Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00894/USCOURTS-caed-2_07-cv-00894-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

BOBLOS’S INC., DBA TRINO’S 

LOUNGE and PABLO SANCHEZ, 

 Plaintiffs, 

 v. 

THE BURLINGTON INS. CO. and 

DOES 1 through 50 inclusive, 

 Defendants. 

_____________________________/ 

No. Civ. S-07-894 RRB DAD 

Memorandum of Opinion

and Order

Boblo’s, Inc., dba Trino’s Lounge and Pablo Sanchez 

(collectively “Plaintiffs”) filed a state action against 

Burlington Insurance Company (“Burlington”) alleging that 

Burlington wrongly refused to defend and indemnify Plaintiffs in 

an action arising out of an altercation between agents and/or 

employees of Trino’s Lounge and one of their patrons. 

Burlington removed the action to federal court on the basis of 

diversity. Burlington now moves to dismiss the second, third, 

fourth, fifth, sixth, seventh, eighth and ninth claims for 

relief alleged in the First Amended Complaint (“FAC”) for 

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failure to state a claim under Rule 12(b)(6). For the following 

reasons, the motion is GRANTED in part and DENIED in part.1

I. BACKGROUND 

 Plaintiffs own and operate Trino’s Lounge, a bar/restaurant 

located in Sacramento County. FAC ¶ 3. Plaintiffs purchased a 

liability insurance policy from Burlington covering the 

operations at Trino’s Lounge. Id. ¶¶ 5,7. On or about 

September 14, 2003, Domonick Robles (“Robles”), a patron of 

Trino’s Lounge, was injured following an altercation with agents 

and/or employees of Trino’s Lounge. Id. ¶ 9. Mr. Robles 

subsequently filed an action against Plaintiffs in Sacramento 

Superior Court, alleging negligence and intentional tort claims. 

Id. Plaintiffs tendered defense of this action to Burlington 

but, after a purported investigation, Burlington denied coverage 

and informed Plaintiffs that it would not provide a defense 

under a reservation of rights. Id. ¶ 10. 

On or about April 12, 2007, Plaintiffs filed a state action 

in Sacramento Superior Court, Notice of Removal ¶ 1, alleging 

 

1

 Inasmuch as the Court concludes the parties have submitted 

memoranda thoroughly discussing the law and evidence in support 

of their positions, it further concludes oral argument is 

neither necessary nor warranted with regard to the instant 

matter. See Mahon v. Credit Bureau of Placer County, Inc., 171 

F.3d 1197, 1200 (9th Cir. 1999)(explaining that if the parties 

provided the district court with complete memoranda of the law 

and evidence in support of their positions, ordinarily oral 

argument would not be required). 

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the following claims: (1) breach of contract; (2) breach of the 

implied covenant of good faith and fair dealing; and (3) fraud. 

Compl. ¶¶ 1-34. On May 11, 2007, Plaintiffs removed the action 

to federal court on the basis of diversity. Notice of Removal 

¶¶ 4-8. On May 17, 2007, Burlington moved to dismiss 

Plaintiffs’ fraud claim for failure to state a claim for relief 

under Rule 12(b)(6). Mot. to Dismiss at 3-11. On July 20, 

2007, Burlington’s motion was granted under Rule 9(b) for 

failure to plead averments of fraud with particularity. Docket 

at 10. 

On August 17, 2007, Plaintiffs filed an amended Complaint 

alleging the following claims: (1) breach of contract; (2) 

breach of the implied covenant of good faith and fair dealing; 

(3) tortious or bad faith refusal to provide benefits and 

services due under an insurance contract; (4) tortious or bad 

faith refusal to pay benefits due under an insurance policy; (5) 

breach of fiduciary duty; (6) intentional interference with 

protective property interest; (7) intentional infliction of 

emotional distress; (8) deceit; and (9) declaratory relief. FAC 

¶¶ 1-54. Burlington now moves to dismiss each and every claim 

in the FAC, except the breach of contract claim, pursuant to 

Rule 12(b)(6). Mot. to Dismiss 2-17. 

