Court Opinion

ID: 5098952
Source: CourtListenerOpinion
Date Created: 2021-10-01 20:01:30.188061+00
Date Added: 2024-06-11T08:20:56.006340
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                               OCT 1 2021
                    UNITED STATES COURT OF APPEALS                         MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

CHATTANOOGA PROFESSIONAL                         No.   20-17422
BASEBALL LLC, DBA Chattanooga
Lookouts; et al.,                                D.C. No. 2:20-cv-01312-DLR

              Plaintiffs-Appellants,
                                                 MEMORANDUM*
 v.

NATIONAL CASUALTY COMPANY; et
al.,

              Defendants-Appellees.

                    Appeal from the United States District Court
                             for the District of Arizona
                    Douglas L. Rayes, District Judge, Presiding

                      Argued and Submitted August 11, 2021
                            San Francisco, California

Before: CHRISTEN and FORREST, Circuit Judges, and ANELLO,** District
Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Michael M. Anello, United States District Judge for
the Southern District of California, sitting by designation.
       Owners and operators of several professional baseball teams (collectively,

the Teams)1 appeal the district court’s order granting National Casualty Company,

Scottsdale Indemnity Company, and Scottsdale Insurance Company’s (collectively,

the Insurers) motion to dismiss the Teams’ claims for breach of contract and

anticipatory breach of contract. We review de novo an order granting a motion to

dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Autotel v. Nev. Bell

Tel. Co., 697 F.3d 846, 850 (9th Cir. 2012). We review only the complaint,

materials incorporated by reference into the complaint, and judicially noticeable

matters. Karasek v. Regents of the Univ. of Cal., 956 F.3d 1093, 1104 (9th Cir.

2020). “A complaint will not survive a motion to dismiss unless it ‘contain[s]

sufficient factual matter, accepted as true, to state a claim to relief that is plausible

       1
        Chattanooga Professional Baseball LLC; Agon Sports and Entertainment
LLC; Boise Hospitality and Food Services LLC; Boise Professional Baseball LLC;
Bowie Baysox Baseball Club LLC; Columbia Concessions & Catering LLC;
Columbia Fireflies LLC; Eugene Emeralds Baseball Club Inc.; Fort Wayne
Professional Baseball LLC; Frederick Keys Baseball Club LLC; Fredericksburg
Baseball LLC; Frisco Roughriders LP; Greenjackets Baseball LLC; Greenjackets
Hospitality Food & Beverage Services LLC; Idaho Falls Baseball Club Inc.; Inland
Empire 66ers Baseball Club of San Bernardino Inc.; Jethawks Baseball LP; Myrtle
Beach Pelicans LP; Panhandle Baseball Club Inc.; SAJ Baseball LLC; San Antonio
Missions Baseball Club Inc.; Swing Batter Swing LLC; West Virginia Baseball
LLC; and 7th Inning Stretch LLC.
                                             2
on its face.’” Id. (alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009)). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.2

      1.     The Teams filed their complaint in the district court in Arizona. Thus,

Arizona’s choice-of-law rules apply. See Abogados v. AT&T, Inc., 223 F.3d 932,

934 (9th Cir. 2000). For insurance contract disputes, Arizona law applies the law

of the “state which the parties understood was to be the principal location of the

insured risk.”3 Beckler v. State Farm Mut. Auto. Ins. Co., 987 P.2d 768, 772 (Ariz.

Ct. App. 1999) (emphasis omitted) (citation omitted). Because the Teams’ insured

risks are their ballparks, the laws of the ten states where they are located apply,

respectively, to the individual claims of the owners and operators.

      The Teams argue that the virus exclusion in their policies does not preclude

all coverage for their claimed losses because they alleged their losses were

attributable to other causes not implicated by the virus, including the attendant

disease, resulting pandemic, governmental responses to the pandemic, and Major

League Baseball (MLB) not supplying players. The virus exclusion in the Teams’

policies excludes:

      2
       Because the parties are familiar with the facts, we recite only those
necessary to decide this appeal.
      3
        The baseball teams are located in the following ten states: California,
Idaho, Indiana, Maryland, Oregon, South Carolina, Tennessee, Texas, Virginia,
and West Virginia.
                                           3
             loss or damage caused by or resulting from any virus,
             bacterium or other microorganism that induces or is
             capable of inducing physical distress, illness or disease.

Whether this exclusion bars coverage for the Teams’ claimed losses turns on how

the laws of the states implicated in this appeal determine causation.4

      Three of the ten relevant states—California, Oregon, and West

Virginia—have expressly held that the proper method to determine causation is the

efficient proximate cause analysis.5 Five of the other seven states—Idaho, Indiana,

Maryland, Tennessee, and South Carolina—have either applied or been persuaded

by this analysis.6 The two remaining states, Texas and Virginia, use other methods

to determine causation.

