Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-01528/USCOURTS-cand-4_05-cv-01528-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Petition for Removal

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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

Jess B. Millikan (SB#095540)

Samuel H. Ruby (SB#191091)

BULLIVANT HOUSER BAILEY PC

601 California Street, Suite 1800

San Francisco, California 94108

Telephone: 415.352.2700

Facsimile: 415.352.2701

E-mail: jess.millikan@bullivant.com

E-mail: samuel.ruby@bullivant.com

Attorneys for Defendants:

THE TRAVELERS INSURANCE COMPANY

THE TRAVELERS INDEMNITY COMPANY

THE TRAVELERS INDEMNITY COMPANY OF 

 CONNECTICUT

THE ST. PAUL TRAVELERS COMPANIES, INC.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

OAKLAND DIVISION

RONALD BERNSTEIN, et al.,

Plaintiffs,

vs.

THE TRAVELERS INSURANCE 

COMPANY, et al.,

Defendants.

Case No.: C05-01528 (SBA)

ORDER 

[Docket No. 15]

Hearing Date: September 20, 2005

Time: 1:00 p.m.

Case 4:05-cv-01528-SBA Document 30 Filed 10/17/05 Page 1 of 8
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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

This matter comes before the Court on Defendants’ The Travelers Insurance Company, 

The Travelers Indemnity Company, The Travelers Indemnity Company of Connecticut, and The 

St. Paul Travelers Companies, Inc. (collectively “Defendants”) consolidated Rule 12 motions 

against Plaintiffs Ronald and Toni Bernstein, and United Signs, Inc. (“United Signs ”) 

(collectively “Plaintiffs”). In this motion Defendants seek: (a) to dismiss certain causes of 

action pursuant to Fed. R. Civ. P. 12(b)(6); (b) to strike certain allegations pursuant Fed. R. Civ. 

P. 12(f); and (c) to require a more definite statement pursuant to Fed. R. Civ. P. 12(e). The 

Court has considered all of the papers submitted and has heard oral argument. The Court finds 

that Defendants’ motion to strike should be GRANTED and Defendants’ motion to dismiss 

should be GRANTED with leave to amend. Defendants’ alternative motion for a more definite 

statement is DENIED as moot.

BACKGROUND

A. Facts1

Plaintiffs Ronald and Toni Bernstein wholly own the California corporation United 

Signs. Beginning in March 2001, United Signs’ building was damaged by water intrusion and 

mold. (First Amended Complaint (“FAC”) ¶ 11 et seq.) As a result, United Signs suspended its 

operations in the building and vacated the property in June 2001. (Id. at ¶ 14.) In May 2001, 

United Signs gave notice of claim to Defendants for repair costs and business interruption. (Id.

¶ ¶ 11-14.) As of February 2003, Defendants had paid to United Signs at least $376,387 in 

insurance payments. (Id. ¶ 24(c).) However, United Signs asserted it was owed additional 

monies. In accordance with the policy between United Signs and Defendants, the parties agreed 

to an independent appraisal, pursuant to Insurance Code § 2071. The appraisal award was 

issued on or about May 3, 2004 and ultimately established that in addition to the monies already 

paid to United Signs, Plaintiffs were due an additional payment of just under $225,000. (Id. ¶¶

26 & 32.) 

In December 2001, Harrison Construction, the party Plaintiffs allege is primarily 

 

1

 These facts are taken from Plaintiffs' First Amended Complaint.

Case 4:05-cv-01528-SBA Document 30 Filed 10/17/05 Page 2 of 8
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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

responsible for the water damage, brought a lawsuit against Plaintiffs in San Francisco Superior 

Court. (Id. ¶ 36.) Around that same time, Asbestos Management Group ("AMG") sued 

Plaintiffs to recover payments allegedly owed for the construction work it performed for 

Plaintiffs. (Id. ¶ 42.) Plaintiffs refused to pay AMG because the extensive damages AMG 

caused in its construction exceeded the amount ostensibly due them. (Id.) 