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II. DISCUSSION 

A. Rule 12(b)(6) 

 “A Rule 12(b)(6) motion tests the legal sufficiency of a 

claim. A claim may be dismissed only if ‘it appears beyond 

doubt that the plaintiff can prove no set of facts in support of 

his claim which would entitle him to relief.’” Navarro v. 

Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal pursuant to 

Rule 12(b)(6) is appropriate where there is no cognizable legal 

theory or there is an absence of sufficient facts alleged to 

support a cognizable legal theory. Id. The issue is not 

whether a plaintiff is likely to succeed on the merits but 

rather whether the claimant is entitled to proceed beyond the 

threshold in attempting to establish his or her claims. De La 

Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978).

In considering a Rule 12(b)(6) motion, the allegations in 

the complaint must be construed in the light most favorable to 

the plaintiff, Parks School of Business, Inc. v. Symington, 51 

F.3d 1480, 1484 (9th Cir. 1995), and the court accepts all 

material allegations as true, as well as all reasonable 

inferences to be drawn from them. Navarro, 250 F.3d at 732; 

Pareto v. FDIC., 139 F.3d 696, 699 (9th Cir. 1998). The court, 

however, is not required to accept as true allegations that are 

merely conclusory, unwarranted deductions of fact, or 

unreasonable inferences. Sprewell v. Golden State Warriors, 266 

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F.3d 979, 988 (9th Cir. 2001). Nor do courts assume the truth 

of legal conclusions merely because they are cast in the form of 

factual allegations, Western Mining Council v. Watt, 643 F.2d 

618, 624 (9th Cir. 1981), or that a plaintiff can prove facts 

different from those it has alleged. Associated Gen. Contractors 

of California, Inc. v. California State Council of Carpenters, 

Inc., 459 U.S. 519, 526 (1983). 

 “If a complaint is dismissed for failure to state a claim, 

leave to amend should be granted unless the court determines 

that the allegation of other facts consistent with the 

challenged pleading could not possibly cure the deficiency.” 

Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc., 806 

F.2d 1393, 1401 (9th Cir. 1986); see Thinket Ink Information 

Resources, Inc. v. Sun Micorsystems, Inc., 368 F.3d 1053, 1061 

(9th Cir. 2004) (leave to amend should be granted unless 

amendment would be futile, i.e., the complaint can not be saved 

by amendment). 

B. Motion to Dismiss 

 Burlington seeks to dismiss each and every claim in the 

FAC, except the breach of contract claim, pursuant to Rule 

12(b)(6). Plaintiffs’ claims are discussed individually below. 

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1. Breach of the Implied Covenant of Good Faith and Fair 

Dealing 

 Burlington argues that dismissal of this claim is 

appropriate because Plaintiffs did not allege that Burlington 

acted unreasonably or in bad faith in withholding benefits under 

the policy. 

“Every contract imposes on each party an implied duty of 

good faith and fair dealing,” which mandates that “neither party 

will do anything which will injure the right of the other to 

receive the benefits of the agreement.” Chateau Chamberay 

Homeowners Ass’n v. Associated Int’l Ins. Co., 90 Cal. App. 4th 

335, 345 (2001) (quotation marks omitted); Amadeo v. Principal 

Mut. Life Ins. Co. 290 F.3d 1152, 1158 (9th Cir. 2002). All 

insurance contracts include the implied covenant of good faith 

and fair dealing. See Century Surety Co. v. Polisso, 139 Cal. 

App. 4th 922, 948 (2006). “When the insurer engages in 

unreasonable conduct in connection with an insured's insurance 

claim, the insurer is said to have tortiously breached the 

implied covenant.” Id. 

