Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_14-cv-02022/USCOURTS-azd-4_14-cv-02022-0/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1441 Petition for Removal- Fraud

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IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Glenda Moreno, 

Plaintiff, 

v. 

Minnesota Life Insurance Company, et al., 

Defendants.

No. CV-14-02022-TUC-FRZ (CRP)

REPORT & RECOMMENDATION 

 Pending before the Court is Defendants’ Motion to Dismiss Plaintiff’s First 

Amended Complaint (“FAC”) for failure to state a claim (Doc. 22). For the following 

reasons, the Magistrate Judge recommends that the District Court grant in part and deny 

in part Defendants’ Motion to Dismiss. 

FACTUAL & PROCEDURAL BACKGROUND

This action was removed from state court. Thereafter, Defendants moved to 

dismiss the Complaint. (Doc.16). In response, Plaintiff conceded that her Complaint was 

deficient (Doc. 18), and filed her FAC (Doc. 17). Pursuant to a subsequent stipulation 

filed by the parties (Doc. 20), the Court denied Defendants’ Motion to Dismiss (Doc. 16) 

without prejudice as moot. (Doc. 21). Defendants now seek dismissal of Plaintiff’s 

FAC. 

 This action arises out of an accidental death and dismemberment insurance policy 

(“Policy”) purchased by Plaintiff’s now deceased father. In her FAC, Plaintiff asserts 

five claims for relief: (1) consumer fraud under A.R.S. '44-1521, et seq.; (2) insurance 

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fraud under A.R.S. '20-443, et. seq.; (3) negligent misrepresentation; (4) fraudulent 

concealment; and (5) estoppel. 

 Plaintiff alleges that in April 2012, her father, Jose Reynoso, received a written 

solicitation through his Wells Fargo bank account for the purchase of the Policy at issue. 

(FAC, &13 & Exh. 1 (Activation Form)). The Activation Form, which Reynoso received 

at his home, indicated in 12 point, bold print that he was “eligible for up to $300,000 of 

protection:...[and indicated in smaller, non-bold print:] for as little as $5.50 per month per 

$50,000 of coverage....”; however, a footnote attached to that statement indicated in even 

smaller print: “All coverage is reduced by 50% at age 70.” (FAC, &&24, 26, 27; 58, 68 

& Exh. A). In April 2012, Reynoso, a retired landscape laborer who primarily spoke 

Spanish, was 83 years of age. (FAC, & 11). Plaintiff further alleges that Defendants 

Minnesota Life Insurance Company (“MLIC”) and Wells Fargo, N.A., knew Reynoso’s 

age at the time he purchased the Policy and paid the premium. (FAC, &38). The 

Activation Form also listed amounts of coverage “Recommended for J. Reynoso[.]” 

(FAC, Exh. A; see also FAC, &15). The recommended amounts were $300,000, 

$150,000, $100,000 and $50,000, with $300,000 appearing in larger print than the other 

listed amounts. (Id.). Next to each recommended coverage amount was a box for 

Reynoso to check. (FAC, &29 & Exh. A). He marked the box for $300,000 and he 

named his daughter, “Brenda Moreno”, as beneficiary. (FAC, Exh. A; see also FAC, 

&&15-16). Reynoso paid the monthly premiums of $33.00 until the time of his death by 

accidental means in February 2013. (FAC, &&15, 17-19, 32; see also FAC, 33 

(Defendant MLIC in cooperation with Defendant Wells Fargo Bank, N.A....until the 

accidental death of Jose C. Reynoso deducted from [his] checking account and paid to 

Defendant MLIC the $33.00, amount stated in the Activation From for $300,000 worth of 

coverage ($5.50 per $50,000 worth of coverage) per month.”)). Plaintiff also alleges that 

Defendant MLIC “represented in the Activation Form...” Reynoso received in April 

2012, that it would pay Reynoso’s designated beneficiary “$300,000 when he died of an 

accidental cause provided he pay $5.00 per $50,000 in coverage per month.” (FAC, 

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&31). Plaintiff, as beneficiary under the Policy, received $150,000, rather than $300,000. 

(FAC, &20). 

