STREET SKILLED CARE, LLC, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts corporation; YOUNG & ASSOCIATES, INC., a California corporation; and DOES 1 to 20, inclusive, Defendants.

No. 1:21-cv-01247-JLT-BAK (BAM)

United States District Court, E.D. California

May 24, 2022

ORDER GRANTING DEFENDANT YOUNG & ASSOCIATES INC.'S MOTION TO DISMISS (Doc. 9)

ORDER GRANTING LEAVE TO AMEND

Height Street Skilled Care, LLC alleges Young & Associates, Inc. engaged in unlawful, unfair, and/or fraudulent business practices in violation of Business & Professions Code § 17200, et seq. (Doc. 1.) Young seeks dismissal of Height Street's claim against it pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc 9.) Height Street opposes the motion, asserting its complaint is adequately pled. (See Doc. 11.) The Court finds the matter suitable for decision without oral argument pursuant to Local Rule 230(g) and General Order 618. For the reasons set forth below, Young's motion to dismiss Height Street's third cause of action as to Young is GRANTED, with leave to amend.

I. Background and Allegations

Height Street is a nursing home and skilled care operator located in Bakersfield, California. (Doc. 1 at 16.) Height Street alleges that it purchased a commercial property insurance policy underwritten by Liberty Mutual and covering the period of June 7, 2016, through June 7, 2017. (Id.) Height Street asserts that on or about September 17, 2016, one of its buildings suffered severe damage due to a major fire. (Id.) Height Street alleges it “promptly tendered the claim to Liberty Mutual and coverage was accepted.” (Id.)

Height Street asserts Liberty Mutual retained Jerry Kessloff of Young & Associates, Inc.^[1] to “assist it with adjustment of the Claim, to interface with the insured, and to conduct inspections of the Property and to make recommendations regarding the existence and extent of coverage, among other things.” (Doc. 1 at 16.) Height Street alleges Liberty Mutual and Kessloff conducted an initial inspection of the damage and recommended Height Street “retain local contractor STOP Bakersfield to perform the repairs.” (Id.) Height Street asserts it retained STOP, whose work was “seriously deficient.” (Id. at 17-18.) Accordingly, Height Street asserts a claim for violation of Business & Professions Code § 17200, et seq. against Young^[2] “by virtue of its handling of [Height Street's] insurance claim” and by “suggesting and recommending that [Height Street] utilize STOP Bakersfield as its repair contractor.. .without providing the disclosures required by the California Fair Claims Settlement Practices Act.” (Id. at 25.)

On September 13, 2021, Young filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 9.) Height Street filed an opposition on October 5, 2021. (Doc. 11.) On October 12, 2021, Young filed a reply. (Doc. 12.)^[3]

II. Legal Standard

A Rule 12(b)(6) motion “tests the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

Dismissal of a claim under Rule 12(b)(6) is appropriate when “the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). Thus, under Rule 12(b)(6), “review is limited to the complaint alone.” Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993); see also Schneider v. Cal. Dep't of Corrections, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998) (“A court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss.”).

The Supreme Court explained: “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Supreme Court explained,

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. The plausibility standard is not akin to a “probability requirement, ” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.'”

Iqbal, 556 U.S. at 678 (internal citations omitted).

“The issue is not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court “will dismiss any claim that, even when construed in the light most favorable to plaintiff, fails to plead sufficiently all required elements of a cause of action.” Student Loan Marketing Assoc. v. Hanes, 181 F.R.D. 629, 634 (S.D. Cal. 1998). To the extent pleading deficiencies can be cured by the plaintiff alleging additional facts, leave to amend should be granted. Cook, Perkiss & Liehe, Inc. v. Northern Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990) (citations omitted).

III. Discussion and Analysis

Young seeks dismissal of the claim against it arising under California's Unfair Competition Law. (Doc. 9-1.) Under the Unfair Competition Law, unfair competition includes any “unlawful, unfair, or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. Therefore, there are three prongs under which a claim may be established under § 17200. Daro v. Superior Ct., 151 Cal.App.4th 1079, 1093 (2007) (“Because section 17200 is written in the disjunctive, a business act or practice need only meet one of the three criteria-unlawful, unfair, or fraudulent-to be considered unfair competition.”) (emphasis in original).

A. Unlawful practices

Height Street seeks to hold Young liable for “unlawful practices” under § 17200.^[4] The business acts proscribed under the “unlawful” prong of § 17200 include “anything that can properly be called a business practice and that at the same time is forbidden by law.” Farmers Ins. Exch. v. Superior Ct., 2 Cal.4th 377, 383 (1992) (quoting Barquis v. Merchants Collection Assoc., 7 Cal.3d 94, 113 (1972)). In essence, the UCL “borrows violations of other laws and treats them as unlawful practices independently actionable under Section 17200.” Saunders v. Superior Ct., 27 Cal.App.4th 832, 839 (1994) (internal quotation marks, citation omitted).

“To state a claim under the unlawful prong of the UCL, a plaintiff must plead: (1) a predicate violation, and (2) an accompanying economic injury caused by the violation.” Aerojet Rocketdyne, Inc. v. Global Aero., Inc., 2020 WL 3893395, at *6 (E.D. Cal. July 10, 2020) (citation omitted); see also Berryman v. Merit Property Management, Inc., 152 Cal.App.4th 1544, 1554 (2007) (“a violation of another law is a predicate for stating a cause of action under the UCL's unlawful prong”). Predicate violations include “any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made.” Saunders, 27 Cal.App.4th at 838-39.

Importantly, a plaintiff must allege facts to support any alleged predicate violations of state or federal law. See Berryman, 152 Cal.App.4th at 1554. For example, if a plaintiff alleges facts sufficient to support claims of violations of a federal or state statute, such as the Fair Labor Standards Act or the California Labor Code, the statutes are proper predicate violations under the UCL. See, e.g., Duarte v. Mzr Inc., 2010 WL 11586755, at *7 (N.D. Cal. July 8, 2010) (finding where the plaintiff “allege[d] several violations of federal and state labor statutes, including the Fair Labor Standards Act and California Labor Code ..., [the statutory claims] may serve as predicate violations under the ‘unlawful' prong of the UCL”). Conversely, if a plaintiff fails to state a claim under the “borrowed” law, it cannot support the UCL claim. Pellerin v. Honeywell Int'l, Inc., 877 F.Supp.2d 983, 992 (S.D. Cal. 2012) (a claim under the UCL “must be dismissed if the plaintiff has not stated a claim for the predicate acts upon which he bases the claim”); see also Yellowcake, Inc. v. Morena Music, Inc., 522 F.Supp.3d 747, 772 (E.D. Cal. 2021) (“When the underlying legal claim that supports a UCL cause fails, however, ‘so too will the [the] derivative UCL claim.'”) (quoting AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal.App. 5th 923, 950 (2018)).

1. Predicate violation

Height Street bases its claim upon Young's alleged violation of California's Fair Claims Settlement Practices Regulations, § 2695.9(c).^[5] This section, titled “Additional Standards Applicable to First Party Residential and Commercial Property Insurance Policies, ” provides in relevant part:

(c) No insurer shall suggest or recommend that the insured have the property repaired by a specific individual or entity unless:

(1) the referral is expressly requested by the claimant; or

(2) the claimant has been informed in writing of the right to select a repair individual or entity and, if the claimant accepts the suggestion or recommendation, the insurer shall cause the damaged property to be restored to no less than its condition prior to the loss and repaired in a manner which meets accepted trade standards for good and workmanlike construction at no additional cost to the claimant other than as stated in the policy or as otherwise allowed by these regulations.

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