In the context of insurance contracts, “the insurer’s 

responsibility to act fairly and in good faith with respect to 

the handling of the insured’s claim is not the requirement 

mandated by the terms of the policy itself--to defend, settle, 

or pay, but rather, to act fairly and in good faith in 

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discharging its contractual responsibilities.” Chateau 

Chamberay, 90 Cal. App. 4th at 346 (quotation marks omitted). 

“‘Thus, allegations which assert such a claim must show that the 

conduct of the defendant, whether or not it also constitutes a 

breach of a consensual contract term, demonstrates a failure or 

refusal to discharge contractual responsibilities, prompted not 

by an honest mistake, bad judgment or negligence but rather by a 

conscious and deliberate act, which unfairly frustrates the 

agreed common purposes and disappoints the reasonable 

expectations of the other party thereby depriving that party of 

the benefits of the agreement.’” Id. 

In the present case, Plaintiffs’ claim of bad faith is 

premised upon Burlington’s failure to timely and properly 

investigate and defend the underlying action. FAC ¶ 21. The 

ultimate test of bad faith liability is whether the refusal to 

pay policy benefits was unreasonable. Chateau Chamberay, 90 

Cal. App. 4th at 346; Amadeo, 290 F.3d at 1161. “Tort liability 

for an insurer’s breach of the implied covenant of good faith 

and fair dealing arises when the insurer unreasonably and in bad 

faith withholds payment of the insured’s claim.” Benavides v. 

State Farm General Ins. Co., 136 Cal. App. 4th 1241, 1249 

(2006). To establish an implied covenant tortious breach, an 

insured must show that: (1) benefits were due under the policy, 

and (2) that the benefits were withheld without proper cause. 

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Id. at 1250. “‘[A]n insurer cannot reasonably and in good faith 

deny payments to its insured without fully investigating the 

grounds for its denial.’” Id.; Frommoethelydo v. Fire Ins. 

Exchange, 42 Cal. 3d 208, 215 (1986); Egan v. Mutual of Omaha 

Ins. Co., 24 Cal. 3d 809, 818-19 (1979); see Shade Foods, Inc. 

v. Innovative Products Sales & Marketing, Inc., 78 Cal. App. 4th 

847, 879-80 (2000) (the covenant of good faith and fair dealing 

entails a duty to investigate properly submitted claims and the 

adequacy of the investigation is one of the most critical 

factors bearing on the insurer’s good faith). Thus, an 

insurer’s breach of the implied covenant of good faith and fair 

dealing is established if an insurer fails to properly 

investigate an insured’s claim. Egan, 24 Cal. 3d at 819; see

Jordan v. Allstate Ins. Co., 148 Cal. App. 4th 1062, 1074 (2007) 

(where an insurer denies coverage but a reasonable investigation 

would have disclosed facts showing the claim was covered, the 

insurer’s failure to investigate breaches its implied covenant). 

In the instant case, the allegations in the FAC are 

sufficient to state a claim for breach of the implied covenant 

of good faith and fair dealing. The FAC alleges that Burlington 

had a duty under the policy to investigate and defend the 

underlying claim and that it breached this duty by failing to 

properly and timely investigate and defend such claim. Thus, 

the FAC effectively alleges that Burlington breached the implied 

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covenant by withholding policy benefits without properly 

investigating Plaintiffs’ claim, i.e., Burlington breached the 

implied covenant by withholding policy benefits without proper 

cause. Such allegations are sufficient to survive a motion to 

dismiss. 

 For this reason, dismissal is not warranted with respect to 

this claim. 

2. Bad Faith Refusal to Provide Benefits 

 Burlington argues that Plaintiffs’ third,2

 fourth3 and sixth 

claims4

 for relief should be dismissed because the allegations 

supporting these claims are duplicative of the bad faith alleged 

in the implied covenant claim. 