 Plaintiff alleges that Defendant MLIC “hid” the statement that coverage would be 

reduced for insureds over 70 “amongst other fine text unrelated to the terms of the 

insurance in non-bold print in a size less than half of the bold print offering coverage of 

$300,000.” (FAC, &35; see also FAC, &38 (that Defendant MLIC “intended to reduce 

the $300,000 coverage by 50% was buried at the bottom of the activation [form] in fine 

print amongst other text, numbers and symbols unrelated to coverage.”); &40 (Defendant 

MLIC “suppressed...” such fact).1

 Defendants seek dismissal pursuant to Rule 12(b)(6) of the Federal Rules of Civil 

Procedure. 

STANDARD

 “‘To survive a motion to dismiss [under Fed.R.Civ.P. 12(b)(6)], a complaint must 

contain sufficient factual matter, accepted as true, to state a claim to relief that is 

plausible on its face;’ that is, plaintiff must ‘plead[ ] factual content that allows the court 

to draw the reasonable inference that the defendant is liable for the misconduct alleged.’” 

Telasaurus VPC, LLC. v. Power, 623 F.3d 998, 1003 (9th Cir. 2010) (quoting Ashcroft v. 

Iqbal, 556 U.S. 662, 678 (2009)); see also Moss v. United States Secret Serv., 572 F.3d 

962, 969 (9th Cir. 2009) (to defeat a motion to dismiss, the “non-conclusory ‘factual 

content,’ and reasonable inferences from that content, must be plausibly suggestive of a 

claim entitling the plaintiff to relief.”). Dismissal under Rule 12(b)(6) “can be based on 

the lack of a cognizable legal theory or the absence of sufficient facts alleged under a 

cognizable legal theory.” Balistreri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 

1990), abrogated on other grounds by Bell Atl. Corp. v. Twombly, 530 U.S. 544 (2007). 

 

1

 The FAC quotes the following text from the Activation Form: “All coverage is reduced by 50% at age 70” set out in a very small font size. (See e.g. FAC, &35). 

Although Defendants correctly point out that “[t]he font size actually used in the Activation Form is larger than the font size used in the Amended Complaint[]”,(Motion, p. 4), the font used for the footnote in the Activation Form is considerably smaller than that used for the majority of the form Reynoso completed. (See FAC, Exh. A). 

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. 

 “[T]he tenet that a court must accept as true all of the allegations contained in a 

complaint...” does not apply to legal conclusions. Iqbal, 556 U.S. at 678; see also 

Telasaurus, 623 F.3d. at 1003 (pleadings that are no more than legal conclusions “‘are 

not entitled to the assumption of truth.’” (quoting Iqbal, 556 U.S. at 679). Thus, 

“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory 

statements, do not suffice.” Iqbal, 556 U.S. at 678. Moreover, the court “cannot assume 

any facts necessary to [the plaintiffs’]...claim that they have not alleged.” Jack Russell 

Terrier Network of Northern Calif. v. American Kennel Club, Inc., 407 F.3d 1027, 1035 

(9th Cir. 2005). 

 However, the court will assume “‘well-pleaded factual allegations,’...to be true, 

‘and then determine whether they plausibly give rise to an entitlement to relief.’” 

Telasaurus, 623 F.3d. at 1003 (quoting Iqbal, 556 U.S. at 679); see also Iqbal, 556 U.S. 

at 678 (“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.” Iqbal, 556 U.S. at 678. Determining plausibility is a “context-specific 

task...” that requires the court to “draw on its judicial experience and common sense.” Id. 

at 679. A complaint cannot survive dismissal where the court can only infer that a claim 

is merely possible rather than plausible. Id. 

Additionally, under Rule 9 of the Federal Rules of Civil Procedure, “[i]n alleging 

fraud or mistake, a party must state with particularity the circumstances constituting...” 

the fraud. Fed.R.Civ.P. 9(b). “Rule 9(b) ensures that allegations of fraud are specific 

enough to give defendants notice of the particular misconduct which is alleged to 

constitute the fraud charged so that they can defend against the charge and not just deny 

that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 

1985). “A pleading is sufficient under [R]ule 9(b) if it identifies the circumstances 

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constituting fraud so that a defendant can prepare an adequate answer from the 

allegations.” Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). 

