Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02197/USCOURTS-caed-2_05-cv-02197-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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This motion was determined suitable for decision without *

oral argument. L.R. 78-230(h). 

The caption has been amended to reflect the dismissal of 1

Defendant Allstate California Insurance Company (Order, Jan. 26,

2006, at 4-6), and the dismissal of the Doe Defendants (Status

Order, Feb. 24, 2006, at 1-2.) 

All references to “Rules” are to the Federal Rules of 2

Civil Procedure unless otherwise noted.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

DON MAFFEI, JR.; SHELLY MAFFEI; ) 02:05-cv-2197-GEB-PAN(JFM)

RODNEY NEW; JUDITH ANN NEW; )

MIKE LUSK; CAROL ANN LUSK; )

JOHN BRICKERHOFF, )

)

Plaintiffs, )

)

v. ) ORDER 

*

)

ALLSTATE INSURANCE COMPANY; )

ALLSTATE PROPERTY AND CASUALTY )

INSURANCE COMPANY; ALLSTATE LIFE )

INSURANCE COMPANY, )

)

Defendants. )

1

)

Defendants move for dismissal of Plaintiffs’ fraud claim

under Federal Rule of Civil Procedure 12(b)(6). (Defs.’ Mot. to 2

Dismiss Pls.’ First Am. Compl. (“Defs.’ Mot.”) at 4.) Plaintiffs

oppose the motion. 

Case 2:05-cv-02197-GEB-EFB Document 21 Filed 05/19/06 Page 1 of 8
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FACTUAL ALLEGATIONS IN COMPLAINT

Don Maffei Jr., Rodney New, Mike Lusk, and John Brinckerhoff

(“Plaintiffs”) worked for Allstate Insurance Company, Allstate

Property and Casualty Insurance Company, and Allstate Life Insurance

Company (“Defendants”) from approximately 1998 through 2005. (Pl.’s

First Am. Compl. ¶¶ 9-12, 38.) In 2001 and 2002, Defendants

instructed Plaintiffs to utilize certain practices to move insurance

policy holders from lower to higher mileage bands. (Id. ¶¶ 13, 18-

21.) Defendants also assured Plaintiffs “that the placement of a

customer into [a higher] mileage band rating [utilizing these

practices] was legal and proper as well as necessary to the success of

the company.” (Id. ¶ 22.) Defendants subsequently learned these

practices were illegal and/or improper, but did not inform Plaintiffs

about the illegality and/or impropriety of these practices. (Id.

¶¶ 51-52.) 

A lawsuit was filed against Defendants concerning their

illegal and/or improper mileage band practices, and the California

Department of Insurance investigated or was requested to investigate

Defendants. (Id. ¶¶ 28-29.) Defendants conducted their own

investigation into the mileage band practices, during which corporate

security interviewed Plaintiffs about whether they had moved policy

holders from lower to higher milage bands. (Id. ¶¶ 31-34.) 

Plaintiffs told corporate security they had moved policy holders into

higher mileage bands utilizing the practices endorsed by Defendants. 

(Id. ¶ 33.) Plaintiffs suffered “great emotional and mental distress”

as a result of their participation in the interviews because “their

personal integrity was attacked.” (Id. ¶ 51.) 

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In February 2005, Defendants told Plaintiffs their

employment was terminated “for engaging in improper and/or illegal

mileage band classification practices, specifically that they were

being terminated for ‘violating company policy regarding mileage

bands.’” (Id. ¶ 38.) Plaintiffs lost wages, benefits, and other

types of employment compensation, and suffered emotional and mental

injury as a result of their terminations. (Id. ¶¶ 54, 56-57.) 