 Although Plaintiffs’ third and fourth claims for relief are 

styled as claims for “Bad Faith Refusal To Provide Benefits And 

Services Due Under Insurance Policy” and “Bad Faith Refusal To 

Pay Benefits Due Under Insurance Policy,” these claims are more 

appropriately evaluated as claims for tortious breach of the 

implied covenant of good faith and fair dealing. See Hand v. 

 

2 Plaintiffs’ third claim for relief is titled “Tortious Or 

Bad Faith Refusal To Provide Benefits And Services Due Under 

Insurance Policy.” 

3

 Plaintiffs’ fourth claim for relief is titled “Tortious Or 

Bad Faith Refusal To Pay Benefits Due Under Insurance Policy.” 

4

 Plaintiffs’ sixth claim for relief is titled “Intentional 

Interference With Protective Property Interest.” 

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Farmers Ins. Exchange, 23 Cal. App. 4th 1847, 1854-55 (1994). 

Similarly, although Plaintiffs’ sixth cause of action is styled 

as a claim for “Intentional Interference With Protective 

Property Interest,” it is more appropriately evaluated as a 

claim for tortious breach of the implied covenant of good faith 

and fair dealing. This is because “‘tortious interference with 

a protected property interest’ is understood as a constituent 

component of the tort of breach of the covenant of good faith 

and fair dealing, rather than an independent cause of action. 

Valley Air Conditioning & Repair, Inc. v. Beneficial Life Ins. 

Co., 2007 WL 2758018, * 3 (E.D. Cal. 2007). 

For these reasons, Plaintiffs’ third, fourth and sixth 

claims for relief are dismissed. 

3. Breach of Fiduciary Duty 

 Burlington argues that dismissal of this claim is 

appropriate because California does not recognize a cause of 

action for breach of fiduciary duty arising out of the insurerinsured relationship. 

 The insurer-insured relationship is not a true fiduciary 

relationship; rather, it is a relationship often characterized 

by unequal bargaining power in which the insured must depend on 

the good faith and performance of the insurer. Vu v. Prudential 

Property & Casualty Ins. Co., 26 Cal. 4th 1142, 1150-51 (2001). 

“This characteristic has led the courts to impose special and 

heightened’ duties, but [w]hile these special duties are akin 

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to, and often resemble, duties which are also owed by 

fiduciaries, the fiduciary-like duties arise because of the 

unique nature of the insurance contract, not because the insurer 

is a fiduciary.” Id. at 1151 (quotation marks omitted, emphasis 

in original); see Tran v. Farmers Group, Inc., 104 Cal. App. 4th 

1202, 1212 (2002) (observing that California courts have 

refrained from characterizing the insurer-insured relationship 

as a fiduciary one and that an insurer’s breach of its 

“fiduciary-like duties” is adequately redressed by a claim for 

breach of the covenant of good faith and fair dealing implied in 

the insurance contract); see also Solomon v. North American Life 

& Cas. Ins. Co., 151 F.3d 1132, 1138 (9th Cir. 1998) (holding 

that while the insurer-insured relationship is fiduciary in 

nature, it does not provide for an independent action for common 

law breach of fiduciary duty).

 Accordingly, because the insurer-insured relationship does 

not provide for an independent cause of action for breach of 

fiduciary duty, this claim is dismissed. See Almon v. State 

Farm Fire & Cas. Co., 724 F. Supp. 765 (S.D. Cal. 1989) 

(“California law does not recognize an action for breach of 

fiduciary duty between an insured and an insurer.”); see also

Valley Air Conditioning & Repair, 2007 WL 2758018 at * 2. 

4. Intentional Infliction of Emotional Distress 

 Defendant argues that dismissal of this claim is 

appropriate because the FAC does not allege that Burlington 

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committed acts that were “so extreme as to exceed all bounds of 

that usually tolerated in a civilized community.”5

“The elements of a prima facie case for the tort of 

intentional infliction of emotional distress are: (1) outrageous 

conduct by the defendant; (2) the defendant’s intention of 

causing or reckless disregard of the probability of causing 

emotional distress; (3) the plaintiff’s suffering severe or 

extreme emotional distress; and (4) actual and proximate 

causation of the emotional distress by the defendant’s 

outrageous conduct.” Fletcher v. Western National Life Ins. 