 Plaintiff has attached a copy of the Activation Form to her Complaint. (See FAC, 

Exh. A). On a motion to dismiss, the Court may properly consider exhibits attached to 

the complaint. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2002), impliedly 

overruled on other grounds as discussed in Gallardo v. DiCarlo, 203 F.Supp.2d 1160, 

1162 n.2(C.D. Cal. 2002).

STATUTORY FRAUD CLAIMS (CLAIMS ONE AND TWO) 

 Under Arizona’s consumer fraud statute, 

[t]he act, use or employment by any person of any deception, deceptive or 

unfair act or practice, fraud, false pretense, false promise, 

misrepresentation, or concealment, suppression or omission of any material 

fact with intent that others rely on such concealment, suppression or 

omission, in connection with the sale or advertisement of any merchandise 

whether or not any person has in fact been misled, deceived or damaged 

thereby, is declared to be an unlawful practice. 

A.R.S. '44-1522(A). 

 Likewise, Arizona’s insurance fraud statute, A.R.S. '20-443, upon which Plaintiff 

relies in her second claim for relief, prohibits an insurer from misrepresenting the terms 

or benefits of an insurance policy. “The Arizona Consumer Fraud Act, A.R.S. '14-

1521..., and the Unfair Insurance Practices Act, A.R.S. '20-443...are both statutory 

fraud claims and have identical elements.” Stratton v. American Medical Security, Inc.,

2008 WL 2039313, *7 (D. Ariz. May 12, 2008). In addressing Plaintiff’s statutory fraud 

claims, the parties primarily rely on case law construing the Consumer Fraud Act. The 

parties do not suggest that a different holding would apply to the Unfair Insurance 

Practices Act than to the Consumer Fraud Act, which is sound given the fact that both 

statutes have identical elements. 

 To succeed on a statutory fraud claim the “plaintiff must show a false promise or 

misrepresentation made in connection with the sale or advertisement of merchandise and 

consequent and proximate injury resulting from the promise.” Id. (citing Kuehn v. 

Stanley, 208 Ariz. 124, 129, 91 P.3d 346, 351 (2004)). Although “[a] prerequisite to such 

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damages is reliance on the unlawful acts[]”, Peery v. Hansen, 585 Ariz. 266, 269, 585 

P.2d 574, 577 (App. 1978), the reliance need not be reasonable. Kuehn, 208 Ariz. at 129, 

91 P.3d at 351 (“An injury occurs when a consumer relies, even unreasonably, on false or 

misrepresented information.”); see also Stratton v. American Medical Security, Inc., 266 

F.R.D. 340, 348 (D. Ariz. 2009). “In addition, allegations of fraud must be specific 

enough to give Defendants notice of the particular misconduct, so to allow them the 

ability to defend against the charge by doing more than just denying the allegation.” 

Stratton, 2008 WL 2039313 at *7 (citing Fed.R.Civ.P. 9); see also Bergdale v. 

Countrywide Bank FSB, 2013 WL 105295, *3 (D. Ariz. Jan. 9, 2013) (Rule 9 

requirements apply to claims brought under Arizona’s Consumer Fraud Act). 

 Defendants argue that Plaintiff fails to state with specificity any representation 

made by any Defendant that was false, deceptive or misleading. (Motion, p. 7). Instead, 

Defendants argue that “[t]he fact that one provision in the Activation Form qualifies 

another does not render either provision false.” (Id.). Defendants also stress that Plaintiff 

does not allege that she was aware of the Policy before Reynoso’s death or that she, 

rather than Reynoso, “relied upon whatever representation she believes was false or 

deceptive.” (Id. at pp. 4, 7). 

 The FAC sets out factual allegations supporting Plaintiff’s statutory fraud claims. 

