Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00778/USCOURTS-caed-1_07-cv-00778-3/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 28:1441 Petition for Removal- Racketeering (RICO) Act

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

JOHN WALLACE and NORMA )

WALLACE, individually and on )

behalf of all others )

similarly situated, and on )

behalf of the general public, )

)

)

)

Plaintiffs, )

)

vs. )

)

)

BCS INSURANCE COMPANY, WORLD )

ACCESS SERVICE CORPORATION, )

ACCESS AMERICA, and DOES )

1-25, )

)

)

Defendants. )

)

)

No. CV-F-07-778 OWW/SMS

MEMORANDUM DECISION DENYING

IN PART AND GRANTING IN PART

WITH LEAVE TO AMEND 

DEFENDANTS' MOTION TO

DISMISS AMENDED COMPLAINT

(Doc. 87)

Plaintiffs John Wallace and Norma Wallace are proceeding

pursuant to an Amended Complaint filed in the Fresno County

Superior Court and removed to this Court on May 25, 2007. 

Defendants are BCS Insurance Company, World Access Service

Corporation, Access America and Does 1-25. The Amended Complaint

alleges the following claims:

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(1) First Cause of Action for mail fraud and

wire fraud in violation of the Racketeer

Influenced and Corrupt Organizations Act

(RICO). The First Cause of Action is alleged

as a nationwide class action against all

Defendants;

(2) Second Cause of Action for breach of

contract alleged by John and Norma Wallace

individually against BCS Insurance Company;

(3) Third Cause of Action for bad faith

claims handling and denial alleged by John

and Norma Wallace individually against BCS

Insurance Company; and 

(4) Fourth Cause of Action for unfair

business practices in violation of California

Business and Professions Code §§ 17200 et

seq. The Fourth Cause of Action is alleged

against all Defendants as a class action for

all California Insureds.

Defendants move to dismiss the First and Fourth Causes of

Action on the ground that Plaintiffs do not have standing to

bring either claim. Alternatively, Defendants move to dismiss

the First and Fourth Causes of Action pursuant to Rule 12(b)(6),

Federal Rules of Civil Procedure, for failure to state a claim

upon which relief can be granted.

In moving to dismiss, Defendants concede that the “physician

did not advise ground” for denying Plaintiffs’ claim does not

apply, asserting that that ground for denial of the claim (as

well as those of putative class members) had been “inadvertently

included” in communications.

A. ALLEGATIONS OF AMENDED COMPLAINT.

The Amended Complaint is very lengthy and somewhat

repetitive. 

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The Amended Complaint alleges in pertinent part that

“Defendants, through the use of travel agents, tour operators,

airlines and others, Defendants’ interconnected web sites, and

other means, offer insurance coverage for Trip Cancellation or

Trip Interruption coverage for any serious injury or unforeseen

medical condition which is so disabling as to cause a reasonable

person to cancel or interrupt their trip” and that Defendants

“falsely represent to claimants, including Plaintiffs and members

of the class, that Trip Cancellation and Trip Interruption

coverage requires that a physician advise the Insured to cancel

or interrupt their trip”. (¶¶ 8-9). The Amended Complaint

further alleges:

10. To dissuade insureds, including

Plaintiffs and members of the class, from

even filing claims for Trip Cancellation or

Trip Interruption, Defendants post on their

interconnected web site a Claim Form and a

Physician Statement Form that falsely

represent that Trip Cancellation and Trip

Interruption coverage requires that a

physician advise the insured to cancel or

interrupt their trip.

11. If insureds, including Plaintiffs and

members of the class, are not dissuaded from

filing claims for Trip Cancellation or Trip

Interruption, Defendants’ claims handling

software is designed to generate a ‘Reason’

for denying coverage based on the fact that a

physician did not advise the insured to

cancel or interrupt their trip.

12. If insureds, including Plaintiffs and

members of the class, call Defendants by

telephone to protest the denial of their

claims, Defendants’ representatives are

trained by Defendants to falsely represent

that the insurance certificate language

requires that a physician advise the insured

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to cancel or interrupt their trip.

13. And if insureds, including Plaintiffs

and members of the class, use the mails to

write to Defendants to protest denial of

their claims, Defendants’ representatives are

trained by Defendants to mail letters to the

insureds that falsely represent that the

insurance certificate language requires that

a physician advise the insured to cancel or

interrupt their trip.

The relevant allegations in the Amended Complaint

specifically related to Defendants’ acts with regard to

Plaintiffs are set forth in Paragraph 28(l) of the Class Action

Allegations and in the Second Cause of Action for breach of

contract against BCS Insurance Company. Paragraph 28, which

pertains to the commonality requirement for a class action,

alleges in pertinent part:

28. There is a well-defined commonality of

interest among the members of the proposed

class. Plaintiffs, like all other members of

the class allege:

...

(l) by misrepresenting to the Plaintiffs and

members of the class, in the Claim Form, in

the Physician Statement Form, in

correspondence, and by telephone, that the

Trip Cancellation and Trip Interruption

coverage required a physician to advise the

claimant to cancel or interrupt their trip,

Defendant [sic] committed ‘unfair,’

‘unlawful,’ and ‘fraudulent’ business

practices in violation of Business &

Professions Code section 17200 et seq. By

way of example, when the WALLACES asked their

travel agent for assistance in resolving

their claim. [sic] On behalf of the WALLACES,

their travel agent called Defendants on the

telephone on March 15, 2006, to inquire

regarding the status of the WALLACES’ claim. 

During that telephone call, Maxine Daniely,

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an agent of the Defendants, falsely

represented that the insurance coverage

issued to the WALLACES required that a

physician advise them to cancel or interrupt

their trip. Plaintiffs are informed and

believe, and thereon allege, that such false

representations made by telephone are part of

Defendants’ pattern and practice of claims

handling. As another example, Defendants’

Regulatory Claims Compliance Manager, Keith

Redden-McAllister, sent a letter by U.S. Mail

to the WALLACES dated June 16, 2006. In that

letter, Defendants affirmed the denial of

coverage for the WALLACES’ claim, and again

falsely represented that the insurance

coverage issued to the WALLACES required that

a physician advise them to cancel or

interrupt their trip. Plaintiffs are

informed and believe, and thereon allege,

that such false representations in letters

sent by U.S. Mail are part of Defendants’

pattern and practice of claims handling ....

The Second Cause of Action alleges in pertinent part:

73. Plaintiffs ... planned a trip from

Fresno ... to Des Moines, Iowa, then on to

Macon, Georgia, with a return trip in reverse

order (‘the Trip’.) They planned to leave

Fresno on September 28, 2005, and arrive back

in Fresno on October 28, 2005. This Trip was

more than 100 miles and was not to obtain

health care or treatment of any kind.

74. On ... August 29, 2005, Plaintiffs ...

purchased a policy of travel insurance called

‘AAA TripAssist Cruises and Tours - Basic

Plan,’ policy number 190429248, hereinafter

referred to as ‘the Policy.’ 

...

84. Under ‘A. TRIP CANCELLATION AND

INTERRUPTION PROTECTION,’ the Policy stated:

A. TRIP CANCELLATION AND

INTERRUPTION PROTECTION

Trip cancellation coverage provides

benefits for loss(es) You incur for

Trips cancelled up to the time and

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date of departure. Trip

interruption coverage provides

benefits for loss(es) You incur for

Trips that are interrupted or

delayed after the time and date of

departure.

For all the covered reasons

outlined below, You must notify the

appropriate travel suppliers of

Your cancellation or interruption

within 72 hours of the occurrence,

unless the condition prevents it,

then as soon as reasonably

possible. Otherwise the right to

compensation will lapse.

A maximum benefit of up to the

amount indicated in Your Letter of

Confirmation is provided to cover

certain expenses listed below which

result from the cancellation or

interruption of your Trip due to:

1. Any serious Injury or any

unforeseen serious medical

condition:

a. Occurring to You or a Traveling

Companion, which is so disabling as

to cause a reasonable person to

delay, cancel, or interrupt their

Trip;

b. Occurring to a Family Member

that is considered life threatening

or requiring hospitalization; or

c. Occurring to a Family Member

requiring Your care.

For Trip Cancellation benefits, an

actual examination by a licensed

Physician must take place within 72

hours of the cancellation. For

Trip Interruption benefits, this

examination must take place during

your Trip. This Physician must not

be [a] member of Your or Your

Traveling Companion’s immediate

family or Yourself, or an immediate

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family member of the person whose

condition caused the cancellation

or interruption.

...

87. On ... October 14, 2005, while the

Policy was in full force and effect,

Plaintiffs ... boarded a scheduled flight to

go from Macon, Georgia, to Des Moines, Iowa,

that was part of their ‘Trip’ insured under

the Policy. Plaintiff NORMA WALLACE fell in

an ‘Accident’ and sustained an ‘Injury’ to

her arm and wrist. Plaintiffs ... boarded

the flight in the hope that they would not

have to ‘Interrupt’ their ‘Trip’. However,

they reasonably concluded they needed to

‘Interrupt’ their ‘Trip’ so that NORMA

WALLACE could seek medical attention, and

that she needed JOHN WALLACE’s assistance to

do so. Plaintiffs ... disembarked and rented

a car and drove to the Macon Medical Center,

where, on October 14, 2005, NORMA WALLACE was

examined, x-rayed, treated and received a

prescription for pain medication from a

licensed ‘Physician’, who was not in any way

related to Plaintiffs ....

88. By the time the Physician’s examination

and x-ray were completed, Plaintiff[s]’ ...

flight had departed. They therefore used the

rental car to drive from Macon ... to Des

Moines ... and from Des Moines, resumed their

scheduled ‘Trip.’ 