PROCEDURAL BACKGROUND

In September 2005, Plaintiffs filed this lawsuit against

Defendants asserting claims for wrongful termination in violation of

public policy, intentional infliction of emotional distress, and

fraud. (See Order, Jan. 26, 2006, at 3.) Defendants moved to dismiss

the fraud claim, arguing Hunter v. Upright, Inc., 6 Cal. 4th 1174

(1994) precludes an employee from asserting a fraud claim for

misrepresentations that lead to the termination of employment. (See

id. at 7.) Plaintiffs countered that their fraud claim was

distinguishable from Hunter and analogous to Lazar v. Rykoff-Sexton,

Inc., 12 Cal. 4th 631 (1996). (See id.) An Order filed January 26,

2006, (“January 26 Order”) considered both cases in light of the

allegations in Plaintiffs’ Complaint: 

Hunter and Laz[a]r reveal employees can maintain a

cause of action for fraud against their employer

only if they allege all of the elements of such a

claim, including detrimental reliance, and if they

allege damages distinct from the termination

itself. In this action, [] Plaintiffs allege

Defendants misrepresented the legality and/or

propriety of mileage band practices and then fired

them for engaging in illegal and/or improper

mileage band practices. [] Plaintiffs further

allege that as a result of their termination, they

have been deprived of compensation and benefits

and have suffered emotional distress. 

[] Plaintiffs’ fraud claim is distinguishable from

that of the employee in Lazar, and is analogous to

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that of the employee in Hunter. Unlike the

misrepresentation in Lazar, the alleged

misrepresentation at issue occurred during the

employment relationship, when Defendants had

“coercive power” over [] Plaintiffs and could

terminate their employment. Thus, like the

employer in Hunter, Defendants “simply employed a

falsehood to do what [they] otherwise could have

accomplished directly,” i.e. fire [] Plaintiffs. 

Therefore, [] Plaintiffs “did not rely to [their]

detriment on the [alleged] misrepresentation”

because Defendants could have fired them for a

reason unrelated to the misrepresentation. 

Furthermore, like the employee in Hunter, []

Plaintiffs seek damages resulting from the

termination itself, i.e. lost wages and benefits. 

Unlike the employee in Lazar, [] Plaintiffs have

not alleged they suffered damages distinct from

their wrongful termination claim.

(Id. at 9-10 (citations omitted).) The January 26 Order concluded

Plaintiffs had failed to state a claim for fraud because they had not

alleged detrimental reliance or damages distinct from the termination

itself. (Id.) Consequently, the fraud claim was dismissed, but

Plaintiffs were granted leave to file an amended complaint within

twenty days. (Id. at 16.) Plaintiffs timely filed an Amended

Complaint, and Defendants again moved to dismiss the fraud claim. 

DISCUSSION

Dismissal is appropriate under Rule 12(b)(6) if Plaintiffs

failed (1) to present a cognizable legal theory, or (2) to plead

sufficient facts to support a cognizable legal theory. Robertson v.

Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984). 

When considering a Rule 12(b)(6) dismissal motion, all material

allegations in the complaint must be accepted as true and construed

in the light most favorable to Plaintiffs. Scheuer v. Rhodes, 416

U.S. 232, 236 (1974); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,

337-38 (9th Cir. 1996). In addition, Plaintiffs are given the

benefit of every reasonable inference that can be drawn from the

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allegations in their complaint. Retail Clerks Int’l Ass’n v.

Shermahorn, 373 U.S. 746, 753 n.6 (1963). Accordingly, a motion to

dismiss must be denied “unless it appears beyond doubt that

[Plaintiffs] can prove no set of facts in support of [their] claim

which would entitle [them] to relief.” Conley v. Gibson, 355 U.S.

41, 45-46 (1957). 

Defendants argue “Plaintiffs have added only one new

allegation [to the fraud claim in their Amended Complaint]- that in

addition to lost wages and benefits flowing from their terminations,

they sustained ‘great emotional and mental anguish’ as a result of

being required to submit to corporate security interviews.” (Defs.’

Mot. at 6.) Defendants contend the exclusivity provisions of the

Workers’ Compensation Act (“WCA”) bar Plaintiffs from recovering

“emotional distress damages sustained as a result of the corporate

security interviews.” (Id.) 

The California Supreme Court has set forth a two-part test

to “determine whether a [claim] is barred by the exclusivity

provisions of the WCA.” People ex rel. Monterey Mushrooms, Inc. v.

Thompson, 136 Cal. App. 4th 24, 29 (2006) (citing Vacanti v. State

Comp. Ins. Fund, 24 Cal. 4th 800 (2001)). “A court is . . . first to

determine whether the alleged injury falls within the scope of the

exclusive remedy provisions.” Thompson, 136 Cal. App. 4th at 29. An

alleged injury falls within the scope of the exclusive remedy

provisions if it “aris[es] out of and in the course of employment.” 

