Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00292/USCOURTS-azd-2_07-cv-00292-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Citizenship

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Charles Beshears, 

Plaintiff, 

vs.

Provident Life and Accident Insurance

Company, a foreign corporation; and

Unum-Provident Corporation, a foreign

corporation, 

Defendants. 

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No. CV-07-00292-PHX-DGC

ORDER

Defendants have filed a motion to dismiss three claims in Plaintiff’s complaint.

Dkt. #14. The Court has reviewed the memoranda submitted by the parties. Dkt. ##14-16.

For the reasons discussed below, the Court will grant the motion to dismiss.

I. Background.

In 1993, Plaintiff purchased from Defendants a disability insurance policy for benefits

if he became (1) unable to do one or more of his substantial and material business duties,

(2) received appropriate care from a physician, and (3) proved a monthly income loss of at

least 20%. Dkt. #1, Ex. 2. The policy provided that Plaintiff must meet these requirements

for an Elimination Period of 180 days before he would begin receiving payments. Id.

Defendants acknowledge that Plaintiff is now disabled and are paying him benefits. Id. ¶ 26.

The parties disagree, however, on when the Elimination Period expired. Plaintiff claims he

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was denied benefits for a period of at least 12 months and is owed a minimum of $72,000

plus interest. Id. 

Plaintiff’s complaint does not enumerate each count against Defendants, but includes

claims for breach of contract, common law fraud, negligent misrepresentation, breach of the

covenant of good faith and fair dealing, breach of fiduciary duty, violation of the Arizona

Consumer Fraud Act (“ACFA”) (codified at A.R.S. §§ 44-1521 et seq.), and racketeering in

violation of A.R.S. § 13-2312. Id. at ¶¶ 59-73. Defendants move to dismiss the claims for

common-law fraud and violation of A.R.S. § 13-2312 under Rule 9(b) of the Federal Rules

of Civil Procedure, and the ACFA claim under Rules 9(b) and 12(b)(6). Dkt. #14. 

II. Discussion.

1. Common Law Fraud.

To prevail on a fraud claim under Arizona law, a claimant must show:

1) a representation; 2) its falsity; 3) its materiality; 4) the speaker’s knowledge

of the representation’s falsity or ignorance of its truth; 5) the speaker’s intent

that it be acted upon by the recipient in the manner reasonably contemplated;

6) the hearer’s ignorance of its falsity; 7) the hearer’s reliance on its truth;

8) the right to rely on it; and 9) his consequent and proximate injury.

Echols v. Beauty Built Homes, 647 P.2d 629, 631 (Ariz. 1982); see Haisch v. Allstate

Ins. Co., 5 P.3d 940, 944 (Ariz. Ct. App. 2000).

Defendants argue that Plaintiff failed to plead his fraud claim with the particularity

required by Rule 9(b). Under this rule, a plaintiff “must state the time, place, and specific

content of the false representations as well as the identities of the parties to the

misrepresentation.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401

(9th Cir. 1986); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)

(“Averments of fraud must be accompanied by the who, what, when, where, and how of the

misconduct charged.”); Lancaster Cmty. Hosp. v. Antelope Valley Dist., 940 F.2d 397, 405

(9th Cir. 1991) (Rule 9(b) “requires a pleader of fraud to detail with particularity the time,

place, and manner of each act of fraud, plus the role of each defendant in each scheme.”). 

Plaintiff’s complaint alleges that “Defendants made material misrepresentations to the

Plaintiff in 1993 when he purchased his policy” and that “Defendants defrauded the Plaintiff

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by informing him when he purchased the Policy that he would be paid disability benefits as

soon as the Elimination Period expired.” Dkt. #1 ¶¶ 31, 61. These allegations do not satisfy

the particularity requirements of Rule 9(b). They do not allege which employee or type of

employee made fraudulent statements to Plaintiff before he purchased his policy. While

Plaintiff’s response asserts that fraudulent statements were made by Defendants’ “agents,

including Brian P. Chabot” (Dkt. #15 at 6), the complaint itself does not include these

allegations. Additionally, the complaint fails to allege which Defendant made which

fraudulent statements. See Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir. 2007) (“In the

context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, identify

the role of each defendant in the alleged fraudulent scheme.”) (internal quotations and

alterations omitted). Although Defendant UnumProvident Corporation is the parent company

of Defendant Provident Life and Accident Insurance Company, Plaintiff alleges that the

fraudulent actions “were committed by employees of both corporations acting within the

course and scope of their employment with both companies.” Dkt. #1 at 1-2. Plaintiff must

therefore describe which Defendant took which allegedly fraudulent action. 

The complaint also fails to describe the content of the alleged misrepresentations and

why they were false. “To meet the Rule 9(b) particularity requirement, a plaintiff must set

forth more than the neutral facts necessary to identify the transaction. The plaintiff must set

forth what is false or misleading about a statement, and why it is false.” Orthologic Corp.

v. Columbia/HCA Healthcare Corp., No. CIV 01-0006-PHX-SRB, 2002 WL 1331735 at *2

(D. Ariz. Jan. 7, 2002) (citing Yourish v. California Amplifier, 191 F.3d 983, 993 (9th Cir.