89. Plaintiffs ... submitted a timely claim,

provided an adequate proof of loss, and

complied with all conditions under the

Policy.

90. Defendant BCS INSURANCE COMPANY breached

the terms of the Policy ... by, among other

things, refusing to honor their legitimate

claim for Policy benefits.

91. Defendant denied coverage by letter ...

dated June 16, 2006. Defendant’s denial

letter contended the Policy’s Trip

Interruption coverage requires that ‘In order

to interrupt your trip for a medical reason,

a doctor has to advise you to do so.’ The

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Policy contains no such requirement. 

Defendant’s statement in the denial letter

that the Policy contains such a requirement

is false.

92. Defendant maintains a web site which

contains a Trip Cancellation Or Interruption

Claim Form (medical reasons). This Claim

Form states:

___ A The following question is

only if your illness/injury was the

cause of the

cancellation/interruption:

Your insurance requires that a

licensed physician complete an

examination and advise you that you

cancel or interrupt your trip.

What date did your doctor advise

cancellation/interruption?

__/__/__

___ B If you canceled or

interrupted your trip due to

another person’s illness or injury:

What date did this person’s doctor

advise you to interrupt or cancel

your trip? __/__/__

Please provide the name, address,

and phone number of the physician

...

93. The Policy contains no requirement that

a Physician advise the insureds to cancel or

interrupt their Trip. The representation in

the Claim Form that the Policy contains such

a requirement is false.

Other allegations of the Amended Complaint will be quoted or

described as necessary to address the specific issues raised by

Defendants’ motion. See infra.

A. GOVERNING STANDARDS.

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A motion to dismiss under Rule 12(b)(6) tests the

sufficiency of the complaint. Novarro v. Black, 250 F.3d 729,

732 (9 Cir.2001). Dismissal of a claim under Rule 12(b)(6) is th

appropriate only where “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-

46 (1957). Dismissal is warranted under Rule 12(b)(6) where the

complaint lacks a cognizable legal theory or where the complaint

presents a cognizable legal theory yet fails to plead essential

facts under that theory. Robertson v. Dean Witter Reynolds,

Inc., 749 F.2d 530, 534 (9 Cir.1984). In reviewing a motion to th

dismiss under Rule 12(b)(6), the court must assume the truth of

all factual allegations and must construe all inferences from

them in the light most favorable to the nonmoving party. 

Thompson v. Davis, 295 F.3d 890, 895 (9 Cir.2002). However, th

legal conclusions need not be taken as true merely because they

are cast in the form of factual allegations. Ileto v. Glock,

Inc., 349 F.3d 1191, 1200 (9 Cir.2003). Immunities and other th

affirmative defenses may be upheld on a motion to dismiss only

when they are established on the face of the complaint. See

Morley v. Walker, 175 F.3d 756, 759 (9 Cir.1999); Jablon v. th

Dean Witter & Co., 614 F.2d 677, 682 (9 Cir. 1980) When ruling th

on a motion to dismiss, the court may consider the facts alleged

in the complaint, documents attached to the complaint, documents

relied upon but not attached to the complaint when authenticity

is not contested, and matters of which the court takes judicial

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notice. Parrino v. FHP, Inc, 146 F.3d 699, 705-706 (9th

Cir.1988).

Two threshold issues involving these standards are

addressed.

1. SUBMISSION BY DEFENDANTS OF LETTER DENYING

PLAINTIFFS’ CLAIM FOR BENEFITS.

In Plaintiffs’ opposition to the motion to dismiss,

Plaintiffs object to Defendants’ assertion that their claim was

denied for “two separate reasons”, thereby negating any reliance

on the “physician advise” requirement, and argue that Defendants

are improperly converting the motion to dismiss to a motion for

summary judgment. Plaintiffs contend that Defendants allegedly

denied coverage and assert that the initial denial letter is

missing and that Defendants have been unable to locate it. 

In their reply brief, Defendants refer to the standards

which allow a court to review a document referred to in the

pleading but not attached to the pleading in resolving a Rule

12(b)(6) motion. Defendants refer to Paragraph 28(l) of the

Amended Complaint quoted above and the June 16, 2006 letter to

Plaintiffs from Defendants’ Regulatory Claims Compliance Manager,

Keith Redden-McAllister. A copy of the June 16, 2006 letter was

filed on May 11, 2007 in the state court proceedings prior to

removal of the action as an Exhibit to the Declaration of Ely

Chayet. The June 16, 2006 letter states in pertinent part:

BCS Insurance Company (BCS) has forwarded

your letter of June 12, 2006, to my attention

for review and response. World Access

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Service Corp. (WASC) is the administrator of

a travel protection program that includes

insurance underwritten by BCS. ‘Access

America’ is a division and service mark of

WASC.

...

The letter you sent with your claim form

indicated that you choose to rent a car

rather than use your airline tickets because

you had hurt your wrist. You indicated in

your letter that ‘... I felt I could not

stand the confinement of an airplane for the

return trip ...’. 

Your contract of insurance you purchased

provided trip interruption benefits for very

specific reasons. In order to interrupt your

trip for a medical reason, a doctor has to

advise you to do so. I see no evidence in

the claim file that this requirement was met. 

Your contract was also very specific in

precluding coverage for an insured making

changes to personal plans. [Emphasis added]

Although the Court can take judicial notice of the contents

of this letter in ruling on the motion to dismiss, it cannot take

judicial notice of the validity of the alleged second ground for

denial of the claim, changes to personal plans, or the impact of

the alleged second ground for denial in determining whether

Plaintiffs have established causation or reliance for purposes of

standing or statement of a claim under RICO. See Lee v. City of

Los Angeles, 250 F.3d 668, 689-690 (9 Cir.2001): th

A court may take judicial notice of ‘matters

of public record’ without converting a motion

to dismiss into a motion for summary judgment

... But a court may not take judicial notice

of a fact that is ‘subject to reasonable

dispute.’ Fed.R.Civ.P. 201(b). Thus, the

district court had authority under Rule 201

to take judicial notice of the fact of the

extradition hearing, the fact that a Waiver

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of Extradition was signed by Kerry Sanders,

and the fact that Kerry Sanders purportedly

waived his right to challenge his extradition

to New York as ‘Robert Sanders.’ The court

may also have had the authority to do so

because plaintiff’ First Amended Complaint

repeatedly refers to the extradition process

that Kerry Sanders underwent, and arguably

incorporates the fact of the extradition

hearing and the waiver by reference ....

But the court did more that take judicial

notice of undisputed matters of public

record. The court took judicial notice of

disputed facts stated in public records ....

On a Rule 12(b)(6) motion to dismiss, when a

court takes judicial notice of another

court’s opinion, it may do so ‘not for the

truth of the facts recited therein, but for

the existence of the opinion, which is not

subject to reasonable dispute over its

authenticity.’ ... Here, the district court

incorrectly took judicial notice of the

validity of Kerry Sanders’ waiver, which was

as yet unproven.

Defendants also assert that a transcript of the March 15,

2006 telephone conversation alleged in Paragraph 28(l) was

submitted in state court proceedings. However, judicial notice

cannot be taken of this transcript unless Plaintiffs do not

dispute its authenticity, accuracy, and underlying facts. 

Plaintiffs have not conceded the authenticity or accuracy of that

transcript. Therefore, the transcript is not considered in

resolving the motion to dismiss.

Plaintiffs argue in their opposition to the motion to

dismiss that they have no obligation to anticipate and plead

around other exclusions or policy defenses Defendants may raise.

Cal. Practice Guide: Fed. Civil Procedure Before Trial ¶

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8:139 (Rutter 2007), states that a “[p]laintiff is generally not

required to plead facts in the complaint to negate anticipated

affirmative defenses” but that “the result is different where

plaintiff pleads facts which show its claims are time barred or

otherwise subject to an affirmative defense.” 

Defendants argue that Plaintiffs have been aware through

discovery and other proceedings in state court before they filed

the Amended Complaint that Defendants have consistently relied on

the “change in personal plans exclusion” since their claim for

benefits was denied:

Plaintiffs cannot successfully ‘plead around’

the fact that Defendants have consistently

asserted another legitimate ground for

denying their claim. As Plaintiffs do not

challenge the merit of that ground for denial

(they only argue - incorrectly - that

Defendants cannot rely on it because it is

‘outside’ the pleadings), they essentially

concede its validity. Thus, Plaintiffs’ RICO

and Section 17200 claims must be dismissed

because Plaintiffs have not alleged causation

in their failure to allege any harm, i.e.,

denial of their claim, resulting from the

purportedly bad conduct.

The issues of reliance and causation are discussed in more

detail infra and are a recurring theme throughout this motion and

Plaintiffs’ opposition.

2. WAIVER OF MOTION TO STRIKE.

Because Defendants’ motion to dismiss addresses only two of

the four causes of action alleged in the Amended Complaint,

Plaintiffs argue that Defendants should have filed a motion to

strike the First and Fourth Causes of Action under Rule 12(f),

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Federal Rules of Civil Procedure. Plaintiffs further argue that,

because Defendants filed a Rule 12(b)(6) motion to dismiss which

did not include a motion to strike, Defendants have waived their

right to file a motion to strike.

Plaintiffs arguments are without merit. Cal.Practice Guide:

Fed. Civil Procedure Before Trial ¶ 9:189 (Rutter 2007), states

that “[i]n a complaint alleging several distinct claims for

relief, a Rule 12(b)(6) motion may be directed to less than all

of the claims asserted.” A Rule 12(b)(6) motion challenges the

legal sufficiency of the pleading while a Rule 12(f) motion to

strike seeks to strike any insufficient defense or any redundant,

immaterial, impertinent, or scandalous matter, rather than to

test the legal sufficiency of the claim. Id. at ¶¶ 9:197.5,

9:203.

