Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-00917/USCOURTS-cand-4_05-cv-00917-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SECURIMETRICS, INC.,

Plaintiff,

v.

HARTFORD CASUALTY INSURANCE

COMPANY, 

Defendant.

 /

No. C 05-00917 CW

ORDER DENYING

DEFENDANT’S 

MOTION TO DISMISS

AND DENYING

DEFENDANT’S

MOTION TO STRIKE

PLAINTIFF’S CLAIM

FOR PUNITIVE

DAMAGES

Plaintiff SecuriMetrics, Inc. filed this lawsuit against

Defendant Hartford Casualty Insurance Company alleging that

Defendant failed to provide insurance coverage in bad faith and

breach of contract. Defendant moves pursuant to Federal Rule of

Civil Procedure 12(b)(6) to dismiss the complaint for failure to

state a claim upon which relief can be granted, and

Case 4:05-cv-00917-CW Document 21 Filed 07/21/05 Page 1 of 8
United States District Court

For the Northern District of California

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alternatively to strike Plaintiff’s request for punitive damages

under Federal Rule of Civil Procedure 12(f). Plaintiff opposes

the motion. This matter was heard on July 15, 2005. Having

considered the papers filed by the parties and oral argument on

the motion, the Court DENIES Defendant’s motion to dismiss and

its motion to strike Plaintiff’s request for punitive damages.

BACKGROUND

Plaintiff’s complaint alleges the following. Defendant

issued Plaintiff a written insurance policy, Policy No. 57 SBA

AT8252 (the Policy), for the period February 28, 2003 to

February 28, 2004. Complaint ¶ 2. The Policy covered damages

Plaintiff might incur for offenses that caused “personal or

advertising injury” arising out of Plaintiff’s business in the

United States during the policy period. The Policy also

required Defendant to defend Plaintiff in any suit seeking

damages for “personal and advertising injury.” Complaint ¶ 6. 

Plaintiff paid the Policy premium and satisfied all other

requirements of the Policy. Complaint ¶ 5. 

In or about October, 2003, Iridian Technologies, Inc.

(Iridian) filed a false counterclaim against Plaintiff, alleging

that Plaintiff was liable for damages because of a “personal and

advertising injury” caused by Plaintiff’s offenses in the United

States during the Policy period. Iridian’s claim was covered by

the Policy. Plaintiff made a timely demand on Defendant to

defend it against Iridian’s counterclaim, but Defendant refused. 

Complaint ¶ 7. At the time of Defendant’s refusal, it knew that

it was obliged to defend Plaintiff, and that it was violating

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its duty of good faith and fair dealing in refusing to do so. 

Complaint 

¶ 15. 

Plaintiff alleges causes of action for breach of written

contract and tortious breach of the implied covenant of good

faith and fair dealing, and seeks a declaratory judgment that

Defendant is obliged to defend Plaintiff. 

LEGAL STANDARD

I. Dismissal Under Rule 12(b)(6)

A motion to dismiss for failure to state a claim will be

denied unless it is “clear that no relief could be granted under

any set of facts that could be proved consistent with the

allegations.” Falkowski v. Imation Corp., 309 F.3d 1123, 1132

(9th Cir. 2002), citing Swierkiewicz v. Sorema N.A., 534 U.S.

506 (2002). All material allegations in the complaint will be

taken as true and construed in the light most favorable to the

plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898

(9th Cir. 1986). A complaint must contain a “short and plain

statement of the claim showing that the pleader is entitled to

relief.” Fed. R. Civ. P. 8(a). “Each averment of a pleading

shall be simple, concise, and direct. No technical forms of

pleading or motions are required.” Fed. R. Civ. P. 8(e). These

rules “do not require a claimant to set out in detail the facts

upon which he bases his claim. To the contrary, all the Rules

require is ‘a short and plain statement of the claim’ that will

give the defendant fair notice of what the plaintiff’s claim is

and the grounds on which it rests.” Conley v. Gibson, 355 U.S.

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41, 47 (1957).

II. Motion to Strike Under Rule 12(f)

Pursuant to Federal Rule of Civil Procedure 12(f), the

Court may strike from a pleading “any redundant, immaterial,

impertinent or scandalous matter.” Fed. R. Civ. P. 12(f). The

purpose of a Rule 12(f) motion is to avoid spending time and

money litigating spurious issues. Fantasy, Inc. v. Fogerty, 984

F.2d 1524, 1527 (9th Cir. 1993), reversed on other grounds, 510

U.S. 517 (1994). Matter is immaterial if it has no essential or

important relationship to the claim for relief plead. Id.

Matter is impertinent if it does not pertain and is not

necessary to the issues in question in the case. Id. Rule

12(f) motions to strike are "generally not granted unless it is

clear that the matter sought to be stricken could have no

possible bearing on the subject matter of the litigation." 

Rosales v. Citibank, Federal Sav. Bank, 133 F. Supp. 2d 1177,

1180 (N.D. Cal. 2001). 

DISCUSSION

I. Motion to Dismiss Under Rule 12(b)(6)

A. Breach of Contract and Declaratory Relief

Defendant argues that the breach of contract claim and

request for declaratory judgment should be dismissed, because

plaintiff did not attach a copy of the contract to the complaint

or set forth the contract terms verbatim. 