Plaintiff cites wording, emphasized by the size of type font used in the Activation Form, 

indicating that Reynoso was eligible for up to $300,000 of coverage and that such an 

amount was recommended for him (FAC, &&25, 26, 28, 63, 75), when all the while 

Reynoso was not entitled to such coverage due to his age. According to Plaintiff, 

Defendant MLIC represented in the Activation Form that “Reynoso was eligible for and 

entitled to $300,000 in coverage so long as he paid Defendant [MLIC] $5.50 per $50.000 

in coverage or $33.00.” (FAC, &34; see also FAC &60 alleging MLIC’s statement was a 

misrepresentation)). Plaintiff alleges that Defendant MLIC. “hid the...statement at the 

bottom of the activation form an inch below the signature line amongst other fine text 

unrelated to the terms of the insurance in non-bold print in a size less than half of the 

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bold print offering coverage for $300,000: ‘All coverage is reduced by 50% at age 70.’” 

(FAC, &32 (reduced font size in original omitted)). Plaintiff also alleges that Defendants 

knew that Reynoso “was 83 years old when he purchased the [Policy]...yet the only 

notice...” that coverage would be reduced “by 50% was buried at the bottom of the 

activation [form] in fine print amongst other text, numbers and symbols unrelated to 

coverage.” (FAC, &38). According to Plaintiff, Defendant MLIC “suppressed the fact 

that it intended to pay Jose C. Reynoso’s beneficiary only 50% of the coverage requested 

and paid for by Jose C. Reynoso each month until his death by highlighting in large bold 

print at the top of the page that Jose C. Reynoso could have $300,000 in coverage and 

burying in fine print one inch below the form’s signature line amongst text, numbers and 

symbols unrelated to coverage a term that ‘All coverage is reduced by 50% at age 

70’....”(FAC, &40 (reduced font size in original omitted); see also FAC, &&41, 48, 49, 

59, 63)), and that such act was misleading and deceptive (FAC, &47, 52, 60-62, 66; see 

also FAC, &50 (alleging MLIC deceived Reynoso and his intended beneficiary)). 

Plaintiff also alleges that she and her father relied on the representation in the Activation 

Form that he was entitled to $300,000 in coverage, and he had paid the premium for 

same. (FAC, &&45, 54, 64). 

 Plaintiff maintains, and Defendants have not disputed, that Plaintiff, who Reynoso 

specifically listed as a beneficiary on the Activation Form, is a third-party beneficiary. 

See e.g. Araiza v. U.S. West Business Resources, Inc., 183 Ariz. 448, 454, 904 P. 2d 

1272, 1278 (App. 1995) (“For a third party to maintain an action on a contract, the 

contract must have been entered into for the express benefit of the third party; the party 

cannot be merely an incidental beneficiary....The benefit must be both intentional and 

direct, and it must definitely appear that the parties intend to recognize the third party as 

the primary party in interest.”)(internal quotation marks and citations omitted). 

 The parties have cited no Arizona cases discussing whether a third-party 

beneficiary has standing to bring suit under the statutes relied on by Plaintiff. Defendants 

cite the holding in Sullivan v. Pulte Home Corp., 231 Ariz. 53, 60-61, 290 P.3d 446, 453-

54 (App. 2012), reversed on other grounds, 232 Ariz. 344, 306 P.3d 1 (2013), that 

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subsequent home purchasers could not sue the homebuilder under the Consumer Fraud 

Act where there was no transaction or contract between the parties. Defendants’ reliance 

on Sullivan is inapposite given that the transaction between Reynoso and Defendants was 

for the express benefit of Plaintiff. Sullivan did not address application of the Consumer 

Fraud Act in the context of a third party-beneficiary. 

 Plaintiff points out that the Consumer Fraud Act “is designed to root out and 

eliminate ‘unlawful practices’ in merchant-consumer transactions.” People ex rel. 

Babbitt v. Green Acres Trust, 127 Ariz. 160, 164, 618 P.2d 1086, 1090 (App. 1980), 

superseded by statute on other grounds as discussed in State ex rel. Corbin v. Pickrell, 

136 Ariz. 589, 592, 667 P.2d 1304, 1307 (1983), superseded by statute on other grounds 

as discussed in Lifeflite Medical Air Transport, Inc. v. Native American Air Services, Inc. 

198 Ariz. 149, 7 P.3d 158 (App. 2000). In interpreting statutes, courts look to the intent 

of the legislature as well as the context of the statute, the language used, the subject 

matter, the effects and consequences and the spirit and purpose of the law. Sellinger v. 