In January 2002, Plaintiffs brought an action in San Mateo Superior Court ("the 

tortfeasor action") against the adjoining landowner and agents they believed responsible for the 

water damage, and the Harrison Construction suit was eventually transferred to the San Mateo 

Superior Court. (Id. ¶ ¶ 29 & 36.) In September 2003, Defendants filed a complaint in 

intervention in the tortfeasor action, asserting their subrogation rights against Harrison 

Construction and other tortfeasors. (Id. ¶ 30.) Defendants settled the matter for $200,000. (Id. 

¶ 32.) Plaintiffs ultimately recovered against the tortfeasors for their non-covered/nonsubrogated damages. (Id. ¶ 33.)

Plaintiffs' policy with Defendants expired in September 2001, and Defendants issued 

them a short-term policy in exchange for premium payments by Plaintiffs. (Id. ¶ 46.) In August 

2003, when Plaintiffs failed to make the required payments, Defendants sued Plaintiffs in San 

Mateo Superior Court for approximately $7,500 in unpaid insurance premiums. (Id. ¶ 45.) 

Plaintiffs did nothing in the action and Defendants obtained a default judgment against Plaintiffs 

in October 2003. (Id. ¶ 47.) In or about November 2004, that matter was finally resolved. (Id.)

B. Procedural History

On February 14, 2005, Plaintiffs filed a complaint against Defendants in Alameda 

County Superior Court which was then subsequently removed by Defendants to this Court on 

April 14, 2005 [Docket No. 1.] On May 26, 2005 Plaintiffs filed a First Amended Complaint 

(“FAC”) which alleged, among other things, claims for breach of insurance contract, breach of 

duty of good faith and fair dealing, negligence, deceit and intentional infliction of emotional 

distress ("IIED"). (FAC ¶¶ 55-76.) Defendants now move pursuant to Federal Rule of Civil 

Procedure 12(f) to strike the allegations concerning the Defendants' lawsuit against Plaintiffs on 

the grounds that they are impertinent and immaterial. Defendants also move pursuant to Federal 

Case 4:05-cv-01528-SBA Document 30 Filed 10/17/05 Page 3 of 8
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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

Rule of Civil Procedure 12(b) to dismiss the claims for negligence, deceit, and IIED on the 

grounds that they barred under the statute of limitations, and lack essential elements.

MOTION TO STRIKE

Legal Standard

Under Federal Rule of Civil Procedure 12(f) the Court has the discretion to strike a 

pleading or portions thereof. Federal Sav. and Loan v. Gemini Management, 921 F.2d 241, 243 

(9th Cir. 1990). Rule 12(f) provides that a court “may order stricken from any pleading . . . any 

redundant, immaterial, impertinent or scandalous matter.” “‘Immaterial’ matter is that which 

has no essential or important relationship to the claim for relief or the defenses being pleaded.” 

Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir.1993). “‘Impertinent’ matter consists of 

statements that do not pertain, and are not necessary, to the issues in question. ” Id. “[T]he 

function of a Rule 12(f) motion to strike is to avoid the expenditure of time and money that must 

arise from litigating spurious issues by dispensing with those issues prior to trial . . . .” SidneyVinson v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983).

Analysis

In their Second Cause of Action, Plaintiffs allege that Defendants breached the implied 

covenant of good faith and fair dealing by, among other things, “suing plaintiffs.” (FAC ¶ 55.) 

That allegation relates to an action that Defendants filed to collect an unpaid premium. (Id. ¶¶ 

45-48.) Defendants move to strike the allegations concerning the collection action, arguing that 

as a matter of law, the allegations do not state a cause of action for breach of the implied 

covenant of good faith in fair dealing. 

At oral argument, Plaintiffs’ counsel clarified that the allegations regarding the 

collection action are not intended to state a cause of action, separate and independent from the 

other acts of bad faith alleged in the FAC. Rather, counsel clarified, they are intended merely as 

evidentiary allegations regarding Defendants’ state of mind. In response, Defendants argue that 

the allegations are not probative of any relevant state of mind issue. 

The Court finds that as mere evidentiary allegations the allegations are inessential to the 

pleading. Accordingly, the Court GRANTS Defendants’ motion to strike the allegations. 

