T h i s d i sposi t i on i s n ot app r op r i at e f or p u b l i cat i on and i s n otpre ce d en t ex ce p t a s p r ovi d ed * by9th C i r . R
. 36- 3.

T h e H o n o rab le Lee H
. R ose n th al , D i str i ctJu d ge f orth e U
. S
. D i str i ct C ou r t f or S o u th ern ** Texa s , s i t t i ng byde s i g na t i o n. NOT F OR P UB L I CAT I ON

UN I TE D STATE S C OU RT OF APPE ALS FOR T HE NI NTH CI RC UI T
K A U A I S C U B A C E N T E R , I N C ., P la in tif

f - A p p e lla n t,
v. P A D I A M E R I C A S , I N C ., e t a l. , D efen d an t s - A p p el l ees. N o. 11- 56346 D
. C. N o . 8 : 1 0
- c v - 0 1 5 7 9
- D O CMAN
ME MOR AN DU M *

A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f o rth e C e n tr a l D is tr ic t o f C a lif o rn ia D a vi d O
. C a r t e r , D i s tr i c tJ udge , P r e s i di ng A r gue d a nd S ubm i tt e d A pr i l 12, 2013 P a s a d e n a , C a lif

o rn ia B ef ore: B E R Z O N and T A L L M A N , C i rc ui tJudg es , and R O S E N T H A L , D i stri ct Judg e. ** K auai S cuba C ent er , Inc. (“ K auai ”) appeal s fr om the di sm i ss al w i th p re j ud i ce of i t s c l as s a ct i on com pl ai ntas se rt i ng st at e l aw cl ai m s for m i sr epre se nt at i on , brea ch of c ontr a c t , br e a c h of

f i duc i a ry duty , a nd de c e pt i v e t rade pr a c t i c e s a r i s i ng f r om the 

# FI LED MA Y03 2 013 M OLLY C. DW Y ER, CLERK U
. S. C O U R T OF APPE ALSV & B r ef er s t o V i cenci a & B u ckl eyand al so P A D I R i sk P u r chasi n g G r ou p , I n c. 1 PA D I r e f

e r s t o PA D I A m e r i c a s , I nc . a nd PA D I W o r l dwi de C o rp. 2 2 pu rc hase of com m er ci al general l i abi l i ty ( “ C G L ”) and p roperty dam age ( “ P D ”) i nsurance pol i ci es for s cuba di vi ng shop s. T he appel l ees ar e V i ce nci a & B uckl ey I ns ur a nc e S e rvi c e s , I nc . ( “ V & B ” ), a n i ns ur a nc e br oke r ; L e xi ngt on I ns ur a nc e C o. 1 ( “ L e x i n g t o n ” ) , th e s u rp l u s l i n e s i n s u r e rth a ti s s u e d th e g r o u p p o l i c i e s ; P AD I A m e r i c a s , I nc . ( “ P A D I ” ) , as c uba di vi ng c e r t i f i c a t i on or ga ni z a t i on tha ts pons or e d the 2 p o l i c i e s ; a n d Y o rkRi s kSe rv i c e s G r o u p , I n c . ( “ Y o rk ” ) , a n i n s u r a n c e c l a i ms
a d m in is tr a to r a n d a d

ju s te r . K au a i s u e d o n its o w n b e h a lf a n d o n b e h a lf

o f a ll s im ila r ly si tuat ed di ve shop s that pu rc hase d such grou p po l i ci es . T he D i stri ctC ou rtdi sm i ss ed K a u a i’s o r ig in a l c o m p la in t u n d e rR u le 1 2 ( b ) ( 6 ) o f th e F e d e r a l R u le s o f C iv il P r oc e dur e . A f

t e rtw o a m e nde d c om pl a i nt s , the D i s tr i c tC our tf ound tha tthe
a lle g a tio n s w e r e s till d e f ic ie n t a n d g r a n t e d t h e d e f e n d a n ts ’ m o tio n s to d is m is s , w ith pr e j udi c e a nd w i thoutl e a ve t o a m e nd. W e ha ve j ur i s di c t i on unde r28 U
. S
. C
. § 1291,
a n d w e a f

f i rm. W e r evi ew de no vo a di sm i ss al for f ai l ure t o s t at e a cl ai m un der R ul e 12(b)(6). N avarro v. B lock , 25 0 F
. 3d 72 9, 7 3 1 (9 th C i r. 20 01 ). A com pl ai ntm ustpl ea d suff i ci entfa ct s t o “ st at e acl ai m t o rel i ef that i s pl ausi bl e on i t s f ac e. ” B e l l