C. PLAINTIFFS’ LACK OF STANDING.

Defendants move to dismiss the First and Fourth Causes of

Action on the ground that Plaintiffs lack standing to bring these

claims.

In Lierboe v. State Farm Mut. Auto. Ins. Co., 350 F.3d 1018,

1022 (9 Cir.2003), the Ninth Circuit explained: th

[O]ur law makes clear that ‘if none of the

named plaintiffs purporting to represent a

class establishes the requisite of a case or

controversy with the defendants, none may

seek relief on behalf of himself or any other

member of the class.’ O’Shea v. Littleton,

414 U.S. 488, 494 ... (1974). As Herbert B.

Newberg explains in his seminal work on class

actions, ‘standing is the threshold issue in

any suit. If the individual plaintiff lacks

standing, the court need never reach the

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class action issue.’ ....

“[T]o satisfy Article III’s standing requirements, a plaintiff

must show (1) it has suffered an ‘injury in fact’ that is (a)

concrete and particularlized and (b) actual or imminent, not

conjectural or hypothetical; (2) the injury is fairly traceable

to the challenged action of the defendant; and (3) it is likely,

as opposed to merely speculative, that the injury will be

redressed by a favorable decision.” Friends of the Earth, Inc.

v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 180-

181 (2000), citing Lujan v. Defenders of Wildlife, 504 U.S. 555,

560-561 (1992). 

Defendants argue that Plaintiffs lack standing to bring

either the First or Fourth Cause of Action because Plaintiffs

have not alleged, and cannot allege, that they suffered any

injury as a result of Defendants’ alleged actions:

Plaintiffs premise their claims on the theory

that the insureds were misled by certain

claim forms when, in fact, the Amended

Complaint itself evidences that Plaintiffs

themselves were not misled by the forms and

proceeded to file their claim. Their claim

for benefits continues to be denied based on

an exclusion other than the one that

Plaintiffs allege is common to the putative

class. Thus, Plaintiffs, and any other

insureds in their same shoes, lack standing

to pursue this claim.

1. First Cause of Action

With regard to the First Cause of Action for violation of

RICO, “[t]o state a civil RICO claim, plaintiffs must allege (1)

conduct (2) of an enterprise (3) through a pattern (4) of

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racketeering activity (5) causing injury to plaintiffs’ ‘business

or property.’ 18 U.S.C. § 1964(c).” Ove v. Gwinn, 264 F.3d 817,

825 (9 Cir. 2001). th

“[A] showing of ‘injury’ requires proof of concrete

financial loss, and not mere ‘injury to a valuable intangible

property interest.’” Oscar v. University Students 

Co-op Ass’n, 965 F.2d 783, 785 (9 Cir.), cert. denied, 506 U.S. th

1020 (1992). Defendants cite Expanding Energy, Inc. v. Koch

Industries, Inc., 132 F.R.D. 180, 183 (S.D.Tex.1990), a case

addressing class certification, for the proposition that “[t]he

device of the class action cannot be permitted to relieve

Plaintiffs of their burden of proving in this RICO action that

the class was injured in its business or property.” 

Defendants contend that Plaintiffs are unable to meet these

requirements on two fundamental levels. First, Defendants

argue, Plaintiffs allege the RICO claim on the basis of mail and

wire fraud, even though the alleged fraud, inclusion of the

“physician did not advise” language in the claim forms and

assertion of that purported requirement as an “alternate ground”

for denial of Plaintiffs’ claim, was not relied on by Plaintiffs.

Defendants contend:

Despite the lack of reliance, Plaintiffs have

creatively manufactured a speculative factual

scenario in which Defendants are defrauding

the public because certain forms (claim forms

and physician statement forms that insureds

are instructed to utilize on the Access

America website) refer to the date that a

physician advised an insured to cancel or

interrupt their trip when the certificate

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issued did not have such a provision. 

(Amended Complaint, ¶¶ 49-53.) The ‘fraud

scheme’ that Plaintiffs have dreamed up, and

upon which their claim is based, however, has

one fatal flaw: Plaintiffs themselves never

relied upon the ‘fraud’ that they claim was

being perpetrated, nor is their any

suggestion that anyone else did either. 

Notably, missing from Plaintiff’s RICO claim

is any allegation that Plaintiffs themselves

were misled by the claim form or physician

statement form that they complain about;

significantly, their Amended Complaint admits

that they proceeded to file their claim

regardless of the inapplicable language of

the claim form or physician statement form. 

(Amended Complaint, ¶ 89). Thus, the Amended

Complaint itself evidences that the language

did not deter Plaintiffs from filing or

pursuing their claim for benefits. (Id.). 

If Plaintiffs are ‘typical’ of the class that

they wish to represent, then the putative

class members likewise proceeded to file

claims irrespective of the language that

Plaintiffs decry in a vacuum as fraudulent.

Defendants cite Poulos v. Caesars World, Inc., 379 F.3d 654,

664 (9 Cir.2004): th

Causation lies at the heart of a civil RICO

claim. Lumping claims together in a class

action does not diminish or dilute this

requirement. It is well settled that, to

maintain a civil RICO claim predicated on

mail fraud, a plaintiff must show that the

defendants’ alleged misconduct proximately

caused the injury ... In some cases, reliance

may be ‘a milepost on the road to causation.’ 

In citing Poulos, Defendants recognize that the Ninth Circuit has

not definitively ruled that reliance is always necessary to prove

causation in a civil RICO, see Poulos, id. at 666:

Because it is neither necessary nor prudent

to reach the issue of whether reliance is the

only way plaintiffs can establish causation

in a civil RICO claim predicated on mail

fraud, we decline to do so. Rather, we note

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that our holding is both narrow and casespecific, and that we have been careful to

frame the controlling issue in terms of

causation, not reliance.

Defendants note that the issue was certified to the Supreme Court

in Bank of China, New York Branch v. NBM L.L.C., 545 U.S. 1138

(2005). However, the case settled before the Supreme Court could

rule on the issue. Nonetheless, Defendants contend, the weight

of authority supports the conclusion that reliance is required in

a civil RICO alleging mail or wire fraud. See Bank of China, New

York Branch v. NBM L.L.C., 359 F.3d 171, 176 (2 Cir.2004); nd

Summit Props., Inc. v. Hoechst Celanese Corp., 214 F.3d 556, 562

(5 Cir.2000), cert. denied, 531 U.S. 1132 (2001); Appletree th

Square I, Ltd. P’ship v. W.R. Grace & Co., 29 F.3d 1283, 1286

(8 Cir.1994); Caviness v. Derand Res. Corp., 983 F.2d 1295, th

1305 (4 Cir.1993); compare Sys. Mgmt., Inc. v. Loiselle, 303 th

F.3d 100, 103-104 (1 Cir.2002). st

Defendants further argue that Plaintiffs lack standing to

bring the civil RICO claim because the “purported conduct is not

the cause of any particularized injury to themselves or members

of the purported class.” Defendants contend that because

Plaintiffs cannot truthfully allege that the nonpayment of their

claim was proximately caused by the reference to the inapplicable

provision, Plaintiffs lack standing because they suffered no

tangible, concrete injury to business or property directly

resulting from the alleged RICO violation. In so arguing,

Defendants rely on the letter denying Plaintiffs’ claim for

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benefits. See discussion supra. Defendants argue that the only

class of persons on whose behalf Plaintiffs arguably allege the

“missing reliance element” is a class of person who never filed a

claim for benefits because they were deterred by the language on

the claim form. Defendants argue that these allegations are

“purely speculative on behalf of an imaginary class of persons of

which these Plaintiffs are not typical”, that “[t]here is no

reason to believe that ... such a class of persons exist, as

Plaintiffs themselves were not deterred and thus lack standing to

pursue these make-believe claims.” Defendants further contend:

[A]s to the class of persons that did file

claims and may have had the erroneous

provision included as one of several reasons

for denial of the claims, Plaintiffs have

failed ... to allege that the class members’

insurance claims would have been paid but for

the inclusion of the inapplicable ‘physician

must advise’ provision in the examination of

the claim. In failing to do so, Plaintiffs,

and the putative class members, have

judicially admitted that the requisite

element of ‘injury’ is not derived from ‘the

conduct constituting the violation.’ Thus,

Plaintiffs have judicially admitted that they

do not have standing because they have not

alleged any damages that are ‘fairly

traceable to the challenged action of the

defendant’, i.e., damage caused by the

inclusion of language (that a physician must

advise the insured to interrupt their trip)

in claim forms relating to a condition

precedent not contained in their insurance

certificates. Plaintiffs - well aware that

their claim and the claims of other insureds

were concurrently denied because of

exclusions or unsatisfied conditions

precedent that were included in the insurance

certificate issued to them - cannot cure this

defect in their standing. 

Plaintiffs respond that, because the Amended Complaint

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alleges denial of their legitimate claim for Trip Interruption

benefits, a concrete, particularized and actual injury, nothing

more is required to demonstrate their standing. Plaintiffs refer

to the numerous allegations in the Amended Complaint that

Defendants denied coverage for legitimate claims to Plaintiffs

and class members and wrongfully retained money owed to

Plaintiffs and class members under the insurance contracts,

referring to Paragraphs 2, 6,7, 90, 94, 100(f) & (h), 103, 110,

111, 112 of the Amended Complaint. Plaintiffs contend that the

First Cause of Action for RICO alleges that Defendants’ acts of

wire and mail fraud damaged Plaintiffs and the class members by

denying payment of benefits to which they are entitled for valid

claims, referring to Paragraph 47 of the Amended Complaint. 