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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

However, the Court reserves judgment on whether the alleged evidence may be probative of a 

relevant fact and therefore admissible at trial. The striking of the allegations from the pleading 

is without prejudice to either side’s position regarding the admissibility of the alleged evidence.

MOTION TO DISMISS

Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss should not be 

granted “unless 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). For 

purposes of such a motion, the complaint is construed in a light most favorable to the plaintiff 

and all properly pleaded factual allegations are taken as true. Jenkins v. McKeithen, 395 U.S. 

411, 421 (1969); Everest & Jennings, Inc. v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th 

Cir. 1994). All reasonable inferences are to be drawn in favor of the plaintiff. Knievel v. 

ESPN, 393 F.3d 1068, 1079-80 (9th Cir. 2005).

The court does not accept as true unreasonable inferences or conclusory allegations cast 

in the form of factual allegations. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 

1981); see In re Daou Systems, Inc., 411 F.3d 1006, 1013 (9th Cir. 2005) (“[C]onclusory 

allegations of law and unwarranted inferences will not defeat a motion to dismiss for failure to 

state a claim.”) (citations omitted).

When 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 Distrib. Co. v. ServWell Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). The court should consider factors 

such as “the presence or absence of undue delay, bad faith, dilatory motive, repeated failure to 

cure deficiencies by previous amendments, undue prejudice to the opposing party and futility of 

the proposed amendment.” Moore v. Kayport Package Express, 885 F.2d 531, 538 (9th Cir. 

1989). Of these factors, prejudice to the opposing party is the most important. See Jackson v. 

Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990) (citing Zenith Radio Corp. v. Hazeltine 

Research, Inc., 401 U.S. 321, 330-32 (1971)). Leave to amend is properly denied “where the 

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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

amendment would be futile.” DeSoto Yellow Freight Sys., 957 F.2d 655, 658 (9th Cir. 1992).

Analysis

A. Third Cause of Action (Negligence) and Fifth Cause of Action (IIED)

Defendants move to dismiss Plaintiffs’ Third Cause of Action (Negligence) and Fifth 

Cause of Action (IIED) on the grounds that they are barred by the statute of limitations. See

CCP § 335.1 (“Within two years: An action for assault, battery, or injury to, or for the death of, 

an individual caused by the wrongful act or neglect of another.”) 

Plaintiffs concede that the claims are facially time-barred but argue that the doctrine of 

equitable tolling should apply. See Prudential-LMI Commercial Insurance v. Superior Court of 

San Diego County, 51 Cal.3d 674, 274 Cal.Rptr. 387 (1990). As Defendants point out, 

however, that doctrine was applied there, and in other cases, only to breach of contract and bad 

faith claims (i.e., disputes over the payment of policy benefits), not to tort claims. The Court is 

not persuaded that the doctrine should be extended to tort claims, like Plaintiffs’ claims, which 

seek damages other than policy benefits. Consequently, Plaintiffs’ third and fifth causes of 

action – negligence and intentional infliction of emotional distress, respectively - are timebarred. 

Furthermore, with respect to Plaintiffs’ third cause of action of negligence, even if it 

were not time-barred, it would be invalid insofar as it attempts to make a negligence claim out 

of Defendants’ alleged delay in or failure to pay benefits due under the insurance contract. Aas 

v. Superior Court, 24 Cal. 4th 627, 643, 101 Cal. Rptr. 2d 718, 729 (2000) (“A person may not 

ordinarily recover in tort for the breach of duties that merely restate contractual obligations”). 

Plaintiffs failed both in their briefing and during oral argument to distinguish their case from 

this rule as set forth by the California Supreme Court or provide this Court with any authority to 

permit their negligence cause of action to go forward

Consequently, Plaintiffs’ Third and Fifth Causes of Action are DISMISSED without 

leave to amend. 