Freeway Mobile Home Sales, Inc., 110 Ariz. 573, 575, 521 P.2d 1110, 1121 (1974) 

(citations omitted). “Statutes shall be construed with the view to effect their object and 

promote justice.” Id. at 576, 521 P.2d at 1122. (holding that the Consumer Fraud Act 

created a private cause of action). The clear purpose of the Consumer Fraud Act “is to 

protect the public from deceptive acts....” State of Ariz. ex. Re. Babbitt v. The Goodyear 

Tire & Rubber Co., 128 Ariz. 483, 486, 626 P.2d 1115, 1118 (App. 1981). Moreover, 

Arizona courts have recognized that the Consumer Fraud Act “‘is a broadly drafted 

remedial provision designed to eliminate unlawful practices in merchant-consumer 

transactions.’ Madsen v. W. Am. Mortg. Co., 143 Ariz. 614, 618 694 P.2d 1228, 1232 

(App. 1985). The CFA ‘provide[s] injured consumers with a remedy to counteract the 

disproportionate bargaining power often present in consumer transactions. Waste Mfg. & 

Leasing Corp. v. Hambicki, 183 Ariz. 84, 88, 900 P.2d 1220, 1224 (App.1995).’” Shaw 

v. CTVT Motors, Inc., 232 Ariz. 30, 32, 300 P.3d 907, 909 (App. 2013) (holding 

economic loss rule does not apply to the Consumer Fraud Act). 

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 In light of the allegations in the FAC, the insured in this case, Reynoso, would 

have a cause of action for statutory fraud. No language in either the Consumer Fraud Act 

or the Unfair Insurance Practices Act suggest that the beneficiary of a life insurance 

policy would not also have a cause of action in place of the insured under similar 

circumstances. Nor is there any “logical basis upon which to distinguish [the beneficiary] 

from the insured...” on the facts of this case. Gould v. Mutual Life Insur. Co. of N.Y., 37 

Wash.App. 756, 759, 683 P.2d 207, 208 (App. 1984) (holding that beneficiary of a life 

insurance policy had cause of action for bad faith against insurer under the Washington 

Consumer Protection Act), overruled on other grounds Haberman v. Washington Public 

Power Supply Sys., 109 Wash 107, 744 P.2d 1032 (1987); see also Bryant v. Country Life 

Insur. Co., 414 F.Supp.2d 981, (W.D. Wash. 2006) (recognizing that beneficiary of a life 

insurance policy was owed a direct contractual obligation by the insurance company and 

could sue under the policy to enforce that obligation); cf. Kersh v. United Healthcare 

Insur. Co., 946 F.Supp.2d 621, 644 (W.D. Tex. 2013) (noting that under Texas law “[a] 

third party beneficiary may qualify as a consumer of goods or services, as long as the 

transaction was specifically required by or intended to benefit the third party and the 

good or service was rendered to benefit the third party” and holding that beneficiary of 

life insurance policy could bring claims under Texas insurance code and Deceptive Trade 

Practices Act) (citations omitted). 

 Plaintiff also points out that at the time the insurer is obligated to perform under a 

life insurance policy, the insured has ceased to exist and, therefore, consumer fraud 

protection would be meaningless unless it extended to the third-party beneficiary. (See

Response, p. 14). In light of the broad remedial purposes of the Consumer Fraud Act, 

Plaintiff’s argument is well taken in context of a life insurance policy. Significantly, both 

the insured and insurer specifically intended Plaintiff to receive the benefit of the 

transaction. Plaintiff alleges that Reynoso relied on the large print of the Policy 

Activation Form advising he was eligible for up to $300,000 in coverage and 

recommending that same amount of coverage. Plaintiff also alleges that she relied on the 

statements, as well. Plaintiff’s ability to prove reliance under the statutes is a question for 

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summary judgment, not a motion to dismiss under Rule 12(b)(6). Under the 

circumstances of this case, Defendants’ Motion to Dismiss Plaintiff’s claims under 

A.R.S. '' 44-1522 and 20-443 should be denied. 

