Opinion
NO. CIV. S-07-1015 LKK/EFB.
August 29, 2007
ORDER
This is an action brought by an insurance company against its corporate claims administrator over the alleged mishandling of a claim arising from an automobile accident. Pending before the court is defendant's motion to transfer and motion to dismiss. For the reasons set forth below, the court denies the motion to transfer, and grants the motion to dismiss with respect to the negligence and negligent misrepresentation claims but denies the motion to dismiss with respect to the breach of contract, good faith and fair dealing, and fraud claims.
I. Background
This is a lawsuit between a Pennsylvania insurer, Lincoln General Insurance Company ("Lincoln"), whose headquarters are located in Pennsylvania, and a claims administrator, Access Claims ("Access"), whose headquarters are located in Georgia. Compl. ¶¶ 1-2. Pursuant to a claims service agreement, Access administered claims for Lincoln's California insurance policies. Compl. ¶ 6. Lincoln has now filed suit against Access for its alleged mishandling of a claim that arose out of an automobile accident and a subsequent third-party personal injury claim. The complaint alleges five causes of action: (1) breach of contract, (2) breach of good faith and fair dealing, (3) negligence, (4) fraud/intentional deceit, and (5) negligent misrepresentation. The action was originally filed in San Joaquin County Superior Court and later removed by Access to this court.Lincoln originally issued an auto liability insurance policy to Manuel Coleman, a California resident, with a coverage limit of $30,000 for bodily injuries resulting from a single auto accident. Coleman was then involved in an accident in California with Diana Dias and her husband, who are also California residents. Diana Dias claimed that she was paralyzed as a result of the accident and sued Coleman in San Joaquin County Superior Court. Pursuant to the claims service agreement between Lincoln and Access, Access handled the defense of the Dias lawsuit, including the retention of three California lawyers to defend the lawsuit on Coleman's behalf. Lincoln alleges that Access handled the defense of the Dias lawsuit inappropriately and exposed Lincoln to damages far in excess of the $30,000 policy limits.
Specifically, Lincoln claims that Access failed to respond in a timely manner to a time-limited demand letter from Dias' counsel asking for the $30,000 policy limits. Compl. ¶ 12. Lincoln also alleges that Access withheld the existence of the Dias claim and Access' mishandling of the same from Lincoln. According to Lincoln, it only learned of the Dias claim as a result of an internal file audit. Compl. ¶¶ 9-11, 12, 14. Lincoln alleges that when it learned of the potential exposure of liability, it chose to participate in the settlement process directly and thereafter settled the Dias claim for $3.8 million. Decl. of Tim Kirk, ¶¶ 5-6. The mediation and settlement process took place in California. Id. ¶¶ 7-13. Access, however, maintains that all of its administration of the Dias claim occurred in Georgia at Access' office. Decl. of Michael Meadows ¶ 4.
II. Standard
A. Motion to Transfer
For the convenience of parties and witnesses, a district court may transfer any civil action to any other district or division where it might have been brought if to do so is in the interest of justice. 28 U.S.C. § 1404(a). The defendant must make a strong showing of inconvenience, however, to warrant upsetting plaintiff's choice of forum. Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). The relevant factors in this inquiry include plaintiff's choice of forum, convenience to the parties, convenience to the witnesses, ease of access to evidence, familiarity of the forum with applicable law, feasibility of consolidation with other claims, local interests in the controversy, and court congestion. Williams v. Bowman, 157 F. Supp. 2d 1103, 1106 (N.D. Cal. 2001).
B. Motion to Dismiss
On a motion to dismiss, the allegations of the complaint must be accepted as true. See Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give the plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. See Retail Clerks Intern. Ass'n, Local 1625, AFL-CIO v. Schermerhorn, 373 U.S. 746, 753 n. 6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See id.; see also Wheeldin v. Wheeler, 373 U.S. 647, 648 (1963) (inferring fact from allegations of complaint).
In general, the complaint is construed favorably to the pleader. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The court may not dismiss the complaint if there is a reasonably founded hope that the plaintiff may show a set of facts consistent with the allegations. Bell Atlantic Corp. v. Twombly, 127 U.S. 1955, 1967-69 (2007). In spite of the deference the court is bound to pay to the plaintiff's allegations, however, it is not proper for the court to assume that "the [plaintiff] can prove facts which [he or she] has not alleged, or that the defendants have violated the . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).
III. Analysis
A. Motion to Transfer
The court may transfer a civil action to any other district where it might have been brought for the convenience of the parties and witnesses and in the interest of justice. 28 U.S.C. § 1404(a). As an initial matter, the plaintiff's choice of forum is typically entitled to considerable weight, but may be lessened where the plaintiff's choice is not its residence. Inherent.com v. Martindale-Hubbell, 420 F. Supp. 2d 1093, 1099 (N.D. Cal. 2006). Here, Access maintains that transfer is appropriate because of (1) convenience of the parties, (2) convenience of the witnesses, (3) ease of access to evidence, (4) familiarity of each forum with the applicable law, (5) the absence of a significant California interest in the controversy, and (6) relative court congestion.
