Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-03178/USCOURTS-cand-5_05-cv-03178-1/pdf.json

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

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1

 This disposition is not designated for publication and may not be cited.

2

 Because Plaintiffs’ previously filed a first amended complaint, the Court construes the

instant motion as seeking leave to file a second amended complaint.

Case No. C 05-03178 JF 

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

**E-Filed 9/6/06**

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

EDUARDO CECENA, et al.,

 Plaintiffs,

 v.

ALLSTATE INSURANCE COMPANY, et al.,

 Defendants.

Case Number C 05-03178 JF

ORDER1 GRANTING IN PART AND

DENYING IN PART PLAINTIFFS’

MOTION FOR LEAVE TO FILE

SECOND2 AMENDED COMPLAINT

[re: docket no. 38]

Plaintiffs Eduardo Cecena and Maria Cecena move for leave to file an amended

complaint. Defendant Allstate Insurance Company (“Allstate”) opposes the motion. The Court

heard oral argument on September 1, 2006. For the reasons set forth below, the motion will be

granted in part and denied in part.

Case 5:05-cv-03178-JF Document 49 Filed 09/06/06 Page 1 of 10
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3

 Plaintiffs are, and for all relevant times have been, residents of the State of California. 

Allstate is, and for all relevant times has been, a corporation organized and existing under the

laws of the State of Illinois, with its principal place of business in Northbrook, Illinois. Romero

is, and for all relevant times has been, a resident of the State of California.

2

Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

I. BACKGROUND

On February 15, 2005, Plaintiffs filed suit in the San Benito Superior Court against

Allstate, Michael Romero (“Romero”), and Does One through One-Hundred, alleging claims for

breach of contract, bad faith and negligence.3 See San Benito Superior Court Case No. CU-05-

00019; see also Complaint, ¶¶ 6-15. Plaintiffs’ claims stem from Allstate’s alleged failure timely

to timely pay benefits owed to Plaintiffs under a homeowner’s insurance policy when Plaintiffs’

home sustained fire damage. Complaint, ¶¶ 8, 12. In addition, Plaintiffs allege that Romero, the

Allstate sales agent who serviced Plaintiffs’ policy, negligently breached his duty to advise

Plaintiffs of the coverage requirements for their home. Id., ¶ 14. On June 2, 2005, Defendants

separately demurred to the complaint. On July 14, 2005, the superior court sustained Allstate’s

demurrer with leave to amend and sustained Romero’s demurrer without leave to amend,

expressly dismissing the complaint in its entirety as to Romero. Notice of entry of the superior

court’s order was filed by Defendants on July 25, 2005.

On July 26, 2005, Plaintiffs filed a first amended complaint (“FAC”) in the superior

court. Plaintiffs again named Romero as a defendant, alleging new claims against him for fraud

and negligent misrepresentation. See FAC, ¶¶ 29-44. Plaintiffs acknowledged that

“[t]echnically, [they] should have sought Leave to Amend from the court” before filing the new

claims against Romero. Motion to Remand, at 2. Nonetheless, Plaintiffs maintained that their

intent in including new claims was to “save judicial resources.” Id. On August 5, 2005, Allstate

removed the action to this Court pursuant to 28 U.S.C. § 1441(a). On August 16, 2005, Romero

moved to strike the FAC as to the claims brought against him, and Plaintiffs moved for remand. 

On November 2, 2005, this Court issued an Order granting Romero’s motion to strike and

denying Plaintiffs’ motion for remand. 

A settlement conference was held between the parties on March 1, 2006 before

Case 5:05-cv-03178-JF Document 49 Filed 09/06/06 Page 2 of 10
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4

 Claims four and five were dismissed by this Court in its Order dated November 2, 2005.

3

Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

Magistrate Judge Howard R. Lloyd. The case did not settle. Fact discovery in this case is set to

close on October 6, 2006, and a jury trial is scheduled for January 12, 2007. 