COMMON LAW CLAIMS: NEGLIGENT MISREPRESENTATION & FRAUDULENT 

CONCEALMENT (CLAIMS THREE AND FOUR) 

 Arizona recognizes the tort of negligent representation as defined by the 

Restatement (Second) of Torts '552. Haisch v. Allstate Insur. Co., 197 Ariz. 606, 610, 5 

P.3d 940, 944 (App. 2000). The elements of negligent misrepresentation are: (1) the 

defendant provided false information in a business transaction; (2) the defendant intended 

for the plaintiff to rely on the incorrect information or knew that plaintiff reasonably 

would rely; (3) the defendant failed to exercise reasonable care in obtaining or 

communicating the information; (4) the plaintiff justifiably relied on the incorrect 

information; and (5) resulting damage. KB Home Tucson, Inc. v. Charter Oak Fire Insur. 

Co., __ Ariz. __, __ P.3d __, 2014 WL 6678662, *7 n.7 (citing Mur–Ray Mgmt. Corp. v. 

Founders Title Co., 169 Ariz. 417, 422–24, 819 P.2d 1003, 1008–09 (App.1991)). “A 

claim for relief for negligent misrepresentation is one governed by the principles of the 

law of negligence. Thus, there must be ‘a duty owed and a breach of that duty before one 

may be charged with the negligent violation of that duty.’” Id. (quoting Van Buren v. 

Pima Cmty. Coll. Dist. Bd., 113 Ariz. 85, 87, 546 P.2d 821, 823 (1976)). 

 Arizona also relies on the definition of fraudulent concealment set out the 

Restatement (Second) of Torts, '550: 

One party to a transaction who by concealment or other action intentionally 

prevents the other from acquiring material information is subject to the 

same liability to the other, for pecuniary loss as though he had stated the 

nonexistence of the matter that the other was thus prevented from 

discovering. 

Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local no. 396 

Pension Trust Fund, 201 Ariz. 474, 495, 38 P.3d 12, 34 (2002) (quoting Restatement 

(second) of Torts §550 (1976). 

 Defendants raise the same challenges to Plaintiff’s common law claims as they did 

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to Plaintiff’s statutory fraud claims: that Plaintiff’s allegations lack specificity as to any 

representation made by any Defendant that was false, deceptive or misleading, that 

Plaintiff does not allege that she was aware of the Policy before Reynoso’s death or that 

she, rather than Reynoso, “relied upon whatever representation she believes was false or 

deceptive.” (Motion, pp. 4, 7). Plaintiff does not specifically respond to Defendants’ 

argument regarding her common law claims. Instead, her response focuses on her ability 

to bring the statutory fraud claims, relying on her status as a third-party beneficiary of the 

transaction between Reynoso and Defendants, and stating that any “reliance 

needed...would be the reliance of the policyholder Mr. Reynoso at the time he contracted 

for and paid for the $300,000 death benefit for [Plaintiff.].” (Response, pp. 16-20). As 

discussed above, Plaintiff should be permitted to proceed with her statutory fraud claims 

as a third-party beneficiary of the subject policy. 

 However, Plaintiff has not argued that her status as a third-party beneficiary 

confers standing to allege her common law claims. Nor does she provide any rationale to 

counter Defendants’ argument that her common law claims should be dismissed under 

Rule 12(b)(6). With regard to Plaintiff’s negligent misrepresentation claim, the FAC is 

devoid of any factual allegations that the alleged misrepresentation/concealment induced 

her to act. As Defendants point out, Plaintiff does not allege that she was aware of the 

Policy before Reynoso’s death. Nor does she allege facts to sufficiently show that she 

was a party to the transaction giving rise to a fraudulent concealment claim. 

Accordingly, Defendants’ Motion to Dismiss should be granted with regard to Plaintiff’s 

common law claims.2

ESTOPPEL (CLAIM FIVE) 

Plaintiff’s Fifth Claim for Relief is captioned “Estoppel”. (FAC, p.28). Plaintiff 

alleges, inter alia, that Defendant MLIC’s “actions highlighting Jose C. Reynoso’s 

eligibility for $300,000 in accidental death insurance coverage as well as recommending 

 

2

 Defendants also argue that Plaintiff’s common law claims are subject to dismissal under the economic loss doctrine. Because Plaintiff fails to state a claim for her 

common law theories, the Court need not address that argument. 