1999)); see also Williamson v. Allstate Insurance Co. 204 F.R.D. 641, 645 (D. Ariz. 2001)

(dismissing counts of fraud when Plaintiff failed to set forth the content of alleged

misrepresentations or why they were false). 

Plaintiff only once refers to an allegedly fraudulent statement made before he

purchased his policy – that Defendants told him he would receive disability benefits upon

expiration of the Elimination Period. Dkt. #1 ¶ 31. But Plaintiff never explains the details

behind this statement, including its content, how it was communicated, or why it was false.

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Plaintiff’s complaint alleges that Defendants made false statements “when he

purchased his policy, and in subsequent years after the Policy was already in effect.”

Dkt. #1, ¶ 61. Plaintiff never specifies these subsequent statements, but they could not have

been relied upon by Plaintiff in entering into the policy, a necessary requirement of fraud.

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Plaintiff’s complaint identifies a disagreement about the date the Elimination Period started,

an issue that will be addressed in the breach of contract claim, but it does not plead fraud

with particularity. 

Plaintiff argues that he could not have pled with more specificity because “Defendant

insurance companies have the claim file that they have not yet disclosed to Beshears[.]” Dkt.

#15 at 4 (citing Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993) (stating that a plaintiff

in an insider-trading case was not expected to “plead with the specificity Rule 9(b) requires

without allowing some limited opportunity for discovery”)). Plaintiff apparently believes

that he may satisfy Rule 9(b) by alleging that the necessary information lies in the

Defendants’ exclusive control. Id. at 4-5 (citing Shapiro v. UJB Financial Corp., 964 F.2d

272, 285 (3d Cir. 1992); United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193

F.3d 304, 308 (5th Cir. 1999); Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th

Cir. 1987)). But Plaintiff, as the recipient of the allegedly fraudulent statements and the

person who relied on them, should be able to describe the statements, who made them, and

why they were false. In any event, Plaintiff’s complaint does not allege that Defendants have

exclusive control of information Plaintiff needs to plead his claim, a necessary allegation

under his own cases. See Shapiro, 964 F.2d at 285. Nor does Plaintiff explain why the claim

file, which includes claim-related documents that arose a decade after the policy was issued,

is likely to contain information about statements made by Defendants before the policy was

issued.1

2. Consumer Fraud.

Defendants argue that Plaintiff’s ACFA claim is insufficient for the same reasons as

the common law fraud claim. Dkt. #14 at 8. The required elements of a private ACFA claim

are “a false promise or misrepresentation made in connection with the sale or advertisement

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of merchandise and the hearer’s consequent and proximate injury.” Holeman v. Neils, 803

F.Supp. 237, 242 (D. Ariz. 1992). The particularity requirement of Rule 9(b) applies to

ACFA claims. Williamson, 204 F.R.D. at 643-44. For the reasons discussed above, Plaintiff

has not described the allegedly false promises or misrepresentations with the particularity

required by Rule 9(b). The Court will therefore dismiss the ACFA claim. 

3. Racketeering.

Plaintiff asserts that “Defendants engaged in racketeering . . . in violation of A.R.S.

§ 13-2312, by denying Plaintiff’s disability benefits and similarly denying other insureds’

disability benefits,” and that Defendants “have a history of wrongfully denying disability

income benefits to their insureds throughout the country.” Dkt. #1 ¶ 71. Defendants argue

that the statute cited in the complaint is criminal and does not create a private right of action,

noting that Plaintiff presumably meant to assert his claim under A.R.S. § 13-2314.04, which

creates a civil cause of action and requires particularity in pleading. A.R.S. § 13-2314.04(R)

(“If any pleading, motion or other paper includes an averment of fraud or coercion, it shall

state these circumstances with particularity with respect to each defendant.”). 

Plaintiff concedes that the racketeering claim should have been brought under A.R.S.

§ 13-2314.04, analogizes Arizona’s racketeering statute to federal RICO statutes, and argues

that his claim should not be dismissed when he has had no opportunity for discovery. Dkt.

#15 at 10 (citing Hurst v. Sears, Roebuck & Co., 613 F.Supp. 1210 (D.C. Pa. 1985)).

Plaintiff also cites Seville Industrial Machinery Corp. v. Southmost Machinery Corp., 742

F.2d 786 (3d Cir. 1984), for the proposition that a plaintiff alleging a racketeering claim need

not allege the “date, place, or time” to satisfy the particularity requirements of Rule 9(b).

For the reasons discussed above, Plaintiff has failed to plead his racketeering-related

allegations of fraud with particularity. He has also failed to state any basis for his allegation

that “Defendants have a history of wrongfully denying disability income benefits to their

insureds throughout the country.” Dkt. #1 ¶ 71. Plaintiff’s complaint therefore fails to

satisfy the particularity requirements of A.R.S. § 13-2314.04. 

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IT IS ORDERED that Defendants’ Motion to Dismiss (Dkt. #14) is granted.

Plaintiff’s Complaint (Dkt. #1) is dismissed in part as set forth above.

 DATED this 14th day of May, 2007.

 

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