A t l
. C or p.
v . T w o m b ly , 55 0 U
. S
. 54 4, 57 0 (20 07 ). F ac i al pl ausi bi l i ty r equi re s f ac t s that“ al l ow [ ]T h e D i str i ctC ou r tproper l yconsi d er ed th e p ol i ci es , w h i ch w er e a t t ached as exh i b i t s t o a m ot i on 3 to d ism iss. S ee Ma rderv. L o p ez , 450 F. 3d 445, 448 ( 9th C i r . 2006) ( e xpl a i ni ng tha ta di str i ctc o ur trul i ng o n a m o t i o n t o d i s mi s s ma yv e n tu r e b e y o n d th e p l e a d i n g s t o c o n s i d e rd o c u me n t s “ o n wh i c h th e c o mp l a i nt ‘n ece ss ar i l yr el i es ’ i f: ( 1 ) th e c om p l ai n tr ef er s t o the d ocum ent ; (2) th e docu m enti s cent r al t o th e pl ai n t i f f’s claim ; an d (3 ) n o p artyq u es ti o n s th e a u th en ti cityof th e c o p yattach ed to th e 1 2 (b )(6 ) m o ti o n .”). 3 the c our tt o dr a w the r e a s onabl e i nf e r e nc e tha tthe de f

e nda nti s l i abl e f

orthe
m i sc on du ctal l eged. ” A s hc r of t v . I qbal , 55 6 U
. S
. 66 2, 67 8 (20 09 ). K auai pai d a nn ual prem i um s and w as nam ed as an addi t i on al i nsured on m as t er po l i ci es betw ee n L exi ng t on and P A D I. K auai al l eged that un der the m as t erpo l i ci es i n effect from 2 0 0 6 th ro u g h 2 0 1 0 , P A D I, n o tL ex i n g t o n , w as req u i red t o p ay th e fi rst $300, 000 i n c ove r e d l os s e s . T he pol i c y l a ngua ge , how e ve r , m a de c l e a rtha tonl y the P D coverage for p ol i cyye ar s 200 6– 20 07 throu gh 20 09 –2 01 0, no tthe C G L coverage,
re qu i re d P A D I t o p ay the fi rs t part of covered cl ai m s. T he l angu age a l so m ade c l ea r th a t th e p a r t PA D I w a s r e q u i r e d t o p a y w a s a$ 3 0 0 , 0 0 0 a n n u a l a g g r e g a t e o f th e c l a i ms
o f al l ad d i t i o n al i n su red s. 3 I n 2 0 1 0 , K au a i r e c e iv e d $ 8 8 ,0 0 0 in p a y m e n t f o raf ir e d a m a g e c la im u n d e rits P D p o lic y . T h a t is th e o n ly c la im K au a i m a d e u n d e rth e p o lic ie s . T h e r e is n o d is p u te
ab o u tth e p a y me n tf

o rth a tc l a i m.K a ua i a m e nde d i t s o r i g i na l c o m pl a i nto nc e be f o r e th e de f

e nda nt s mov e d t o di s m i s s . The 4 am end m ent s w er e nots u b st ant i ve. 4 K a u a i a lle g e d t h a t th e d e f e n d a n ts m is r e p r e s e n te d th e in s u r a n c e b y f a ilin g to di sc l os e PA D I ’ s pa y me ntob l i ga t i on . I n i t s f i r s ta me nd e d c ompl a i nt , K aua i a l l e ge d 4 da m a ge s o n the the ory tha t , a s ar e s ul t , c ove r a ge w a s “ i l l us ory . ” I n i t s s e c ond
a m e nde d c om pl a i nt , K aua i a l l e ge d tha t a pol i c y i m pos i ng s i gni f i c a ntc l a i m - pa y m e nt resp o n si b i l i ty o n P A D I, th e n am ed i n su red , as o p p o sed t o th e i n su rer, w as w o rth l ess than a po l i cy w i tho utsuch a provi si on , and thatK auai had o verpai d i t s pre m i um s a s
ar e s u lt. T he D i stri ctC ou rtcorrect l y di sm i ss ed the com pl ai nt s f or fa i l ure t o st at e a
c l a i m . K aua i f

a i l e d t o a l l e ge a n a c t i onabl e m i s r e pr e s e nt a t i on. T he c l a i m pa y m e nt pr ovi s i on di d nota f

f e c tK aua i ’ s r i ght s unde ri t s i ns ur a nc e c ont ract w i th L e xi ngt on. T he pr ovi s i on di d nota f f e c tthe type ora m ountof c overag e K aua i pa i d f ora nd
r e c e iv e d
. Se e g e n e r a lly P a p er Sa vers, In c. v. N