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$300,000 in coverage, agreeing to provide the $300,000 death benefit to the Plaintiff and 

accepting the premium for $300,000 coverage while at the same time concealing the fact 

that because...Reynoso was over the age of 70 the coverage was reduced by 50% 

led...Reynoso to purchase what he was led to believe was $300,000 in coverage from the 

Defendant [MLIC] rather than some other insurance company or additional coverage.” 

(FAC, &82). Plaintiff also alleges that the representations in the Activation Form 

reasonably led Reynoso to believe that he had purchased $300,000 in coverage for 

Plaintiff’s benefit, caused Reynoso to lose $150,000 in coverage and caused Plaintiff to 

lose $150,000 in death benefits. (FAC, &&83-84). 

 Plaintiff does not specify the form of estoppel upon which she relies. Defendants 

contend that equitable estoppel is available only as a defense. Defendants argue, 

alternatively, that Plaintiff fails to state a claim for equitable estoppel, and that she also 

fails to state a claim for promissory estoppel. (Motion, pp. 9-10; Reply, p. 6-8). 

 Plaintiff does not state in her Response which theory of estoppel she alleges. 

Arizona courts have acknowledged that there is no Arizona “‘authority for the 

proposition that estoppel must be specifically plead as equitable or promissory estoppel.’” 

Gorman v. Pima County, 230 Ariz. 506, 287 P.3d 800, 804 n.4 (App. 2012) (quoting 

Tiffany Inc. v. W.M.K. Transit Mix Inc., 16 Ariz.App. 415, 419, 493 P.2d 1220, 1224 

(1972)); see also Kramer v. Ocwen Loan Servicing, LLC, 2014 WL 1827158, *7 (D. 

Ariz. May 8, 2014)(noting that “Arizona courts have treated claims for equitable estoppel 

as claims for promissory estoppel where plaintiffs have adequately alleged the elements 

of promissory estoppel.”). However, consistent with Defendants’ position, Arizona 

courts have also observed that equitable estoppel is available only as a defense and 

promissory estoppel is used as cause of action for damages. Id. (citing Tiffany, 16 Ariz. 

App. at 419, 493 P.2d at 1224); see also Raup v. Wells Fargo Bank, NA, 2013 WL 

3216175, *11 (D.Ariz. June 25, 2013). Nonetheless, Plaintiff cites to an Arizona 

Supreme Court opinion finding sufficient evidence to support a judgment in favor of the 

plaintiff for “estoppel”, in a case where the plaintiff pled promissory estoppel, the jury 

was instructed on “estoppel”, and on appeal the plaintiff asserted it successfully presented 

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a case for “estoppel”. St. Joseph’s Hosp. and Medical Center v. Reserve Life Insur. Co.,

154 Ariz. 307, 317, 742 P.2d 808, 818 (1987). The St. Joseph’s court stated that: 

Estoppel in pais includes all forms of estoppel not arising from a record, 

from a deed, or from a written contract; estoppel in pais, equitable estoppel 

and estoppel by misrepresentation are interchangeable names for the same 

action....A claim for estoppel arises when one by his acts, representations 

or admissions intentionally or through culpable negligence induces another 

to believe and have confidence in certain material facts and the other 

justifiably relies and acts on such belief causing injury or prejudice. 

Id. (citations omitted). Plaintiff points out that St. Joseph’s has not been overruled. 

Arguably, St Joseph’s can be distinguished because that case did not involve an objection 

to the plaintiff’s ability to allege a claim for equitable estoppel. In any event, this Court 

need not decide here whether Arizona allows a claim, rather than a defense, based on 

equitable estoppel because as discussed below, even if Arizona allowed such a claim, 

Plaintiff fails to allege facts to support it. Plaintiff also fails to state a claim for 

promissory estoppel. 