Shoemaker v. Meyers, 52 Cal. 3d 1, 15 (1990). “Secondly, the court

[is to] determine whether the alleged acts or motives . . . fall

outside the risks encompassed within the compensation bargain.” 

Thompson, 136 Cal. App. 4th at 29. Alleged acts are within the

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In their Opposition, Plaintiffs state they “have alleged 3

emotional distress damages, including damage to their personal and

professional integrity,” and “damage to their reputation.” (Pl.’s

Opp’n at 3-4.) However, Plaintiffs only alleged that they “were

forced to participate in an investigation wherein their personal

and professional integrity was attacked causing them great

emotional and mental distress,” and that they “were caused great

emotional and mental anguish when they were forced to participate

in an investigation where their personal and professional integrity

was called into question.” (Pls.’ Am. Compl. ¶¶ 51, 56.)

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compensation bargain if they “are a normal part of the employment

relationship,” and alleged motives are within the compensation

bargain if they do not “violate a fundamental policy of the state.” 

Id. If the alleged injury falls within the scope of the exclusive

remedy provisions and the alleged acts and motives are within the

compensation bargain, “then the [claim] is barred by the exclusivity

provisions of the WCA.” Id. 

Plaintiffs’ fraud claim alleges Defendants misrepresented

the legality and/or propriety of the mileage band practices, thereby

forcing Plaintiffs to participate in corporate security interviews

and causing them to suffer emotional and mental distress. (Pls.’ 3

Am. Compl. ¶¶ 51, 56.) Applying the first part of the California

Supreme Court test to these allegations reveals Plaintiffs’ alleged

emotional injury arose out of and in the course of their employment. 

See Shoemaker, 52 Cal. 3d at 18 (stating “when an employee is

investigated . . . by the employer . . . the resulting physiological

stress and injury arises out of and in the course of employment”). 

As to the second part of the test, Defendants’ alleged acts were a

normal part of the employment relationship. See Vacanti, 24 Cal. 4th

at 821 (stating “typical employer actions, such as . . . employee

interrogation, are . . . a normal part of the employment

relationship”); Lamke v. Sunstate Equip. Co., 387 F. Supp. 2d 1044,

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1051 (N.D. Cal. 2004) (stating “the employer’s dealing with alleged

employee misconduct” is “closely connected to normal employer

activity”). In addition, Defendants’ alleged motive does not violate

a fundamental public policy of the state. Vacanti, 24 Cal. 4th

at 824 (holding “fraud requires only an ‘intent to induce’ another

‘to alter his position to his injury or risk’ and not an intent that

violates a public policy rooted in a constitutional, statutory, or

regulatory provision”). Therefore, the WCA bars Plaintiffs from

recovering any emotional distress damages sustained as a result of

the corporate security interviews. 

The remaining fraud allegations in Plaintiffs’ Amended

Complaint assert Defendants misrepresented the legality and/or

propriety of the mileage band practices and then fired Plaintiffs for

engaging in illegal and/or improper mileage band practices, thereby

depriving Plaintiffs of wages, benefits, and other types of

employment compensation, and causing them emotional and mental

distress. (Pls.’ Am. Compl. ¶¶ 50-58.) Defendants correctly note

these fraud allegations are exactly the same as those dismissed by

the January 26 Order for failure to state a claim. (See Order,

Jan. 26, 2006, at 10.) 

Consequently, Plaintiffs’ Amended Complaint does not cure

the deficiencies in their fraud claim. Therefore, Plaintiffs’ fraud

claim is dismissed without prejudice. If Plaintiffs can cure the

deficiencies in their fraud claim, Plaintiffs may file and serve a

second amended complaint within ten (10) days from the date this 

///

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Order is filed. Failure to amend within the time prescribed will

automatically convert the dismissal into a dismissal with prejudice. 

IT IS SO ORDERED. 

Dated: May 18, 2006

/s/ Garland E. Burrell, Jr.

GARLAND E. BURRELL, JR.

United States District Judge

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