Defendant cites California State law and an unpublished

district court case for the proposition that a Plaintiff

pleading breach of contract must either attach a copy of the

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contract to the complaint or set forth the relevant contract

terms verbatim. See Otworth v. Southern Pacific Transportation

Co., 166 Cal. App. 3d 452, 459 (1985); Campbell v. Allstate Ins.

Cos., No. 95-1171, 1995 WL 376926, at *2 (C.D. Cal. May 17,

1995) (dismissing complaint under Rule 12(b)(6) for failure to

attach contract, citing California State law). However,

pleading is governed by Rule 8 of the Federal Rules of Civil

Procedure, not by State procedural requirements. Under Federal

Rule of Civil Procedure 8(a), a “short and plain statement of

the claim” suffices. The forms appended to the Federal Rules of

Civil Procedure note that “plaintiff may set forth the contract

verbatim in the complaint or plead it, as indicated, by exhibit,

or plead it according to its legal effect.” Fed. R. Civ. P.

Official Form 3, 12; see also 5 Charles Alan Wright & Arthur R.

Miller, Federal Practice & Procedure § 1235 (2004). These forms

are declared to be sufficient by Federal Rule of Civil Procedure

84. 

Here, Plaintiff has plead the “legal effect” of the

contract as required by Federal Rule of Civil Procedure 8, and

has alleged sufficient facts to enable Defendant to understand

and respond to its claims. The complaint alleges that the

Policy covered damages that Plaintiff incurred for offenses

causing “personal and advertising injury,” and that the Policy

required Defendant to defend Plaintiff in suits seeking damages

for such injury. The complaint further states that Iridian’s

counterclaim alleged “personal and advertising injury” and was

covered by the Policy, but that Defendant refused to defend

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Plaintiff against the counterclaim. Federal law does not

require Plaintiff to recite the contract terms verbatim or to

attach a copy of the contract to the complaint. 

Therefore, Defendant’s motion to dismiss the first claim

for breach of contract and the request for declaratory judgment

is denied. 

B. Breach of Implied Covenant of Good Faith and Fair

Dealing

Defendant argues that Plaintiff’s claim for breach of

implied covenant of good faith and fair dealing should be

dismissed because Plaintiff does not allege facts necessary to

support a “bad faith” claim.

Under California law, “[b]ad faith implies unfair dealing

rather than mistaken judgment or poor prognostication.” Critz

v. Farmers Ins. Group, 230 Cal. App. 2d 788, 796 (1964),

disapproved on other grounds, Crisci v. Security Ins. Co., 66

Cal. 2d 425 (1967). Thus, “the ultimate test of liability . . .

is whether the refusal to pay policy benefits was unreasonable.” 

Austero v. National Cas. Co., 84 Cal. App. 3d 1, 32 (1978).

Here, Defendant argues that Plaintiff has failed to plead

any facts showing the unreasonableness of Defendant’s refusal to

defend. However, the complaint alleges not only that Defendant

erred in denying coverage, but that it “knew that it was

obligated to defend SecuriMetrics, but nonetheless failed and

refused to do so,” and that it “knew that it was acting in

violation of its duty of good faith and fair dealing.” 

Plaintiff’s allegations that Defendant knowingly refused to

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fulfill its obligations demonstrate unreasonableness, not mere

“mistaken judgment,” and so support a claim of bad faith.

Therefore, Defendant’s motion to dismiss the second cause

of action for breach of the implied covenant of good faith and

fair dealing is denied. 

II. Motion to Strike Under Rule 12(f)

Defendant contends that Plaintiff’s request for punitive

damages should be stricken as “redundant, immaterial,

impertinent or scandalous,” because Plaintiff fails to plead

facts sufficient to support such a request. 

Under the California Civil Code, punitive damages are

awarded only where the “defendant has been guilty of oppression,

fraud, or malice. . .” Cal. Civil Code § 3294; see also Silberg

v. California Life Ins. Co., 11 Cal. 3d 452, 462-63 (1974)

(holding that defendant’s breach of implied covenant of good

faith and fair dealing, without separate showing of intent to

injure plaintiff, did not justify punitive damages award). 

Here, Defendant claims that Plaintiff has failed to allege

facts showing the “oppression, fraud or malice” required for an

award of punitive damages. However, as discussed above, the

complaint does not allege mere negligence by Defendant, but

instead claims that Defendant “knew it was acting in violation

of its duty of good faith and fair dealing” and “knew it was

obligated to defend SecuriMetrics, but nonetheless failed and

refused to do so.” Plaintiff’s request for punitive damages is

supported by its allegations of Defendant’s intentional refusal

to defend Plaintiff, and is not “redundant, immaterial,

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impertinent or scandalous matter.” 

Therefore, Defendant’s motion to strike Plaintiff’s request

for punitive damages is denied. 

CONCLUSION

For the foregoing reasons, Defendant’s motion to dismiss

the complaint and to strike Plaintiff’s request for punitive

damages (Docket #5) is DENIED. 

IT IS SO ORDERED.

Dated: 7/21/05 /s/ CLAUDIA WILKEN

CLAUDIA WILKEN

United States District

Judge

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