Co., 10 Cal. App. 3d 376, 394 (1970); Ross v. Creel Printing & 

Publishing Co., 100 Cal. App. 4th 736, 744-45 (2002). To 

support a claim for intentional infliction of emotional distress 

against an insurer, the plaintiff must allege conduct exceeding 

all bounds usually tolerated by a decent society especially 

calculated to cause mental distress of a very serious kind. 

Christensen v. Superior Court, 54 Cal. 3d 868, 904-05 (1991). 

Mere “delay or denial of insurance claims is not sufficiently 

outrageous to state a cause of action for intentional infliction 

of emotional distress.” Coleman v. Republic Indem. Ins. Co., 

132 Cal. App. 4th 403, 417 (2005). 

 

5

 This claim is only alleged against Burlington by Pablo 

Sanchez. 

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In the present case, the FAC alleges that Burlington knew 

that Plaintiffs were relying upon the benefits owed under the 

policy and that Burlington acted outrageously, with the intent 

of inflicting severe emotional distress, by wrongfully 

withholding these benefits. Such pleading is insufficient to 

state a claim for intentional infliction of emotional distress. 

This is because the conduct alleged is not the type of conduct 

that is so outrageous that it exceeds all bounds of that usually 

tolerated by a civilized community. Additionally, the pleading 

in this regard is deficient because there is no allegation that 

Pablo Sanchez suffered severe or emotional distress. 

For these reasons, this claim is dismissed. 

5. Deceit 

 Burlington argues that dismissal of this claim is 

appropriate because the fraud allegations in the FAC do not 

satisfy the heightened pleading requirements of Rule 9(b). 

 In diversity cases, federal courts will look to state law 

to determine whether the elements of fraud have been pled 

sufficiently to state a cause of action. Vess v. Ciba-Geigy 

Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). However, in 

state-law causes of action, federal courts will follow Rule 

9(b)’s requirement that the circumstances of the fraud must be 

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stated with particularity. Id.6 Rule 9(b) imposes a heightened 

pleading requirement for fraud allegations in order to safeguard 

defendant’s reputation and goodwill from improvident charges of 

wrongdoing. Id. at 1104. 

 Under California law, “‘[t]he elements of fraud, which give 

rise to the tort action for deceit, are (a) misrepresentation 

(false representation, concealment, or nondisclosure); (b) 

knowledge of falsity (or ‘scienter’); (c) intent to defraud, 

i.e., to induce reliance; (d) justifiable reliance; and (e) 

resulting damage.’” Lazar v. Superior Court, 12 Cal. 4th 631, 

638 (1996); Small v. Fritz Companies, Inc., 30 Cal. 4th 167, 173 

(2003); City Solutions, Inc. v. Clear Channel Communications, 

365 F.3d 835, 839 (9th Cir. 2004). Promissory fraud is a 

subspecies of fraud and deceit and where a promise is made 

without the intention to perform, there is an implied 

misrepresentation of fact that may be actionable fraud. Lazar,

12 Cal. 4th at 638. “An action for promissory fraud may lie 

where a defendant fraudulently induces the plaintiff to enter 

into a contract.” Id.

 

6 Rule 9(b) states that “[in] all averments of fraud or 

mistake, the circumstances constituting fraud or mistake shall 

be stated with particularity. Malice, intent, knowledge, and 

other condition of mind of a person may be averred generally.” 

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 “Federal Rule of Civil Procedure 9(b) requires a pleader 

of fraud to detail with particularity the time, place, and 

manner of each act of fraud, plus the role of each defendant in 

each scheme.” Lancaster Cmty. Hosp. v. Antelope Valley Hosp. 

