University Insurance, LLC v. Allstate Insurance Company
| Decision Date | 29 September 2021 |
| Docket Number | Case No. 2:20-cv-01743-RAJ |
| Citation | 564 F.Supp.3d 934 |
| Parties | UNIVERSITY INSURANCE, LLC, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Washington |
Douglas Clayton Berry, Miller Nash LLP, Seattle, WA, for Plaintiff.
Jodi Ann McDougall, Karl Neumann, Cozen O'Connor, Seattle, WA, for Defendant.
ORDER GRANTING MOTION TO DISMISS
This matter comes before the Court on Defendant's Motion to Dismiss (Dkt. # 5). Having considered the submissions of the parties, the relevant portions of the record, and the applicable law, the Court finds that oral argument is unnecessary. For the reasons below, the motion is GRANTED .
Plaintiff University Insurance LLC ("University") is a limited liability company; its members are shareholders and officers of automobile dealerships in Seattle, Washington. Dkt. # 1-2 ¶¶ 1, 3. Among other products and services, the dealerships sell new Volkswagen and Audi vehicles. Id. ¶ 3.
In 2015, Defendant Allstate Insurance Company ("Allstate") approached University's members, asking if they would promote or sell Allstate's insurance policies to the dealerships’ customers. Id. ¶ 4. The members agreed and formed University Insurance LLC "to operate as an insurance agency" within the dealerships. Id. ¶ 6. To that end, University and Allstate entered the Allstate R3001C Exclusive Agency Agreement ("Agency Agreement"). Id. Under the Agency Agreement, University, as an independent contractor, was responsible for referring customers to Allstate and "assisting Allstate in servicing Allstate insureds’ claims." Id. ¶ 7.
Years later, on April 21, 2020, Allstate terminated the Agency Agreement "without prior notice or opportunity to cure." Id. ¶ 12. Under the agreement, Allstate needed "cause" to terminate the contract in that manner. See id. ¶¶ 8, 12. Allstate stated that it terminated the Agency Agreement because University violated a provision within it. Id. ¶ 23. University alleges that the provision it violated is void under Washington law. Id. ¶¶ 14-15. Because the provision is void, University alleges that Allstate lacked cause when it terminated the Agency Agreement and thus breached the agreement by terminating the contract as it did. Id. ¶ 16.
On October 19, 2020, University sued Allstate in state court. Dkt. # 1-2. Allstate later removed to this Court and moved to dismiss the complaint. Dkt. ## 1, 5. Allstate's motion to dismiss is now ripe and pending before the Court.
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court may dismiss a complaint for failure to state a claim. The court must assume the truth of the complaint's factual allegations and credit all reasonable inferences arising from those allegations. Sanders v. Brown , 504 F.3d 903, 910 (9th Cir. 2007). The court "need not accept as true conclusory allegations that are contradicted by documents referred to in the complaint." Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir. 2008). Instead, the plaintiff must point to factual allegations that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 568, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). If the plaintiff succeeds, the complaint avoids dismissal if there is "any set of facts consistent with the allegations in the complaint" that would entitle the plaintiff to relief. Id. at 563, 127 S.Ct. 1955 ; Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
On a motion to dismiss, a court typically considers only the contents of the complaint. However, a court is permitted to take judicial notice of facts that are incorporated by reference in the complaint. United States v. Ritchie , 342 F.3d 903, 908 (9th Cir. 2003) (); Mir v. Little Co. of Mary Hosp. , 844 F.2d 646, 649 (9th Cir. 1988) () (quoting MGIC Indem. Corp. v. Weisman , 803 F.2d 500, 504 (9th Cir. 1986) ).
University is suing Allstate for breach of the Agency Agreement. Dkt. # 1-2 ¶ 16. Allstate moves to dismiss that claim. Dkt. # 5. Before turning to the parties’ arguments, the Court first addresses the parties’ use of footnotes and the incorporation-by-reference doctrine.