B. Fourth Cause of Action (Deceit)

Federal Rule of Civil Procedure 9(b) states “[i]n all averments of fraud or mistake, the 

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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

circumstances constituting fraud or mistake shall be stated with particularity.” This heightened 

particularity requir ement if Rule 9(b) requires a party alleging a claim of fraud to plead “the 

who, what, when, where, and how.” Parnes v. Gateway 2000, Inc., 122 F.3d 539, 549-50 (8th

Cir. 1997). Allegations of fraud must be brought within three years unless tolled for nondiscovery. See CCP § 338(d) (the cause of action is not to be deemed to have accrued until the 

discovery, by the aggrieved party, of the facts constituting the fraud or mistake.) A plaintiff 

must affirmatively excuse his failure to discover the fraud within the three years in the 

complaint, including such facts as to time and manner of the discovery. Denholm v. Houghton 

Mifflin Co., 912 F.2d 357, 362 (9th Cir. 1990). 

Plaintiffs’ fraud cause of action is set forth in its entirety below:

“Defendants engaged in fraudulent conduct by making misrepresentations to 

plaintiffs regarding the respective rights and obligations of the parties under the 

policy and by concealing the true rights and obligations of the parties under the 

policy. Whereas the policy generally specifies that the insurer must pay 

indemnity for the cost of repairs (etc.), defendants endeavored to take advantage 

of their superior bargaining power and the complexities of the policy language to 

force the insureds to hire repair and remediation contractors of the insurers’ 

choosing to do the work, then to push responsibility for the failure of these same 

replacement contractors back onto plaintiffs. Plaintiffs allege that defendants 

represented to plaintiffs (a) that the insured were required under the policy to use 

contractors selected by the insurer, (b) that the policy did not allow payments for 

repair services above the amounts estimated by the insurer’s contractors and/or 

that plaintiffs categorically had no right to indemnity beyond the lowest bid 

available regardless of quality or competency issues, and (c) that the insurer was 

entitled under the policy to remove and replace contractors, notwithstanding the 

wishes of the insureds. Defendants subsequently represented to plaintiffs and 

others, including AMG, that it was plaintiffs (as opposed to defendants) who had 

“hired” these replacement contractors, including AMG.” 

(FAC ¶ 67.) In defense of their fraud cause of action, Plaintiffs invoke the “delayed discovery” 

exception to the statute of limitations on fraud claims. Their First Amended Complaint states 

“despite the exercise of reasonable diligence, [Plaintiffs] did not discover the true facts until not 

less then [sic] three years prior to the date the above captioned action was filed.” (FAC ¶ 69.)

The Court finds that the Fourth Cause of Action fails to satisfy the basic pleading 

requirement of Rule 9(b). While the First Amended Complaint specifies the content of the 

alleged misrepresentations made by defendants, it does not specify who made them, when they 

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ORDER GRANTING DEFENDANTS’ MOTIONS TO STRIKE/DISMISS

were made, nor whether the misrepresentations were made orally or in writing. As a result, the 

allegation is not specific enough “to give defendants notice of the particular misconduct which 

is alleged to constitute the fraud charged so that they can defend against the charge and not just 

deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 

1985). 

Additionally, the Court finds that Plaintiffs’ delayed discovery allegation is similarly 

lacking in specificity. Plaintiffs have merely conclusorily stated “[Plaintiffs] did not discover 

the true facts until not less then [sic] three years prior” to the filing of the complaint. Plaintiffs

have not pled any of the required facts supporting its claim that its discovery of the alleged fraud 

was delayed, namely “facts as to time and manner of the discovery.” Denholm, 912 F.2d at 362. 

Consequently, Plaintiffs’ Fourth Cause of Action is dismissed, but with leave to amend 

within 30 days of entry of this order. Any amendments must cure the deficiencies noted above 

and plead with sufficient specificity both the fraud cause of action as well as the allegation of 

delayed discovery of the alleged fraud. 

MOTION FOR A MORE DEFINITE STATEMENT

In the alternative to dismissal of Plaintiffs’ Fourth Cause of Action, defendants seek to 

require a more definite statement of the claim. In view of the Court’s dismissal of this cause of 

action with leave to amend, defendants’ alternative request for relief is denied as moot. 

IT IS SO ORDERED.

Date: October 17, 2005 _________________________________

SAUNDRA BROWN ARMSTRONG 

United States District Court Judge

Case 4:05-cv-01528-SBA Document 30 Filed 10/17/05 Page 8 of 8