Plaintiffs argue that Paragraphs 54-57 allege that Defendants use

false statements in claim forms, physician statement forms,

letters and by telephone to dissuade insureds from filing claims

and to avoid legitimate claims and wrongfully retain benefits

belonging to Plaintiffs and class members and that these

misrepresentations in the claim forms were repeated to Plaintiffs

in letters sent to Plaintiffs as well as in telephone calls to

Plaintiffs or their travel agent. Plaintiffs further refer to

the following allegations in the RICO cause of action:

60. The numerous predicate acts of mail

fraud and wire fraud described herein are

part of separate and fraudulent and

extortionate schemes by Defendants designed

to defraud Plaintiffs and the class of money

and property interests under false pretenses. 

Plaintiffs and the class as victims of these

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Plaintiffs also cite Schmuck v. United States, 489 U.S. 705, 1

710-711 (1989):

To be part of the execution of the fraud ...,

the use of the mails need not be an essential

element of the scheme ... It is sufficient for

the mailing to be ‘incident to an essential

part of the scheme,’ ... or ‘a step in [the]

plot,’ ....

The Supreme Court made this statement in the context of discussing

the mailing element of a mail fraud scheme. The Supreme Court was

not discussing the issue of proximate cause or reliance. 

21

unlawful patterns of illegal activity have

and continue to suffer losses as a result of

these activities.

...

66. The Defendants either knew or recklessly

disregarded that the misrepresentations and

omissions described above were material. 

Plaintiffs and the class necessarily relied

on the misrepresentations and omissions in

(a) failing to submit valid claims for Trip

Cancellation or Trip Interruption benefits;

or (b) accepting Defendants’ denial of

coverage for their valid Trip Cancellation or

Trip Interruption claims; or (c) incurring

additional expense, fees and costs in trying

to recover the Trip Cancellation or Trip

Interruption benefits to which they were and

are entitled.

67. The Plaintiffs and the class members

have been injured in their property rights by

Defendants’ overt acts and racketeering

activities.

Plaintiffs recognize that the Ninth Circuit has not definitively

ruled that reliance is an element of causation for civil RICO

alleging wire or mail fraud. In Living Designs, Inc. v. E.I. 1

DuPont de Nemours, 431 F.3d 353, 363 (9 Cir.2005), cert. th

denied, ___ U.S. ___, 126 S.Ct. 2861 (2006):

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The district court concluded, without

analysis, that Plaintiffs were required to

prove that they reasonably relied on DuPont’s

fraudulent misrepresentations to state a

meritorious civil RICO case predicated on

mail and wire fraud ... Under 18 U.S.C. §

1964(c), civil RICO plaintiffs must

demonstrate causation, specifically that they

were injured ‘by reason of’ the alleged

racketeering activity of the defendant ...

‘It is well settled that, to maintain a civil

RICO claim predicated on mail [or wire]

fraud, a plaintiff must show that the

defendants’ alleged misconduct proximately

caused the injury.’ Poulos v. Caesars World,

Inc., 379 F.3d 654, 664 (9 Cir.2004) ... th

Although, in some cases, ‘reliance may be a

milepost of the road to causation,’ id.,

(quoting Blackie v. Barrack, 524 F.2d 891,

906 n.22 (9 Cir.1975)), we have in the past th

declined to announce a black-letter rule that

reliance is the only way plaintiffs can

establish causation in a civil RICO claim

predicated on mail or wire fraud. Id. at

666. We need not address whether this is a

case where Plaintiffs can establish causation

only by demonstrating that they reasonably

relied on DuPont’s fraud, because Plaintiffs

adequately pleaded reasonable reliance in

their amended complaint. Plaintiffs alleged

in their complaint that they ‘reasonably

relied on [DuPont] to obey statutes, court

orders, court rules, rules of evidence,

written agreements, representations to the

court by officers of the court, and

representations made under oath to the court

by [DuPont]’s officers and agents.’ ...

Regardless of whether Plaintiffs were

required to plead reasonable reliance to

satisfy the causation element of their RICO

claims, they did, and thus the district court

erred in granting judgment on the pleadings

on this issue. 

Defendants reply that none of the theories of reliance

alleged in the Amended Complaint apply to Plaintiffs:

First, Plaintiffs did not fail to submit a

claim; their whole case is based on the

denial of a claim they submitted. Second,

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they never accepted Defendants’ denial of

coverage. Third ... Plaintiffs have not

alleged that they would not have had to

secure an attorney ‘to recover’ their

benefits but for the assertion of the

incorrect provision; Plaintiffs cannot make

such an allegation because there was more

than one ground for denying their claim. 

Moreover, it is illogical to argue that the

incursion [sic] of attorneys’ fees to file

suit confers standing. If that were true, a

plaintiff would gain standing simply by

hiring a lawyer to file a complaint.

Again acknowledging that the law on reliance in civil RICO

claims based on mail or wire fraud is unsettled because of the

conflict in the Circuits, Defendants argue that Plaintiffs

“utterly fail to set forth any alternative scenario under which

they could allege causation.” Defendants argue that Plaintiffs’

allegations “lack causation because Plaintiffs have not alleged -

and cannot allege - that the assertion of the incorrect provision

caused a harm.” 

Regulatory Claims Compliance Manager, Keith ReddenMcAllister’s June 16, 2006 letter states in pertinent part:

The letter you sent with your claim form

indicated that you choose to rent a car

rather than use your airline tickets because

you had hurt your wrist. You indicated in

your letter that ‘... I felt I could not

stand the confinement of an airplane for the

return trip ...’. 

Your contract of insurance you purchased

provided trip interruption benefits for very

specific reasons. In order to interrupt your

trip for a medical reason, a doctor has to

advise you to do so. I see no evidence in

the claim file that this requirement was met. 

Your contract was also very specific in

precluding coverage for an insured making

changes to personal plans.

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The Certificate of Insurance issued to Plaintiffs, a copy of

which is attached as an exhibit to the Declaration of Ely Chayet

filed in the state court proceedings prior to removal, provides

in pertinent part:

Trip Cancellation/Interruption benefits do

not cover loss(es) due to:

...

2. You or a Traveling Companion: a) making

changes to personal plans ....

This is a close question. Defendants arguments raise

serious concerns about Plaintiffs’ standing to allege the RICO

claim in the Complaint. Because Plaintiffs undisputedly filed a

claim for insurance proceeds, they cannot establish that

Defendants’ alleged fraud dissuaded them from filing a claim as

alleged in Paragraph 10 of the Amended Complaint. Although

Plaintiffs contend that their claim for trip interruption

insurance was “legitimate”, the Complaint does not acknowledge

that the claim was denied for two reasons, only one of which

involved the invalid “physician advise” requirement. The weight

of authority requires reliance in a civil RICO alleging mail or

wire fraud. Further, even if reliance is not required to be

pleaded, Plaintiffs’ must still allege that Defendants’ mail and

wire fraud proximately caused their injury. The Complaint so

alleges. Although Defendants argue that Plaintiffs cannot

establish proximate cause or reliance sufficient to establish

their standing because of the second ground for denial of the

claim, this is an issue of fact that cannot be resolved on a

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motion to dismiss.

Defendants’ motion to dismiss the First Cause of Action for

lack of standing is DENIED WITHOUT PREJUDICE.

2. Fourth Cause of Action.

Defendants also assert that Plaintiffs lack standing to

bring the Fourth Cause of Action. 

Proposition 64, an initiative measure approved at the

November 2004 general election, imposed new restrictions on

private enforcement under California’s Unfair Competition Law. 

California Business & Professions Code § 17204 provides that

“[a]ctions for relief pursuant to this chapter shall be

prosecuted ... by any person who has suffered injury in fact and

has lost money or property as a result of such unfair

competition.” California Business & Professions Code § 17203

provides in pertinent part:

Any person may pursue representative claims

or relief on behalf of others only if the

claimant meets the standing requirements of

Section 17204 and complies with Section 382

of the Code of Civil Procedure.

California Code of Civil Procedure § 382 provides in pertinent

part: 

[W]hen the question is one of a common or

general interest, of many persons, or when

the parties are numerous, and it is

impracticable to bring them all before the

court, one or more may sue ... for the

benefit of all.

Defendants equate this standing requirement as “consistent

with Article III” and contend that Plaintiffs have not and cannot

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establish that they suffered an injury in fact and a loss of

money or property as a result of the alleged unfair business

practices of Defendant. As with the RICO claim, Defendants argue

that Plaintiffs neither relied on any representation or suffered

any actual injury as a result of that reliance. See discussion

supra. Further, Defendants contend, there were other, valid

reasons for the denial to Plaintiffs of benefits under the Policy

and, therefore, Plaintiffs cannot allege that the nonpayment of

benefits was the “result of” the alleged unfair business

practices. Plaintiffs have not and cannot allege that their

claim would have been paid “but for” the alleged unfair business

practices because their claim would not have been paid regardless

of the assertion of the erroneous provision.

Plaintiffs contend that the issue of whether California

Business & Professions Code § 17200 requires reliance or

causation is pending before the California Supreme Court in In re

Tobacco II Cases, No. S147345, and Pfizer, Inc. v. Superior Court

(Galfano), No. S145775. These cases have been pending since

October 2006 and, as of the date of issuance of this Memorandum

Decision, have not been resolved. Further, Plaintiffs contend,

Paragraphs 66 and 67 adequately allege both causation and

reliance for purposes of the California Business and Professions

Code.