The parties should rethink their use of footnotes. The Court strongly disfavors footnoted legal citations, which serve as an end-run around page limits and formatting requirements dictated by the Local Rules. See Local Rules W.D. Wash. LCR 7(e). Moreover, several courts have observed that "citations are highly relevant in a legal brief" and including them in footnotes "makes brief-reading difficult." Wichansky v. Zowine , No. CV-13-01208-PHX-DGC, 2014 WL 289924, at *1 n.1 (D. Ariz. Jan. 24, 2014). The Court strongly discourages the parties from footnoting their legal citations in any future submissions. See Kano v. Nat'l Consumer Co-op Bank , 22 F.3d 899-900 (9th Cir. 1994).
In ruling on a Rule 12(b)(6) motion, a court may not consider any material beyond the pleadings. Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir. 2001). But it may consider certain materials, such as documents incorporated by reference into a complaint, without converting a motion to dismiss into a motion for summary judgment. Ritchie , 342 F.3d at 907.
Though it asserts a breach of contract claim, University does not attach the Agency Agreement to its complaint. See Dkt. # 1-2. Allstate, however, attaches the agreement to its motion to dismiss and asks that the Court consider it when ruling on the motion. Dkt. # 5 at 2 n.1; Dkt. # 7. University does not oppose that request and indeed cites the Agency Agreement itself in its response to Allstate's motion to dismiss. See Dkt. # 12 at 4-5. Because University's complaint "refers extensively" to the Agency Agreement, and because the agreement "forms the basis of" University's claim, the Court considers the Agency Agreement because it is incorporated by reference into the complaint. Ritchie , 342 F.3d at 908. For purposes of this order, the Court need not consider any other extrinsic evidence.
To plead a breach of contract claim under Washington law, a plaintiff must allege "that a valid agreement existed between the parties, the agreement was breached, and the plaintiff was damaged." Univ. of Washington v. Gov't Emps. Ins. Co. , 200 Wash.App. 455, 404 P.3d 559, 566 (2017).
There is no dispute that the Agency Agreement was a valid agreement between the parties. Dkt. # 7 at 4-20. At issue here is whether Allstate breached that agreement.
According to University, the Agency Agreement set forth the ways that the parties could terminate the contract. Dkt. # 1-2 ¶ 8. One way was if Allstate had "cause," for example, if University breached the agreement. Id. ; Dkt. # 7 at 13. Allstate believed that University did just that. Dkt. # 1-2 ¶¶ 12-13. It believed that University breached a contractual provision preventing University from "refer[ring] a prospect to another company, agent, or broker," without Allstate's prior approval. Id. ; Dkt. # 7 at 5. Because Allstate believed that University breached this provision, it unilaterally terminated the Agency Agreement for cause. Dkt. # 1-2 ¶¶ 12-13.
For its part, University concedes that it violated the referral provision. Id. ¶ 14. But it argues that the provision was void under a Washington statute, RCW 49.62.030. Id. ¶ 15. Because the provision was void, University alleges that Allstate had no cause to terminate the Agency Agreement in the first place. Id. ¶ 16.
Thus, the question before the Court is whether the referral provision that University violated is indeed void under Washington law. If so, then Allstate would have lacked cause when it terminated the agreement, and University states a plausible breach of contract claim. If not, then Allstate would have had cause, and University's contract claim fails.
Under Washington law, a "noncompetition covenant" is "void and unenforceable" against an independent contractor." RCW 49.62.030. The statute defines "noncompetition covenant" as "every written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind." RCW 49.62.010(4). When passing the statute, the state legislature explained that "workforce mobility is important to economic growth and development" and that "agreements limiting competition or hiring may be contracts of adhesion that may be unreasonable." RCW 49.62.005.
The Agency Agreement here contains a provision, Section I.E, limiting University's ability to refer prospective customers to another insurer. Dkt. # 7 at 5. In its entirety, Section I.E provides:
Agency will not, either directly or indirectly, solicit, sell, or service insurance of any kind for any other company, agent, or broker, or refer a prospect to another company, agent, or broker, without the prior written approval of the Company. Agency may, however, write applications for insurance under an assigned risk, cooperative industry, or government established residual market plan or facility in accordance with the Company's rules and procedures.
Id. (emphasis added).
The parties use different terms to characterize Section I.E. University calls it the "noncompetition covenant," while Allstate calls it the "non-solicitation provision." Dkt. # 5 at 2; Dkt. # 12 at 5. Both "noncompetition covenants" and "non-solicitation agreements" are defined by statute. Careful to avoid terms of...
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