Dist., 940 F.2d 397, 405 (9th Cir. 1991). Allegations of fraud 

should specifically include “an account of the time, place, and 

specific content of the false representations as well as the 

identities of the parties to the misrepresentations.” Swartz v. 

KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007); see Vees v. CibaGeigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments 

of fraud must be accompanied by ‘the who, what, when, where, and 

how’ of the misconduct charged”). In alleging fraud, “‘a 

plaintiff must set forth more than the neutral facts necessary 

to identify the transaction. The plaintiff must set forth what 

is false or misleading about a statement, and why it is false.’” 

Id. (emphasis in original) (quoting In re GlenFed, Inc. Sec. 

Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), superseded 

by statute on other grounds as stated in Marksman Partners, L.P. 

v. Chantal Pharm. Corp., 927 F. Supp. 1297, 1309 (C.D. Cal. 

1996)). “Rule 9(b) ‘requires the identification of the 

circumstances constituting fraud so that the defendant can 

prepare an adequate answer from the allegations.’” Schreiber 

Distributing Co., 806 F.2d at 1400; Swartz, 476 F.3d at 764. 

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Burlington argues that the allegations in the FAC are 

insufficient to support a cognizable claim for deceit because 

the circumstances of deceit are not pled with particularity as 

required by Rule 9(b). The court agrees. The allegations in 

the FAC are insufficient to state a claim for deceit because 

there is no account of the time, place, and specific content of 

the false or misleading representations. Nor do the allegations 

sufficiently identify who actually made the representations or 

explain why such representations were false or misleading. 

Rather, the allegations refer generally to “defendants” without 

attributing any specific misconduct to Burlington and simply 

state that at the time the insurance policy was issued, 

“defendants” made promises to provide benefits to Plaintiffs, 

which “defendants” had no intention of performing. Such 

pleading is insufficient to satisfy the heightened pleading 

requirements of Rule 9(b). For these reasons, this claim is 

dismissed. 

6. Declaratory Relief 

 Defendant argues that dismissal of this claim is 

appropriate because the issues raised therein will be resolved 

by the breach of contract claim. 

 28 U.S.C.A. § 2201(a) states, in relevant part, that “any 

court of the United States, upon the filing of an appropriate 

pleading, may declare the rights and other legal relations of 

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any interested party seeking such declaration, whether or not 

further relief is or could be sought. Any such declaration 

shall have the force and effect of a final judgment or decree 

and shall be reviewable as such.” “[W]hen other claims are 

joined with an action for declaratory relief (e.g., bad faith, 

breach of contract ... ), the district court should not, as a 

general rule, remand or decline to entertain the claim for 

declaratory relief.” American Cas. Co. of Reading, Pennsylvania 

v. Krieger, 181 F.3d 1113, 1119 (9th Cir. 1999); Government 

Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 

1998); Snodgrass v. Provident Life and Acc. Ins. Co., 147 F.3d 

1163, 1167 (9th Cir. 1998). 

 For this reason, dismissal is not warranted with respect to 

this claim. 

III. CONCLUSION 

 For the reasons stated above, the motion to dismiss is 

GRANTED in part and DENIED in part. Dismissal is DENIED with 

respect to Plaintiffs’ second and ninth claims for relief and is 

GRANTED with respect to Plaintiffs’ third, fourth, fifth, sixth, 

seventh and eighth claims for relief. While Plaintiffs have the 

option of moving to amend to address issues raised herein, the 

Court is not inclined to permit duplicative pleadings wherein 

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the same essential claims are made under different theories 

unless some basis therefore can be established. 

 IT IS SO ORDERED. 

 ENTERED this 24th day of October, 2007. 

 s/RALPH R. BEISTLINE 

 UNITED STATES DISTRICT JUDGE 

Case 2:07-cv-00894-JAM-DAD Document 16 Filed 10/25/07 Page 18 of 18