Because whether causation and reliance are elements of a

claim under California’s unfair business practices statute is

pending before the California Supreme Court, the motion to

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dismiss on the ground that Plaintiffs lack standing to bring the

Fourth Cause of Action is DENIED WITHOUT PREJUDICE. A federal

court must apply California law to a supplemental cause of action

and in this instance needs a definitive ruling from the Supreme

Court. 

D. FAILURE TO ADEQUATELY PLEAD CIVIL RICO.

Defendants alternatively move to dismiss the First Cause of

Action on the ground that the Amended Complaint does not

adequately plead the elements of a civil RICO claim.

To reiterate, “[t]o state a civil RICO claim, plaintiffs

must allege (1) conduct (2) of an enterprise (3) through a

pattern (4) of racketeering activity (5) causing injury to

plaintiffs’ ‘business or property.’ 18 U.S.C. § 1964(c).” Ove

v. Gwinn, supra, 264 F.3d at 825. 

1. RICO ENTERPRISE.

An “enterprise” is defined as including “any individual,

partnership, corporation, association, or other legal entity, and

any ... group of individuals associated in fact although not a

legal entity.” 18 U.S.C. § 1961(4).

The RICO enterprise is alleged in the Amended Complaint in

pertinent part as follows:

38. Plaintiffs and the class members are

‘persons’ within the meaning of 18 U.S.C. §

1864(c) [sic].

39. At all times relevant hereto, Plaintiffs

and the class, and the Defendants were and

are ‘persons’ within the meaning of 18 U.S.C.

§ 1961(3).

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40. The following persons constitute an

Enterprise, which Plaintiffs collectively

refer to as the ‘Internet Trip Insurance

Enterprise’: (1) Defendant BCS INSURANCE

COMPANY; (2) Defendant WORLD ACCESS SERVICE

CORPORATION; (3) Defendant ACCESS AMERICA;

(4) over 22,000 travel agents not named as

defendants herein; (5) at least fifteen (15)

airlines, not named as defendants herein; (6)

at least twenty-five (25) cruise lines, not

named as defendants herein; and (7) at least

three hundred (300) tour operators, not named

as defendants herein.

41. The Enterprise is an ongoing

organization, which engages in, and whose

activities affect, interstate commerce.

42. While each named Defendant participates

in the Enterprise, and are a part of it, the

Defendants also have an existence separate

and distinct from the Enterprise.

43. Defendants maintain an interest in and

control of the Enterprise and also conduct or

participate in the conduct of the

Enterprise’s affairs through a pattern of

racketeering activity.

44. Defendants control and participate [sic]

in the Enterprise is necessary for the

successful operation of Defendants’ scheme.

45. The Defendant’s [sic] collectively are

members of the Enterprise.

46. The Enterprise has a discernable

structure separate and apart from the pattern

of racketeering activity in which the

Defendants engage.

47. In order to successfully deny coverage

for legitimate claims for Trip Cancellation

and Trip Interruption benefits and retain

those funds owed to Plaintiffs and the class

members as set forth in this Complaint,

Defendants had to have a system which allows

Defendants to channel claims inquiries to a

common source and through that common source,

provide false and misleading information to

Plaintiffs and members of the class. The

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Enterprise provided Defendants with that

ability. The Enterprise also gives

Defendants the ability to conceal their

scheme.

48. The Defendants and unnamed participants

in the Enterprise maintain an interrelated

series of internet web sites that ultimately

lead insureds such as Plaintiffs and members

of the class to the AccessAmerica web site. 

By way of example, the WORLD ACCESS SERVICE

CORPORATION web site, www.worldaccess.com

contains links to the ACCESS AMERICA web

site. The ACCESS AMERICA web site,

www.accessamerica.com contains a ‘Product

Overview’ page which displays twenty (20)

different Travel Insurance products or

programs available to the public, including

Plaintiff’s [sic] and the class members, in

all 50 states, plus the District of Columbia. 

Using the ACCESS AMERICA web site, members of

the public, including Plaintiffs and the

class members, may view the applicable

insurance certificate available in their

state for each Travel Insurance product or

program. Although not every Travel Insurance

product or program is offered in every state,

the ACCESS AMERICA web site contains over

1,000 .pdf images of insurance certificates

available for purchase by the public,

including Plaintiffs and members of the

class. Of the more than 1,000 images, not

one contains an image of an Insurance

Certificate that includes any policy

provision, exclusion, condition or other

language limited [sic] coverage for Trip

Cancellation or Trip Interruption benefits to

cases in which a physician has advised the

insured to cancel or interrupt their trip.

Defendants cite Comwest, Inc. v. Am. Operator Serv., Inc.,

765 F.Supp. 1467, 1475 (C.D.Cal.1991):

‘In order to avoid dismissal for failure to

state a claim, a [RICO] plaintiff must plead

specific facts, not mere conclusory

allegations, which establish the existence of

an enterprise.’ Elliott v. Foufas, 867 F.2d

877, 881 (5 Cir.1989). th

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Defendants also cite United States v. Turkette, 452 U.S. 576, 583

(1981), a case involving a criminal RICO conviction, in which the

Supreme Court held:

The enterprise is an entity, for present

purposes a group of persons associated

together for a common purpose of engaging in

a course of conduct [and] is proved by

evidence of an ongoing organization, formal

or informal, and by evidence that the various

associates function as a continuing unit.

Relying on this authority, Defendants argue that the

allegations of the Amended Complaint are defective for two

reasons. First, Defendants contend, other that a “brief mention

in Paragraph 40", Plaintiffs do not allege that there were

members of the enterprise besides Defendants and do not allege

what role, if any, the members played in the enterprise. In

addition, Plaintiffs fail to properly allege the description of

the enterprise’s purpose in Paragraph 48. Defendants contend

that the example alleged in Paragraph 48 “is of no assistance”:

The interlinking of World Access and Access

America’s websites is a red-herring because,

as stated by Plaintiffs [in Paragraph 19 of

the Amended Complaint], Access America is a

‘division’ and ‘service mark’ of World Access

... Hence, they are the same entity.

Defendants further contend that an enterprise for purpose of

18 U.S.C. § 1962(c) cannot be the same entity as the RICO

persons. 

18 U.S.C. § 1962(c) provides:

It shall be unlawful for any person employed

by or associated with any enterprise ... to

conduct or participate, directly or

indirectly, in the conduct of such

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enterprise’s affairs through a pattern of

racketeering activity.

See Schreiber Distributing v. Serv-Well Furniture Co., 806 F.2d

1393, 1396 (9 Cir.1986): “The courts have consistently held th

that in an action under section 1962(c) the ‘person’ must be a

separate and distinct entity from the ‘enterprise.’” 

Defendants contend that, “excluding the four categories of

organizations not named as defendants, which are only mentioned

once and who’s [sic] existence is not supported by any facts, the

entire alleged enterprise is comprised only of Defendants.” 

Because all of the entities involved are both RICO “persons” and

RICO “enterprises”, Defendants contend the Amended Complaint is

“fatally and incurably defective” because Defendants cannot be

employed or associated with Defendants.

The Amended Complaint is based on Section 1962(a) as well as

Section 1962(c). “[W]e hold that where a corporation engages in

racketeering activities and is the direct or indirect beneficiary

of the pattern of racketeering activity, it can be both the

‘person’ and the ‘enterprise’ under section 1962(a). Schreiber

Distributing, supra, 806 F.2d at 1398. 

With regard to the allegations of “enterprise” for purposes

of Section 1962(c), Plaintiffs cite Brownell v. State Farm Mut.

Ins. Co., 757 F.Supp. 526, 539 (E.D.Pa.1991):

For purposes of § 1962(c), the RICO defendant

and the RICO enterprise must be distinct and

separate ... The combination of a corporation

and its employees does not constitute an

enterprise ....

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In the present case, plaintiff alleges that

‘State Farm and Worldwide, individually and

in association with each other, constitute

enterprises as defined by 18 U.S.C. Section

1961(4).’ That is, plaintiff alleges three

enterprises (1) State Farm, (2) Worldwide,

and (3) the association of State Farm and

Worldwide. Clearly, State Farm and Worldwide

are not enterprises within the ambit of §

1962(c). While plaintiff could have been

more precise in her description, she has

alleged an association in fact of the two

sufficient to withstand a motion to dismiss.

Plaintiffs also cite State Farm Mut. Auto. Ins. Co. v.

Rosenfield, 683 F.Supp. 106, 109 (E.D.Pa.1988):

The David M. Rosenfield law firm, having been

a professional corporation organized to

practice law, constitutes an ‘enterprise’ for

RICO purposes ... Raskin was associated with

the enterprise.

Defendants further argue that Plaintiffs have failed to

allege that the enterprise is separate and apart from the alleged

racketeering activity. Defendants rely on Wagh v. Metris Direct,

Inc., 363 F.3d 821, 830-831 (9 Cir.2003), and Chang v. Chen, 80 th

F.3d 1293, 1299 (9 Cir.1996). th

In Odom v. Microsoft Corporation, 486 F.3d 541 (9th

Cir.2007), the Ninth Circuit held:

We take this opportunity to join the circuits

that hold that an associated-in-fact

enterprise under RICO does not require any

particular organizational structure, separate

or otherwise ... To the extent that our past

precedent suggests the contrary, it is hereby

overruled. See, e.g. Wagh v. Metris Direct,

Inc. 348 F.3d 1102, 1112 [republished as

amended at 363 F.3d 821 (9 Cir.2003)]; th

Simon v. Value Behavioral Health, Inc. 208

F.3d 1073, 1083-84 (9 Cir.2000); Chang, 80 th

F.3d at 1298-1299, 1301.