On June 26, 2006, Plaintiffs filed the instant motion for leave to file a second amended

complaint. Plaintiffs’ allege eleven additional claims for relief in their proposed amended

complaint. Plaintiffs’ Points & Authorities in Support of Motion for Leave to File a First

Amended Complaint, Ex. A (hereinafter “SAC”). As noted above, Plaintiffs’ FAC asserted

claims for (1) breach of contract, (2) bad faith, (3) promissory fraud, (4) fraud, and (5) negligent

misrepresentation.4 Plaintiffs’ proposed amended complaint asserts the following claims for

relief: (1) breach of contract, (2) bad faith: policy sale, (3) bad faith: claims adjusting, (4)

negligence, (5) violation of Business and Professions Code § 17200, (6) fraud and conspiracy, (7)

deceit, (8) promissory fraud, (9) negligent misrepresentation, (10) violations of California

Insurance Code §§ 10102-10103, (11) violation of the Consumers Legal Remedies Act, (12)

violation of the Elder Abuse and Dependent Adult Civil Protection Act, (13) violation of the

Unruh Civil Rights Act, and (14) violations of California Insurance Code §§ 790.02 & 790.025. 

Id. Plaintiffs contend that they have amended their complaint as a result of “facts acquired

and/or understood in discovery, and research into additional legal theories.” SAC, 2. Plaintiffs

allege that such facts include Allstate’s use of sales prices in calculating the actual cash value

(“ACV”) amount of damaged personal property, exclusion of shipping charges from the ACV

amount, and refusal to pay for Plaintiffs’ damaged old redwood. Id. at Ex. A. 

II. DISCUSSION

Motions for leave to amend are governed by Federal Rule of Civil Procedure 15(a), which

provides that “leave shall be freely given when justice so requires.” In deciding whether to grant

leave to amend, the Court will consider several factors, including: (1) undue delay by the party

seeking the amendment; (2) prejudice to the opposing party; (3) bad faith; (4) futility of

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

amendment; and (5) whether the party previously has amended its pleadings. Bonin v. Calderon,

59 F.3d 815, 845 (9th Cir. 1995). The Court has discretion in deciding whether to grant leave to

amend, but it “‘must be guided by the underlying purpose of Rule 15—to facilitate decision on

the merits rather than on the pleadings or technicalities.’” DCD Programs, Ltd. v. Leighton, 833

F.2d 183, 186 (9th Cir. 1987) (quoting United States v. Webb, 655 F.2d 977, 979 (9th Cir.

1981)). Generally, the policy of granting leave to amend is to be applied with extreme liberality. 

Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990); see also Griggs

v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999) (noting that inferences should be

drawn “in favor of granting the motion”). 

A. Undue Delay

Allstate contends that the Plaintiffs have delayed unduly bringing this motion. An

amending party’s delay in seeking to amend its pleadings is not, by itself, sufficient to justify

denying a motion for leave to amend. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708,

712-13 (9th Cir. 2001). Courts are more willing to conclude that delay is prejudicial when facts

were previously available and no reason is given for their exclusion from antecedent complaints. 

Chodos v. W. Pub. Co., Inc., 292 F.3d 992, 1003 (9th Cir. 2002). Plaintiffs assert that they

engaged in discovery during the months of March, April and May from which they learned facts

that were not previously available to them, including the specific details of Allstate’s ACV

calculations. As a general matter, the Court concludes that Plaintiffs have offered sufficient

reasons for the timing of their motion to amend

B. Bad Faith 

Bad faith is another factor to be considered when evaluating whether to grant leave to

amend. Bonin, 59 F.3d at 845. Bad faith often is another aspect of undue delay. See Swanson v.

Babbitt, 3 F.3d 1348, 1354 (9th Cir. 1993) (noting that a deliberate design to delay constitutes

bad faith); see also United States v. Beamon, 992 F.2d 1009, 1013 (9th Cir. 1993) (noting that in

cases of bad faith, the reasons for delay may well control). The timing of a request to amend

when considered in light of the reasons offered for the delay in seeking the request may disclose

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

that the moving party merely is seeking to delay proceedings. Id.; See also Zivkovic v. S.Cal.

Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (noting prejudicial undue delay when the

motion to amend was filed three days prior to the close of discovery). In the instant case,

because five additional weeks of discovery remain as of the hearing date and Plaintiffs’ have

offered a reasonable explanation for their delay in filing the motion, there is no evidence that the

Plaintiffs have acted in bad faith.