      4
        The Teams argue that the lack of an anti-concurrent clause applicable to or
within the virus exclusion allows coverage for multiple contributing causes.
Because the Teams did not make this argument in the district court, we decline to
consider it. See In re Am. W. Airlines, Inc., 217 F.3d 1161, 1165 (9th Cir. 2000).
      5
       See, e.g., Sabella v. Wisler, 377 P.2d 889, 895 (Cal. 1963); Naumes, Inc. v.
Landmark Ins. Co., 849 P.2d 554, 555 (Or. Ct. App. 1993); W. Va. Fire & Cas. Co.
v. Mathews, 543 S.E.2d 664, 668 (W. Va. 2000) (per curiam).
      6
        See, e.g., ABK, LLC v. Mid-Century Ins. Co., 454 P.3d 1175, 1185 (Idaho
2019); Hartford Cas. Ins. Co. v. Evansville Vanderburgh Pub. Libr., 860 N.E.2d
636, 647 (Ind. Ct. App. 2007); Hartford Steam Boiler Inspection & Ins. Co. v.
Henry Sonneborn & Co., 54 A. 610, 611–12 (Md. Ct. App. 1903); Travelers Ins.
Co. v. Aetna Cas. & Sur. Co., 491 S.W.2d 363, 367 (Tenn. 1973); Unisun Ins. v.
Hawkins, 537 S.E.2d 559, 563 (S.C. Ct. App. 2000).
                                          4
      The Efficient Proximate Cause Analysis. The term “efficient proximate

cause” generally refers to the cause “that sets the other causes in motion,” 7 Couch

on Ins. § 101:55 (3d ed. 2021), or “the cause to which the loss is to be attributed,

though the other causes may follow it, and operate more immediately in producing

the disaster,” Sabella, 377 P.2d at 895 (quoting 6 Couch on Ins. § 1466 (1930)).

Some courts, in defining “efficient proximate cause,” have explained that

“coverage would not exist if the covered risk was simply a remote cause of the

loss, or if an excluded risk was the efficient proximate (meaning predominant)

cause of the loss” and “the fact that an excluded risk contributed to the loss would

not preclude coverage if such a risk was a remote cause of the loss.” Garvey v.

State Farm Fire & Cas. Co., 770 P.2d 704, 707 (Cal. 1989) (in bank); see also

Leavitt v. Stamp, 293 P. 414, 416 (Or. 1930); W. Va. Fire & Cas. Co., 543 S.E.2d

at 668.

      For the states that determine causation according to the efficient proximate

cause analysis, the Teams’ argument that the virus exclusion does not apply fails.

Although the “attendant disease, resulting pandemic, and governmental responses”

might have affected the Teams’ claimed losses, the Teams do not plausibly allege

that any of these other causes, and not the spread of the COVID-19 virus, were the

“efficient proximate cause” that set others in motion, Sabella, 377 P.2d at 895, and

                                           5
predominated, Garvey, 770 P.2d at 707. So too for governmental inaction or

actions taken in response to the virus. The Teams have not plausibly alleged that

the need for the government to act in the first place—i.e., the context in which any

alleged governmental inaction or action arose—was something other than the

COVID-19 virus. The Teams also fail to plausibly allege that MLB did not supply

them with players for a reason independent of the spread of COVID-19. In fact,

the Teams’ allegations suggest the opposite by noting that 2019 was the first year

in more than 100 years that minor-league baseball was not played. For the states

implicated in this appeal that determine causation according to the efficient

proximate cause analysis, the district court correctly concluded the virus exclusion

bars coverage.

      Texas and Virginia. In Texas, “when a loss is caused by concurrent perils,

one of which is covered and one of which is excluded, the burden is on the insured

to identify the portion of her loss attributable to the covered peril.” Wong v.

Monticello Ins. Co., No. 04-02-00142-CV, 2003 WL 1522938, at *1 (Tex. App.

Mar. 26, 2003) (citing Travelers Indem. Co. v. McKillip, 469 S.W.2d 160, 162

(Tex. 1971)). The Teams’ causation argument fails under Texas law because the

Teams do not plausibly allege or argue on appeal that there were concurrent causes

                                           6
of the Teams’ claimed losses that are susceptible to allocation. The Teams’ alleged

causes all patently flow from the COVID-19 virus.

      In Virginia, the “proximate cause” analysis has been applied in the insurance

context, see, e.g., Erie Ins. Co. Exch. v. Jones, 448 S.E.2d 655, 658–59 (Va. 1994),

and “[t]he proximate cause of an event is that act or omission which, in natural and

continuous sequence, unbroken by an efficient intervening cause, produces the

event, and without which that event would not have occurred,” Kellermann v.