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Because Odom has overruled Wagh and Chang, this ground for

dismissal of the First Cause of Action is without merit.

Defendants’ motion to dismiss on the ground that the

“enterprise” is not adequately pleaded is DENIED.

2. FAILURE TO PROPERLY PLEAD CLAIM UNDER 18 U.S.C. §

1962(a). 

18 U.S.C. § 1962(a) provides in pertinent part:

It shall be unlawful for any person who has

received any income, directly or indirectly,

from a pattern of racketeering activity ...

to use or invest, directly or indirectly, any

part of such income, or the proceeds of such

income, in acquisition of any interest in, or

the establishment or operation of, any

enterprise which is engaged in, or the

activities of which affect, interstate ...

commerce.

Defendants move to dismiss the Amended Complaint to the

extent it alleges a violation of Section 1962(a) because it does

not allege facts establishing “that such ‘use’ or ‘investment’

directly and proximately caused injury to Plaintiffs.” 

Defendants primarily rely on Sebastian Intern., Inc. v.

Russolillo, 186 F.Supp.2d 1055, 1068 (C.D.Cal.2000):

In order to state a claim under Section

1962(a), a plaintiff must show injury

resulting from defendant’s investment or

improper use of racketeering income. See

Simon v. Value Behavioral Health, Inc., 208

F.3d 1073, 1083 (9 Cir.2000). Furthermore, th

a plaintiff must allege facts, not general

conclusory statements, showing it was injured

by the investment of racketeering income. 

See Nugget Hydroelectric L.P. v. Pacific Gas

and Electric Co., 981 F.2d 429, 437 (9th

Cir.1992), cert. denied, 508 U.S. 908 ...

(1993). Sebastian’s conclusory allegation

that it suffered injury from CAD’s ‘illCase 1:07-cv-00778-OWW -SMS Document 106 Filed 01/14/08 Page 33 of 52
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gotten’ ... income is inadequate to state a

claim under Section 1962(a) against

Defendants, therefore this claim is dismissed

with leave to amend.

Defendants argue that the Amended Complaint does not

specifically support a claim under Section 1962(a):

Plaintiffs, in conclusory fashion, state that

Defendants ‘seek to aid and abet and are

aiding and abetting a scheme to violate 18

U.S.C. § 1962(a) and (c).’ (Amended

Complaint, ¶ 58). Directly contrary to the

aforementioned requirements, Plaintiffs

allege that the purported racketeering acts

were conducted so that ‘Defendants may

wrongfully retain policy benefits and funds

rightfully belonging to Plaintiffs ....’ 

(Amended Complaint, ¶ 54.) Nowhere in the

Amended Complaint do Plaintiffs explain or

allege what ‘income’ Defendants have received

by virtue of the alleged conduct, nor does

the Amended Complaint articulate the manner

by which the income was ‘used’ in the conduct

of the enterprise, as required by case law.

As Plaintiffs have failed to allege that

Defendants used racketeering income to

operate or acquire interests in the

enterprise (itself or the racketeering

activities), this claim for relief should be

dismissed as a matter of law.

Plaintiffs respond that their general allegations of injury

from Defendants’ “use” of the moneys belonging to Plaintiffs and

the class members in violation of Section 1962(a) suffice to

withstand a motion to dismiss. Plaintiffs rely primarily on

National Organization for Women, Inc. v. Scheidler, 510 U.S. 249

(1994).

Scheidler addressed whether RICO requires proof that either

the racketeering enterprise or the predicate acts of racketeering

were motivated by an economic purpose for purposes of Section

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1962(c). 510 U.S. at 252. Before analyzing the merits of this

issue, the Supreme Court discussed whether the petitioners had

standing to bring their claim because the complaint did not

allege an injury fairly traceable to the respondents’ allegedly

unlawful conduct. Id. at 255. In holding the petitioners had

standing, the Supreme Court ruled in pertinent part:

We have held that ‘[a]t the pleading stage,

general factual allegations of injury

resulting from the defendant’s conduct may

suffice, for on a motion to dismiss we

presume that general allegations embrace

those specific facts that are necessary to

support the claim.’ Lujan v. Defenders of

Wildlife, 504 U.S. 555, 561 (1992) ... The

District Court dismissed petitioners’ claim

at the pleading stage pursuant to Federal

Rule of Civil Procedure 12(b)(6), so their

complaint must be sustained if relief could

be granted ‘under any set of facts that could

be proved consistent with the allegations.’ 

Hishon v. King & Spaulding, 467 U.S. 69, 73

(1984). DWHO and SWHO alleged in their

complaint that respondents conspired to use

force to induce clinic staff and patients to

stop working and obtain medical services

elsewhere ... Petitioners claimed that this

conspiracy ‘has injured the business and/or

property interests of the [petitioners].’ ...

In addition, petitioners claimed that

respondent Scheidler threatened DWHO’s clinic

administrator with reprisals if she refused

to quit her job at the clinic ... Paragraphs

106 and 110 of petitioners’ complaint

incorporate these allegations into the §

1962(c) claim ... Nothing more is needed to

confer standing on DWHO and SWHO at the

pleading stage.

Id. at 256.

No use or investment of racketeering income is alleged. 

Dismissal of the First Cause of Action for violation of 18 U.S.C.

§ 1962(a) is GRANTED WITH LEAVE TO AMEND.

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3. FAILURE TO PROPERLY PLEAD CLAIM UNDER 18 U.S.C. §

1962(c).

“To be liable under 18 U.S.C. § 1962(c), a defendant must

(1) participate (2) in the affairs of an ‘enterprise’ (3) through

a ‘pattern’ of (4) ‘racketeering activity.’” Allington v.

Carpenter, 619 F.Supp. 474, 476 (C.D.Cal.1985).

Defendants argue that the Amended Complaint fails to state a

claim for violation of Section 1962(c) because it contains no

allegations that any of the Defendants participated in the

affairs of an enterprise. Defendants cite Reves v. Ernst &

Young, 507 U.S. 170, 185 (1970). Reves involved review of a

summary judgment. In pertinent part, the Supreme Court held that

“‘to conduct or participate, directly or indirectly, in the

conduct of such enterprise’s affairs,’ § 1962(c), one must

participate in the operation or management of the enterprise

itself.” 507 U.S. at 185. 

Plaintiffs cite Virden v. Graphics One, 623 F.Supp. 1417,

1433 (C.D.Cal.1985):

This court agrees that the ‘employed by or

associated with’ requirement of section

1962(c) should be broadly interpreted and

should include outsiders associated with the

enterprise as well as enterprise members. 

Such an interpretation comports with both the

common definition of ‘associate’ ... and the

Sedima Court’s admonition ... that RICO

should be construed broadly to effectuate

Congress’ intent ....

Under this standard, Plaintiffs contend, the Amended Complaint

adequately alleges that Defendants “participated” in the alleged

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enterprise. Plaintiffs refer to Paragraph 2 of the Amended

Complaint:

This action is brought by Plaintiff and the

class in connection with a scheme devised,

conducted and/or participated in by

Defendants BCS INSURANCE COMPANY, WORLD

ACCESS SERVICE CORPORATION and ACCESS

AMERICA, each of whom was employed by or

associated with Defendant BCS INSURANCE

COMPANY to misrepresent the nature and scope

of Trip Cancellation and Trip Interpretation

coverage provided by the insurance policies,

and to retain monies rightfully belonging to

Plaintiffs and members of the class for

Defendants’ own profit.

Plaintiffs refer to Paragraphs 6 and 7 that “Defendants have

taken and retained funds which have been rightfully earned by

Plaintiffs and class members and divert them to their own

profits” and that Defendants have undertaken a common scheme to

systematically deny, delay and diminish benefits owed under

insurance policies issued to Plaintiffs and members of the

class”. Plaintiffs further refer to Paragraphs 8-13, which

allege that Defendants, through travel agents, tour operators,

airlines and Defendants’ interconnected websites, offer the

insurance and falsely represent to claimants that the insurance

requires that a physician advise the insureds to cancel or

interrupt their trips; that, to dissuade the filing of claims,

Defendants post on their interconnected website, a claim form and

physician statement form that falsely represent this requirement;

that, if claimants are not dissuaded by these forms from filing

claims, Defendants’ claims handling software generates a “reason”

for denying coverage based on the absence of physician advice to

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cancel or interrupt; and that if claimants call or use the mail

to protest denial of claims, Defendants falsely represent the

physician advice requirement. Plaintiffs refer to Paragraph 22,

which alleges that all defendants, including Doe defendants, were

the agent and/or employer of the other defendants. Plaintiffs

refer to Paragraphs 42, 43, and 47 concerning the enterprise

quoted above. Finally, Plaintiffs refer to the allegations in

Paragraphs 49-71 pertaining to the predicate acts as

demonstrating the participation of the Defendants in the

enterprise.

Defendants’ motion to dismiss on this ground is DENIED.

4. FAILURE TO SUFFICIENTLY ALLEGE A RICO INJURY.

Defendants repeat the same arguments made above in

connection with causation as well as those made in connection

with Section 1962(a) and (c). For the reasons discussed above,

Defendants’ motion to dismiss on this ground is DENIED. 

5. FAILURE TO PLEAD ELEMENTS OF MAIL AND WIRE FRAUD

WITH PARTICULARITY.

Defendants move to dismiss the First Cause of Action on the

ground that the predicate acts of mail and wire fraud are not

pleaded with the particularity required by Rule 9(b), Federal

Rules of Civil Procedure.