C. Undue Prejudice

Undue prejudice to the opposing party is given the greatest weight in evaluating a motion

for leave to amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir.

2003). Prejudice may exist if the amendment will result in significant delays in the resolution of

the dispute because the addition of new claims will increase the scope and complexity of the

litigation or because the amendment will require the court to reopen discovery. See In re Fritz

Companies Securities Litigation, 282 F.Supp. 2d 1105, 1109 (N.D. Cal. 2003). Nonetheless,

absent a showing of prejudice by the opposing party, or a strong demonstration of any of the

remaining factors, there is a presumption in favor of granting leave to amend. Eminence, 316

F.3d at 1052. 

Allstate argues that it will be prejudiced if the Plaintiffs are permitted to amend their

complaint because discovery is scheduled to close on October 6, 2006, thereby resulting in only

five weeks of fact discovery after this Court hears oral argument on the instant motion. Allstate

also contends that it will take at least five weeks for a Rule 12(b)(6) motion with respect to the

new claims to be filed and heard, meaning that there will be no operative complaint on file at the

time discovery closes. Plaintiffs respond that Allstate has been aware of the proposed amended

complaint for the past sixty days and thus has had time to establish defenses to the new claims

and to engage in further discovery. Additionally, because discovery will remain open for five

weeks, the Court would not be required to reopen discovery if it were to grant Plaintiffs’ motion. 

Because a number of the additional claims in the proposed amended complaint are based upon

facts previously alleged by Plaintiffs, as supplemented with specific additional facts learned in

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

discovery, the Court concludes that Allstate will not be unduly prejudiced if some of the claims

are allowed to proceed. At the same time, some of Plaintiffs’ proposed new claims, such as

claim twelve for violation of the Elder Abuse and Dependent Adult Civil Protection Act and

proposed claim thirteen for violation of the Unruh Civil Rights Act would greatly increase the

scope and complexity of the litigation and would require extensive additional discovery, thereby

prejudicing Allstate. Accordingly, leave to amend will not be granted as to those claims.

D. Futility and Previous Amendments

The general rule that parties are allowed to amend their pleadings does not apply to

actions in which the amendment would be an exercise in futility, or in which the amended

complaint would also be subject to dismissal. Fritz, 282 F.Supp. 2d at 1111 (citing Steckman v.

Hart Brewing, Inc., 143 F.3d 1293, 1297 (9th Cir. 1998)). The court’s discretion to deny

amendment as futile is particularly broad when the plaintiff has been given leave to amend

previously. Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir. 2004). A proposed

amendment is futile if it fails to state a claim under the principles employed by the court when

deciding a Rule 12(b)(6) motion to dismiss. Jones v. Cmty. Redevelopment Agency, 733 F.2d

646, 650 (9th Cir. 1984). A claim may be dismissed pursuant to Rule 12(b)(6) if it asserts a legal

theory that is not cognizable as a matter of law, or if it fails to allege sufficient facts to support

cognizable legal claims. SmileCare Dental Group v. Delta Dental Plan of Cal., 88 F.3d 780, 782

(9th Cir. 1996). 

Allstate argues that all of Plaintiffs’ proposed amendments are futile. For the reasons set

forth below, the Court finds that five of Plaintiffs’ proposed claims for relief are futile because

they fail to state a claim upon which relief may be granted.

As noted above, Plaintiffs filed a FAC in San Benito Superior Court asserting claims

against Romero, a defendant who previously had been dismissed from the case with prejudice. 

In its November 2, 2005 Order granting Romero’s motion to strike, this Court held that Plaintiffs

had defied the superior court’s orders by filing a FAC alleging new claims against Romero for

fraud and negligent misrepresentation, and that these claims had been expressly prohibited by the

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5

 In light of the preceding discussion, the Court need not address whether proposed claim

six for fraud and conspiracy and proposed claim nine for negligent misrepresentation also fail to

meet the Rule 9 standard.

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

state court. Nonetheless, Plaintiffs’ again allege two claims for relief against Romero. The sixth

claim alleges that Romero committed fraud and conspiracy and the ninth claim alleges negligent

misrepresentation by Romero. Because these two claims are substantially similar to the claims

that this Court and the state court dismissed previously, they may not be revived here. 