McDonough, 684 S.E.2d 786, 793 (Va. 2009) (quoting Beverly

Enterprises–Virginia, Inc. v. Nichols, 441 S.E.2d 1, 4 (Va. 1994)). The Teams’

causation argument fails under Virginia law because the Teams do not plausibly

allege that the other alleged causes of their losses were “efficient intervening

cause[s]” that broke the causal chain stemming from the COVID-19 virus.

      2.     The Teams argue that even if the virus exclusion applies, it is

unenforceable pursuant to the doctrines of regulatory estoppel (under federal and

state law) and equitable estoppel. We disagree. As for regulatory estoppel under

federal law, the Teams cite no authority to adequately support the proposition that

federal law recognizes regulatory estoppel. As for regulatory estoppel under state

law, the Teams’ argument fails for two reasons. First, the Teams acknowledge that

of the ten states implicated in this appeal, only one has explicitly recognized the

                                           7
doctrine of regulatory estoppel (West Virginia), and the Teams fail to establish that

the other nine states would adopt the doctrine if presented with the opportunity.

Second, the West Virginia case recognizing the doctrine is distinguishable because

the Teams do not allege that the Insurers, themselves, are attempting to rely on an

interpretation of the virus exclusion that is contrary to one they earlier advocated.

See Joy Techs., Inc. v. Liberty Mut. Ins. Co., 421 S.E.2d 493, 497 (W. Va. 1992).

      The Teams further argue that they have alleged sufficient claims for

equitable estoppel under the laws of the states implicated in this appeal. Although

the test for equitable estoppel varies somewhat across the ten states,7 absent

misrepresentations regarding the scope of coverage made to the insured, equitable

      7
        See, e.g., Rustico v. Intuitive Surgical, Inc., 993 F.3d 1085, 1096 (9th Cir.
2021) (California); Shoup v. Union Sec. Life Ins. Co., 124 P.3d 1028, 1030–31
(Idaho 2005); Ashby v. Bar Plan Mut. Ins. Co., 949 N.E.2d 307, 312–13 (Ind.
2011); St. Paul Mercury Ins. Co. v. Am. Bank Holdings, Inc., 819 F.3d 728, 739
(4th Cir. 2016) (Maryland); Spring Vegetable Co. v. Hartford Cas. Ins. Co., 801 F.
Supp. 385, 392 (D. Or. 1992); Crescent Co. of Spartanburg, Inc. v. Ins. Co. of N.
Am., 225 S.E.2d 656, 659 (S.C. 1976); Henry v. S. Fire & Cas. Co., 330 S.W.2d
18, 30 (Tenn. Ct. App. 1958); Monumental Life Ins. Co. v. Hayes-Jenkins, 403
F.3d 304, 311 (5th Cir. 2005) (Texas); Harris v. Criterion Ins. Co., 281 S.E.2d
878, 881 (Va. 1981); Potesta v. U.S. Fid. & Guar. Co., 504 S.E.2d 135, 150 (W.
Va. 1998).
                                           8
estoppel cannot be used to expand the scope of coverage.8 The Teams do not

allege that they relied on misrepresentations in their policies or misrepresentations

made by the Insurers.9

      AFFIRMED.

      8
        See, e.g., Manneck v. Laws. Title Ins. Corp., 33 Cal. Rptr. 2d 771, 777 (Ct.
App. 1994); Shoup, 124 P.3d at 1030–31; Ill. Farmers Ins. Co. v. Overman, 186 F.
Supp. 3d 938, 944 (N.D. Ind. 2016); Hartford Fire Ins. Co. v. Annapolis Bay
Charters, Inc., 69 F. Supp. 2d 756, 763 (D. Md. 1999); DeJonge v. Mut. of
Enumclaw, 843 P.2d 914, 916 (Or. 1992) (en banc); Pitts v. N.Y. Life Ins. Co., 148
S.E.2d 369, 371 (S.C. 1966); Clark v. Sputniks, LLC, 368 S.W.3d 431, 438 (Tenn.
2012); SnyderGeneral Corp. v. Great Am. Ins. Co., 928 F. Supp. 674, 683 (N.D.
Tex. 1996); Ins. Co. of N. Am. v. Atl. Nat’l Ins. Co., 329 F.2d 769, 775 (4th Cir.
1964) (Virginia); Blake v. State Farm Mut. Auto. Ins. Co., 685 S.E.2d 895, 900–01
(W. Va. 2009) (per curiam).
      9
         The Teams also argue that the district court erred by relying, in the
alternative, on the Policies’ exclusion of losses “caused by or resulting
from . . . [s]uspension, lapse or cancellation of any . . . contract” as another basis
for dismissing the Teams’ complaint. We agree. The Teams’ complaint alleged
that MLB breached its contracts with the Teams by failing to supply them with
players, not that any of their contracts with MLB had lapsed or were suspended or
cancelled. Because we can affirm the district court on any basis supported by the
record, this error does not change the outcome. See Dougherty v. City of Covina,
654 F.3d 892, 900 (9th Cir. 2011).
                                           9