The predicate acts of mail and wire fraud are alleged in

Paragraphs 49-71 of the Amended Complaint:

49. Defendants have used the Enterprise to

direct Plaintiffs, the members of the class,

and other insureds, to the ACCESS AMERICA web

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site to file a claim electronically. Other

than claims under the ‘Vacation Protector’

program [which, ironically, is; [sic] not

depicted on or available for purchase through

the ACCESS AMERICA web site], the ACCESS

AMERICA web site www.accessamerica.com

contains only one claim form for use by

Plaintiffs, the class members, and other

insureds to use in making a claim for Trip

Cancellation or Trip Interruption benefits

when their Trip [sic] was cancelled or

interrupted due to illness or injury, the

‘Trip Cancellation or Interruption Claim Form

(medical reasons).’ Until Plaintiffs filed

the initial Complaint in this action, this

‘Trip Cancellation or Interruption Claim Form

(medical reasons)’ stated:

___ A The following question is

only if your illness/injury was the

cause of the

cancellation/interruption:

Your insurance requires that a

licensed physician complete an

examination and advise you that you

cancel or interrupt your trip.

What date did your doctor advise

cancellation/interruption?

__/__/__

___ B If you canceled or

interrupted your trip due to

another person’s illness or injury:

What date did this person’s doctor

advise you to interrupt or cancel

your trip? __/__/__

Please provide the name, address,

and phone number of the physician

...

50. After the original Complaint in this

action was filed, Defendants have modified

the Trip Cancellation or Interruption Claim

Form (medical reasons).’ [sic] However, it

still falsely suggests that a doctor must

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advise the insured to cancel or interrupt

their trip:

A. The following question in only

if your illness/injury was the

cause of the

cancellation/interruption:

Your insurance requires that a

licensed physician complete an

examination.

What date did your doctor advise

cancellation/interruption:

__/__/__.

B. If you cancelled or interrupted

your trip due to another person’s

illness or injury:

What date did this person’s doctor

advise you to interrupt or cancel

your trip? __/__/__

Please provide the name, address,

and phone number of the physician.

...

51. Moreover, this ‘Trip Cancellation or

Interruption Claim Form (medical reasons)’

instructs Plaintiffs, members of the class,

and other insureds that, ‘It is essential

that the physician of the ill party complete

the enclosed Physician Statement Form and

that you return it with this claim form.’ It

further states, ‘Check the information your

are attaching to this for [¶ ___ Completed

Physician Statement Form ...’

52. The ACCESS AMERICA web site

www.accessamerica.com contains only two

Physician Statement Forms, but they are

identical. This Physician Statement Form for

use by Plaintiffs, the class members, and

other insureds in making a claim for Trip

Cancellation or Trip Interruption benefits

when their Trip [sic] is cancelled or

interrupted due to illness or injury states

in pertinent part:

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41

This form is to be completed by the

physician who advised you or your

family member to cancel or

interrupt your trip. To ensure a

prompt response, please make sure

every question is answered on this

form.

***

Physician Information

Physician who advised

cancellation/interruption: ____

***

Patient’s Diagnosis

Please indicate the primary

diagnosis for which you advised

cancellation/interruption of your

patient’s travel plans:

______

***

Did you advise

cancellation/interruption of the

trip? ___ YES ___ NO.

***

Did you perform an actual

examination when you gave this

advice? ___YES ___NO.

***

Date you advised cancellation

__/__/__.

By my signature and stamp below, I

hereby certify that the above is

true and correct and that I

performed an examination of the

patient at the time I recommended

cancellation/interruption of

his/her travel plans.

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...

53. Despite the statements in the Trip

Cancellation or Interruption Claim Form

(Medical Reasons) and in the Physician

Statement Form representing to Plaintiffs,

the class members, and other insureds that

the insurance coverage for Trip Cancellation

or Trip Interruption required that a

physician advise the insured to cancel or

interrupt their trip, the Insurance

Certificate issued to Plaintiffs contained no

such requirement. Further, not one of the

over 1,000 .pdf images of Insurance

Certificates on the ACCESS AMERICA web site

contains any requirement that a Physician

advise the insureds to cancel or interrupt

their Trip [sic]. The representation in the

Claim Form that any such Insurance

Certificate contains such a requirement is

false, fraudulent, and misleading.

54. Defendants, through use of and

participation in the Enterprise, have sought

to direct Plaintiffs, class members, and

other insureds, to the ACCESS AMERICA web

site to file claims for Trip Cancellation or

Trip Interruption benefits. Defendants,

through use of and participation in the

Enterprise, the misrepresentations including

the Trip Cancellation or Interruption Claim

Form (Medical Reasons) and in the Physician 

Statement Form, provide insureds with false

information regarding the scope of Trip

Cancellation and Trip Interruption benefits,

and falsely informed them that they must have

been advised by a physician to cancel or

interrupt their trip in order to be entitled

to Trip Cancellation or Trip Interruption

benefits. In this manner, Defendants,

through use of and participation in the

Enterprise, seek to dissuade insureds from

ever filing claims for Trip Cancellation or

Trip Interruption benefits in order to avoid

legitimate claims from being made so that

Defendants may wrongfully retain policy

benefits and funds rightfully belonging to

Plaintiffs, class members and other insureds.

55. Further, if unsuccessful in dissuading

insureds from even filing claims for Trip

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Cancellation or Trip Interruption benefits,

Defendants, through use of and participation

in the Enterprise, have developed claims

handling software which includes ‘Physician

Did Not Advise’ as a reason to deny coverage

for Trip Cancellation and Trip Interruption

benefits.

56. If insureds, such as Plaintiffs or class

members, call by telephone to inquire why

their claims for Trip Cancellation or Trip

Interruption benefits have been denied,

Defendants ..., through use of and

participation in the Enterprise, falsely

represent by telephone that the Trip

Cancellation or Trip Interruption benefits do

not apply because a physician did not advise

the insured to cancel or interrupt their

trip.

57. And, if insureds, such as Plaintiffs or

class members send letters in the U.S. mail

inquiring why their claims for Trip

Cancellation or Trip Interruption benefits

have been denied, Defendants, through use of

and participation in the Enterprise, falsely

represent by mail that their Trip

Cancellation or Trip Interruption benefits do

not apply because a physician did not advise

the insured to cancel or interrupt their

trip.

58. With respect to the activities alleged

herein, each Defendant and others not named

as Defendants in this Complaint, in

committing those activities, within the

meaning of 18 U.S.C. § 2, seek to aid and

abet and are aiding and abetting a scheme to

violate 18 U.S.C. § 1962(a) and (c). Each

Defendant also agreed to the operation of the

scheme or artifice to deprive Plaintiffs and

the class members of property interests. In

furtherance of these agreements, each

Defendant also agreed to interfere with,

obstruct, delay or affect commerce by

attempting to obtain and/or actually

obtaining property interests to which

Defendants are not entitled.

59. With respect to the overt acts and

activities alleged herein, each Defendant

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conspired with each other and with others not

named as defendants in this Complaint, to

violate 18 U.S.C. §1962(a) and (c), all in

violation of 18 U.S.C. § 1962(d). Each

Defendant also agreed and conspired with each

other to participate, directly or indirectly,

in the fraudulent scheme or artifice alleged

herein, to wrongfully retain money owed to

Plaintiffs and the class.

60. The numerous predicate acts of mail

fraud and wire fraud described herein are

part of separate and fraudulent extortionate

schemes by Defendants designed to defraud

Plaintiffs and the class of money and

property interests under false pretenses. 

Plaintiffs and the class as victims of these

unlawful patterns of illegal activity have

and continue to suffer losses as a result of

these activities.

61. In carrying out the overt acts and

fraudulent scheme described above the

Defendants engaged in inter alia, violations

of federal laws, including 18 U.S.C. §§ 1341

and 1343, 18 U.S.C. §§ 1341 and 1346, 18

U.S.C. §§ 1343 and 1346 and 18 U.S.C. § 1961

et seq.

62. Section 1961(1) of RICO provides that

‘racketeering activity’ is any act indictable

under any of the following provisions of

Title 18, United States Code § 1341 (relating

to mail fraud), and § 1343 (relating to wire

fraud), 1346 (relating to scheme or artifice

to defraud. [sic]

63. For the purpose of executing and/or

attempting to execute their scheme to defraud

and to obtain money by reason of false

pretenses, representations or promises, the

Defendants, in violation of 18 U.S.C. § 1341,

placed in post offices and/or in authorized

repositories for mail matter and things to be

sent or delivered by the Postal Service and

received matters and things there from

including but not limited to agreements,

correspondence, payments, reports, data,

summaries, statements, faxes, and others.

64. For the purposes of executing and/or

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attempting to execute their scheme to defraud

and to obtain money by means of false

pretenses, representations or promises, the

Defendants, in violation of 18 U.S.C. § 1343,

transmitted and received by wire matter and

things to be sent or delivered by the Postal

Service and received matters and things there

from including but not limited to agreements,

correspondence, payments, reports, data,

summaries, statements, faxes, and others.

65. The Defendants intentionally and

knowingly made these material

misrepresentations and intentionally and

knowingly suppressed material facts from

Plaintiffs and the class, for the purpose of

deceiving them and thereby obtaining

financial gain.

66. The Defendants either knew or recklessly

disregarded that the misrepresentations and

omissions described above were material. 