Allstate contends that Plaintiffs’ proposed claim eleven for violation of the Consumers

Legal Remedies Act (“CLRA”) is futile because California cases have held that insurance is

neither a good nor a service. This Court agrees. Because Plaintiffs cannot maintain a claim

under the CLRA, leave to amend will be denied as to claim eleven.

Allstate contends further that Plaintiffs’ proposed fraud claims fail to satisfy Federal Rule

of Civil Procedure 9(b) which requires a party to plead fraud with particularity. Plaintiffs’

proposed seventh claim for deceit and the proposed eighth claim for promissory fraud must meet

this heightened pleading standard.5 Miscellaneous Serv. Workers Local # 427 v. Philco-Ford

Corp., 661 F.2d 776, 782 (9th Cir. 1981) (noting that Rule 9 requires a plaintiff averring fraud or

deceit to state the circumstances constituting such fraud with particularity). Reference in

pleadings to circumstances constituting fraud usually requires the claimant to allege at minimum

the identity of the person who made the fraudulent statement, and the time, place and content of

the misrepresentation. In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547 n.7 (9th Cir. 1994)

abrogation on other grounds recognized by 253 F.3d 423, 429 (9th Cir. 2001). In their proposed

seventh claim for deceit, Plaintiffs allege that “Allstate concealed from Plaintiffs the nature and

extent of ALE benefits owed, and the fact that if they were entitled to be reimbursed for

engineering and architectural fees.” SAC, 21. This allegation does not plead deceit with

sufficient particularity. The proposed eighth claim for promissory fraud alleges that “Allstate

issued a policy, and in doing so, impliedly represented its willingness to pay for covered damages

arising from a fire to their home. The true facts were that Allstate had no intention of fully

paying benefits to Plaintiffs.” SAC, 21-22. This allegation also fails to plead fraud with

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

sufficient particularity. In light of the impending close of discovery, leave to amend these claims

in Plaintiffs’ amended complaint will be denied. 

As to the remaining claims in the proposed amended complaint, Allstate contends that

Plaintiff’s new allegations are not supported by actual evidence obtained during discovery. As

the motion at issue is for leave to file an amended complaint, it is inappropriate for the Court to

weigh evidence. In determining whether Plaintiffs’ amendments are futile, the Court must

assume the truth of the material facts as alleged in the complaint. Jackson v. Birmingham Bd. of

Educ., 125 S.Ct. 1497, 1502-03 (2005) (evaluating a dismissal under Rule 12(b)(6)); see also

Jones, 733 F.2d at 650 (holding that the Rule 12(b)(6) standard is to be employed in determining

the futility of a Rule 15(a) amendment). 

For reasons state above the Court will exercise its discretion and grant Plaintiffs’ motion

for leave to file an amended complaint with regard to the proposed second (bad faith: policy

sale), fourth (negligence), fifth (violation of Business & Professions Code § 17200), tenth

(violations of California Insurance Code §§ 10102-10103) and fourteenth (violations of

California Insurance Code §§ 790.02 & 790.025) claims for relief. With respect to the nine

remaining claims for relief, the Court will deny Plaintiffs’ motion for leave to file an amended

complaint. 

III. ORDER

Good cause therefore appearing, IT IS HEREBY ORDERED that the motion for leave to

file an amended complaint is GRANTED IN PART and DENIED IN PART as set forth above. 

DATED: September 6, 2006

_________________________ 

JEREMY FOGEL

United States District Judge

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

This Order has been served upon the following persons:

Michael A. Barnes mbarnes@sonnenschein.com, msaplala@sonnenschein.com

Sonia Renee Martin smartin@sonnenschein.com, clakes@sonnenschein.com; 

msaplala@sonnenschein.com

John A. Shepardson johnshepardson@hotmail.com

Jessica Lou Woelfel jwoelfel@sonnenschein.com

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Case No. C 05-03178 JF

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LEAVE TO FILE

AMENDED COMPLAINT

(JFEX1)

Case 5:05-cv-03178-JF Document 49 Filed 09/06/06 Page 10 of 10