a csa , 5 1 C a l. A p p . 4 th 1 0 9 0 , 1 0 9 7 ( C t. A pp. 19 9 6 ) ( “ ‘ [ I ] t i s a n i n s u r e r ’ s d u ty t o i n f o rm th e i n s u r e d o f h i s r i g h t s a nd
o bl i ga t i ons unde rthe pol i c y , pa r t i c ul a r l y w he n a n i ns ur e d’ s appa r e ntl a c k of know l e dge m a y r e s ul ti n al os s of be ne f i t s oraf orfei tu re o f ri ght s . ’ ” ( quot i ng Jones
v . G r e w e L i

f e I ns . C o. , 1 8 9 C a l. A p p . 3 d 9 5 0 , 9 5 5 ( C t. A p p . 1 9 8 7 ) ) ) ; E dd y v. Sh a rp , 1 9 9 C a l. A p p . 3 d 8 5 8 , 8 6 6 ( C t. A p p . 1 9 8 8 ) ( e x p la in in g th a t a n in s u r a n c e b r o k e ris5

“ u n d er a d u ty o f d u e care to accu rat el y i n fo rm [th e i n su red ] o f th e p o l i cy’ s p ro v i si o n s”
ab o u t w h a t is c o v e r e d a n d e x c lu d e d b y ap o lic y )
. N o rh a s K au a i p le a d e d a n a c tio n ab le lo s s . K au a i d i d n o t a l l e g e th a t h a d it k n o w n ab o u t th e p r o v i s i o n r e q u ir in g P A D I to p a y ap o r tio n o f th e a n n u a l a g g r e g a te cl ai m s, i tw ou l d h ave f

oregon e purchasi ng the in su ra nce. O n app ea l , K auai ar gu ed th a t “ [h ] ad th e tru e n atu re o f th e arran g em en tb een d i scl o sed , P l ai n t i ff an d th e cl ass
w o u ld h a v e s o u g h t le g itim a te c o v e r a g e e ls e w h e r e , a n d c le a r ly w o u l d n o t h a v e p a id the pr i c e s the y di d. ” B u t n o ne of K aua i ’ s a l l e ga t i ons pl aus i bl y s how tha tdi ve - s hop in s u r a n c e w ith c o m p a r ab le c o v e r a g e b u t w ith o u t th e p r o v is io n a t is s u e w a s a v a ilab le
a t alo w e rp r e m iu m . Se e , e . g. , P e te rs o n v . C e llc o P ’s h ip , 164 C a l
. A p p . 4 t h 1583, 1591 ( C t . A pp. 2008) ( hol di ng tha tpl a i nt i f f s w ho c ha l l e nge d s a l es c om m i s s i ons on i nsurance pol i ci es bu t di d not al l ege that “ they coul d have bo ug ht the sa m e i nsurance f oral ow e rpr i c e e i t h er d i re c t l y f r om the i ns ur e rorf

r om al i c e ns e d a ge nt ” c oul d not “s h o w [ ] th e y s u f

f e r e d a c tu a l e c o n o m ic in ju ry ” ) . A n d K a u a i a c k n o w le d g e d th a t it
ne e de d the i ns ur a nc e a s ac ondi t i on f orm ai n t ai ni ng P A D I c e r t i f i c a t i on of

the di ve
s hop. T h e D is tr ic t C o u r t g a v e K au a i a m p le o p p o r tu n ity t o c u r e th e d e f e c ts in its pl ea di ng s a ft erpo i nt i ng them ou t . T he se cond am ended com pl ai ntfa i l ed t o d o so. In lig h t o f K au a i’s a lle g a tio n s , f

u r th e rle a v e to a m e n d w o u ld h a v e b e e n f u tile
. Se e , e . g. ,6

U
. S. Mor t g. , I nc . v . Sax ton , 49 4 F
. 3d 83 3, 8 4 3 n. 11 (9th C i r. 20 07 ) ( expl ai ni ng that
w hen a courthas “alrea dy gi ven p l ai nt i ff s one chance t o am end, and p l ai nt i ff s
essen t i a l l y r e - pl e d the s a m e f a c t s a nd l e ga l the or i e s , ” i ti s nota n abus e of di s c r e t i on to f in d th a t f u r th e rle a v e w o u ld b e f

u tile ) , ab roga ted on other groun ds by P roctor v. V ishay Inter tec hn ol og

y I nc. , 5 8 4 F .3 d 1 2 0 8 (9 th C ir. 2 0 0 9 ). T h e D istrict C o u rt’s d i sm i ssal i s AF F I R ME D.