Plaintiffs and the class necessarily relied

on the misrepresentations and omissions in

(a) failing to submit valid claims for Trip

Cancellation or Trip Interruption benefits;

or (b) accepting Defendants’ denial of

coverage for their valid Trip Cancellation or

Trip Interruption claims; or (c) incurring

additional expenses, fees and costs in trying

to recover the Trip Cancellation or Trip

Interruption benefits to which they were and

are entitled.

67. The Plaintiffs and the class members

have been injured in their property rights by

Defendants’ overt acts and racketeering

activities.

68. The members of this ‘Internet Trip

Insurance Enterprise’ shared the common goals

of selling ‘Trip Cancellation’ and ‘Trip

Interruption’ insurance coverage via internet

solicitations. The members of this ‘Internet

Trip Insurance Enterprise’ also shared the

common goal of using misrepresentations of

fact, communicated by U.S. mail, telephone,

and/or the Internet, to (1) dissuade insureds

from even filing claims for Trip Cancellation

or Trip Interruption benefits, and (2) to

deny coverage for claims for Trip

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Cancellation and Trip Interruption benefits

on a ground not contained in the insurance

certificate sold to the insured. The members

of the ‘Internet Trip Insurance Enterprise’

further shared the common goal of sharing and

retaining profits made from denial of

legitimate claims for Trip Cancellation and

Trip Interruption insurance benefits.

69. BCS INSURANCE COMPANY conducted or

participated, directly or indirectly, in the

conduct of the enterprise’s scheme by

underwriting the travel insurance policies.

70. WORLD ACCESS SERVICE CORPORATION

conducted or participated, directly or

indirectly, in the conduct of the

enterprise’s scheme by (1) retaining,

training and compensating the claims

personnel who handled claims made under these

policies, (2) denying coverage for Trip

Cancellation and Trip Interruption benefits,

and (3) communicating with insureds who made

claims under these policies.

71. ACCESS AMERICA facilitated this scheme

by providing the internet web site on which

prospective insureds could (1) review

insurance certificates, (2) purchase travel

insurance, electronically file claims, (2)

review, obtain, and download Trip

Cancellation and Interruption Claim Forms

(Medical Reasons), and review, obtain and

download Physician Statement Forms.

Rule 9(b), Federal Rules of Civil Procedure, requires that

“[i]n all averments of fraud ..., the circumstances constituting

fraud ... shall be stated with particularity.” 

The Ninth Circuit applies the particularity requirements of

Rule 9(b) to RICO fraud claims, including mail fraud and wire

fraud. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 541

(9 Cir.1989); Flores v. Emerich & Fike, 416 F.Supp.2d 885, 911 th

(E.D.Cal.2006). “Rule 9(b) requires that the pleader state the

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‘time, place, and specific content of the false representations,

as well as the identities of the parties to the

misrepresentations.’” Flores, id.

Defendants argue that the allegations in the Amended

Complaint fail to plead the specific time period with

particularity. Defendants contend that the Amended Complaint

fails to allege any time period detailing when the alleged fraud

actually occurred, leaving Defendants to speculate what time

periods Plaintiffs are referring to and on what occasions

Defendants allegedly violated the mail and wire fraud statutes.

In addition, Defendants argue that the Amended Complaint does not

allege the place where the allegedly fraudulent

misrepresentations occurred. Defendants further argue that Rule

9(b) is not satisfied because the Amended Complaint fails to

plead the specific content of the alleged misrepresentations:

Specifically, the Amended Complaint alleges

that if Plaintiffs were to telephone or send

a letter to Defendants to inquire why their

claim for travel insurance coverage was

denied, Defendants would state that ‘benefits

do not apply because a physician did not

advise the insured to cancel or interrupt

their trip.’ (Amended Complaint, ¶¶ 56, 57.) 

It is only by way of example do Plaintiffs

explain a single instance of a telephone call

or letter from a representative of a

Defendant. (Amended Complaint, ¶

28(L)[sic].) However, the specific content

and the materiality of the alleged fraudulent

statements is never explained or defined, nor

is the specific Defendant identified. 

Plaintiffs make nothing more that conclusory

statements, without the necessary factual

specificity, as to the actual basis, if any,

for Plaintiffs’ mail and wire fraud claims.

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Plaintiffs respond that the Amended Complaint alleges that

every insured was given the same Claim Form and Physician

Statement Form via the Internet and that these allegations should

satisfy Defendants’ time and place objections to the specificity

of the allegations. In addition, the express false

representations in those forms is alleged, thereby satisfying

Rule 9(b)’s requirement that the specific content of the

misrepresentation be pleaded.

Defendants’ motion to dismiss on this ground is DENIED.

6. FAILURE TO STATE CLAIM FOR CONSPIRACY IN VIOLATION

OF 18 U.S.C. § 1962(d).

Paragraph 59 of the Amended Complaint alleges that

Defendants conspired to violate Sections 1962(a) and (c), all in

violation of Section 1962(d).

Asserting that the Amended Complaint does not state a claim

upon which relief can be granted under either Sections 1962(a) or

1962(c), Defendants move for dismissal of the claim for violation

of Section 1962(d). 

Section 1962(d) provides that “it shall be unlawful for any

person to conspire to violate any of the provisions of subsection

(a), (b) or (c) of this section.” There can be no RICO

conspiracy without having committed a RICO violation. Flores v.

Emerich & Fike, 416 F.Supp.2d 885, 912 (E.D.Cal.2006). Because

the motion to dismiss the RICO claims under Sections 1962(a) and

(c) is denied, dismissal of the Section 1962(d) claim also is

DENIED. 

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E. FAILURE TO ADEQUATELY PLEAD CLAIM FOR UNFAIR BUSINESS

PRACTICES UNDER CALIFORNIA BUSINESS & PROFESSIONS CODE § 17200 ET

SEQ.

Defendants move to dismiss the Fourth Cause of Action

alleging unfair business practices in violation of California

Business and Professions Code §§ 17200 et seq. 

California Business and Professions Code §§ 17200 et seq.,

known as the “Unfair Competition Law” or “UCL” “prohibits the

following five different types of wrongful conduct: (1) an

‘unlawful’ ... business act or practice’ (2) an ‘unfair ..

business act or practice;’ (3) a ‘fraudulent business act or

practice;’ (4) ‘unfair, deceptive, or untrue or misleading

advertising;’ and (5) ‘any act prohibited by [Bus. & Prof. Code

§§ 17500-17577.5].’ Cal. Bus. & Prof. Code § 17200.” National

Rural Telecommunications Co-op v. DirecTV, Inc., 319 F.Supp.2d

1059, 1073 (C.D.Cal.2003).

Defendants contend that it is apparent from the Amended

Complaint that Plaintiffs rely on the inclusion of the “physician

must advise” language in the claim form and when their claim was

denied as the “predicate acts” for the Fourth Cause of Action. 

Defendants reiterate their arguments set forth above that

Plaintiffs were not mislead by the alleged conduct at issue

because they filed their claim without obtaining a Physician

Statement Form. Defendants assert: 

As charged by the law, Plaintiffs knew the

requirements of their travel insurance

contract and filed their claim in complete

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The Third Cause of Action in the Amended Complaint alleges 2

violations of the implied covenant of good faith and fair dealing.

Defendants have not moved for dismissal of the Third Cause of

Action.

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disregard of the language that they know cite

as the basis for their Section 17200 claim. 

Therefore, with a valid ground for denial

preventing the payment of their claim

regardless of the raising of the inapplicable

provision, Plaintiffs have no predicate act

upon which to base their unfair competition

action.

Defendants cite Carma Developers (Cal.), Inc. v. Marathon

Development California, Inc., 2 Cal.4th 342 (1992).

Carma Developers involved the implied covenant of good faith

and fair dealing. The California Supreme Court held: 2

We are aware of no reported case in which a

court has held the covenant of good faith may

be read to prohibit a party from doing that

which is expressly permitted by an agreement. 

On the contrary, as a general matter, implied

terms should never be read to vary express

terms ... ‘The general rule [regarding the

covenant of good faith] is plainly subject to

the exception that the parties may, be

express provisions of the contract, grant the

right to engage in the very acts and conduct

which would otherwise have been forbidden by

an implied covenant of good faith and fair

dealing ... This is in accord with the

general principal that, in interpreting a

contract “an implication should not be made

when the contrary is indicated in clear and

express words.” ... As to acts and conduct

authorized by the express provisions of the

contract, no covenant of good faith and fair

dealing can be implied which forbids such

acts and conduct. And if the defendants were

given the right to do what they did by the

express provisions of the contract there can

be no breach.’ ....

2 Cal.4th at 374. 

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Relying on this discussion, Defendants argue that assertion

of valid exclusions under the Policy cannot give rise to

liability for nonpayment under either a fraud or UCL claim for

relief and that a class action “could never be maintained because

of the need for insured-by-insured review of each claim.” 

Defendants reiterate that “Plaintiffs’ continued failure to

allege that their claim would have been paid but for the

erroneous language renders their claim subject to dismissal for

its failure to comply with the requirements of Section 17200, as

amended at the behest of the People of the State of California.”

For the reasons discussed above, it is fraudulent for an

insurer to impose a condition of exclusion to insurance coverage

based on a requirement not contained in a contract of insurance

for trip interruption benefits. Defendants’ motion to dismiss on

this ground is DENIED.

CONCLUSION

For the reasons stated above:

1. Defendants’ motion to dismiss is denied in part and

granted in part with leave to amend. 

2. Counsel for Defendants shall prepare and lodge a form of

order setting forth the ruling in this Memorandum Decision within

five (5) court days following the date of service of this

decision. 

3. Plaintiffs shall file a Second Amended Complaint within

20 days of service of the Order.

///

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IT IS SO ORDERED.

Dated: January 14, 2008 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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