 “Equitable estoppel involves, generally speaking, an affirmative misrepresentation 

of a present fact or state of facts and detrimental reliance by another thereon.” Tiffany 

Inc., 16 Ariz. App. at 419, 493 P.2d at 1224. “To prove promissory estoppel, [plaintiff] 

must show that the defendants made a promise and should have reasonably foreseen that 

[plaintiff] would rely on that promise; [plaintiff] must also show that [s]he actually relied 

on the promise to [her] detriment.” Higginbottom v. State, 203 Ariz. 139, 144, 51 P.3d 

972, 977 (App. 2002). Further, the plaintiff “can only recover under the theory of 

promissory estoppel if [s]he had a ‘justifiable right to rely’ on the alleged promise.” Id.

(quoting Trollope v. Koerner, 106 Ariz. 10, 18, 470 P.2d 91, 99 (1970)). “Reliance is 

justified when it is reasonable, but is not justified when knowledge to the contrary 

exists.” Id. (internal quotation marks and citation omitted). At bottom, “[t]he critical 

distinction between [equitable and promissory estoppel]...is that equitable estoppel refers 

to reliance on a misrepresentation of some present or past fact, whereas, promissory 

estoppel rests upon a promise to do something in the future....With that exception 

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promissory estoppel includes all elements of equitable estoppel.” Gorman, 230 Ariz. at 

510 n. 4, 287 P.3d at 804 n.4 (internal quotation marks and citations omitted). 

 Plaintiff provides no explanation in her Response as to how her allegations state a 

claim under either theory. In asserting her estoppel claim, Plaintiff’s does not allege that 

Defendants made any misrepresentations or promises to her upon which she relied to her 

detriment. Indeed, as Defendants point out, Plaintiff does not allege that she was even 

aware of the Activation Form or Policy before Reynoso’s death. Consequently, Plaintiff 

fails to state a claim for “estoppel”, be it promissory estoppel or equitable estoppel. 

CONCLUSION

 Plaintiff should be permitted to proceed on her claims of statutory fraud under 

Arizona’s Consumer Fraud Act, A.R.S. '44-1521, et seq., (Claim One) and Unfair 

Insurance Practices Act, A.R.S. '20-443, et seq., (Claim Two). However, Plaintiff’s 

common law and estoppel claims (Claims Three through Five) should be dismissed for 

failure to state a claim. 

 Plaintiff requests leave to file a Second Amended Complaint should Defendants’ 

Motion be granted. (Response, p. 23). Plaintiff has not suggested that she can plead facts 

which would resurrect her claims that are subject to dismissal here. Nonetheless, because 

leave to amend should be given freely and the Court cannot say that the pleading “could 

not possibly be cured by the allegation of other facts,” Cook, Perkiss and Liehe, Inc. v. 

Northern California Collection Serv., Inc., 911 F.2d 242, 247 (9th Cir. 1990), the FAC 

should be dismissed with leave to amend. 

RECOMMENDATION

 For the foregoing reasons, the Magistrate Judge recommends that the District 

Court grant in part and deny in part Defendants’ Motion to Dismiss Plaintiff’s Amended 

Complaint (Doc. 22). Defendants’ Motion should be granted to the extent that Plaintiff’s 

common law and estoppel claims, set out at Claims Three through Five, should be 

dismissed with leave to amend. The Motion should be denied as to Plaintiff’s claims for 

statutory fraud, set out at Claims One and Two. 

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 Pursuant to 28 U.S.C. §636(b) and Rule 72(b)(2) of the Federal Rules of Civil 

Procedure and LRCiv 7.2(e), Rules of Practice of the U.S. District Court for the District 

of Arizona, any party may serve and file written objections within FOURTEEN (14) DAYS

after being served with a copy of this Report and Recommendation. A party may respond 

to another party’s objections within FOURTEEN (14) DAYS after being served with a copy. 

Fed.R.Civ.P. 72(b)(2). No replies to objections shall be filed unless leave is granted from 

the District Court to do so. If objections are filed, the parties should use the following 

case number: CV 14-2022-TUC-FRZ. 

 Failure to file timely objections to any factual or legal determination of the 

Magistrate Judge may be deemed a waiver of the party’s right to de novo review of the 

issues. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir.) (en banc), i, 540 

U.S. 900 (2003). 

 Dated this 16th day of January, 2015. 

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