1. Convenience to Parties
First, with regard to convenience of the parties, it appears that Georgia would be more convenient to Access, whereas California would be more convenient for Lincoln. Access is located in the Northern District of Georgia. It is unclear whether Access has or ever had any California offices, although, at the very least, it is licensed as an insurance adjuster in California. Lincoln, on the other hand, is based out of Pennsylvania, but contends that it has offices in California.
Clearly, the fact that suit would be more convenient for Access in Georgia, does not mean it can shift the inconvenience to the plaintiff. The relevant question is whether, if the motion to transfer were granted, the added convenience to Access of defending this case in Georgia would be greater than the added inconvenience to Lincoln of prosecuting this case in Georgia. Given that Access is based out of Georgia, whereas Lincoln's principal place of business is in neither Georgia nor California, the court concludes that the overall convenience to the parties would be promoted, albeit marginally, by transfer.
2. Convenience to Witnesses
With regard to convenience to witnesses, it is likely that important witnesses to this action — the Access employees who were involved in the alleged mishandling of the Dias claim — are located in Georgia. Nevertheless, Access has not quantified how many of these witnesses exist. Lincoln, on the other hand, claims that there are at least ten witnesses located in California who may be called upon to testify. They include a Lincoln employee who was involved in the settlement of the Dias claim, several lawyers involved in the settlement, Manuel Coleman, and Diana Dias and her husband.
The relevance and admissibility of the testimony of these witnesses is in dispute. For example, Lincoln maintains that Access will argue that it did not know about or consent to Lincoln's settlement of the Dias claim, and that, as a result, Lincoln will have to put on the California lawyers involved in the settlement to show that Access had knowledge of the settlement. Access responds that none of these witnesses have personal knowledge of the central facts in dispute — how Access handled the Dias claim — and that their testimony would either be barred by attorney-client privilege or would be cumulative of other testimony. Furthermore, Access maintains that testimony by Coleman or Dias would be irrelevant, because the facts of the accident are not in dispute. The reasonableness of the settlement, however, is in dispute. As to that matter, these witnesses' testimony would indeed be relevant.
In sum, there appears to be, on one side, a handful of potential California witnesses who may testify as to various issues balanced against, on the other side, an unknown number of Access representatives and adjusters who will testify as to other issues. Because it is unclear how many Access employees will be called upon to testify, it is impossible for the court to assign any particular weight to the alleged inconvenience to Access employees. Because it is Access' burden to show the propriety of transfer, the court finds that this factor weighs against transfer.
3. Ease of Access to Evidence
With regard to ease of access to evidence, there is little dispute that transfer would be more efficient for Access, given that information related to the Dias claim is located in its offices in Georgia. Transfer would have no effect on Lincoln, however, because its relevant information is housed in its offices in Pennsylvania. Accordingly, the overall ease of access to evidence would be promoted by transfer. This issue, however, is not of significant import since all that appears to be involved is the transport of relevant documents.
4. Familiarity of Each Forum with Applicable Law
The parties dispute whether Pennsylvania or California law applies to Lincoln's claims. This dispute is immaterial for purposes here, however, because there is no reason to believe that a Georgia court would be more familiar with adjudicating either Pennsylvania or California state law claims than a California court. Accordingly, this factor does not weigh in favor of transfer.
5. Local Interest in Controversy
Access maintains that there is only an attenuated local interest in the controversy because the present dispute is one between Georgia and Pennsylvania companies. Furthermore, Access points out that while the automobile accident occurred in California and involved California residents, none of those individuals are party to suit. In addition, Access argues that the conduct that gave rise to suit — the alleged improper administration of the Dias claim — occurred in Georgia, at Access' offices. Meadows Decl. ¶ 4. The harm of that conduct was allegedly felt by Lincoln General in terms of exposure to liability and therefore had no specific geographic locus.
Interestingly, however, Access does not argue in its motion to dismiss that Georgia law should apply to the claims at issue.
Nevertheless, Access is also a California-licensed claims adjuster and, at least in the past if not present, conducted business in California. Although the specific action that gave rise to this suit may not have occurred exclusively in California, it would not have occurred but for the fact that Access was licensed to adjust California insurance policies. The parties' dispute in fact arose from Access' conduct in adjusting Lincoln's California policies. Furthermore, the litigation and settlement of the Dias lawsuit apparently occurred in California.
The court recognizes that the facts surrounding the litigation and settlement of the Dias lawsuit are relevant to some, but not all, of plaintiff's case. First, these facts are relevant to the extent that Access' conduct in the settlement at least partially forms the factual basis for some of Lincoln's claims. For example, the breach of contract claim asserts that Access breached the parties' agreement not only by failing to timely respond to Ms. Dias' demand letter but also "[b]y failing to properly coordinate, direct and manage litigation activity." Compl. ¶ 21(c). Second, the facts surrounding the litigation and settlement of the Dias lawsuit would be relevant to proving that Lincoln is entitled to recover the money it paid to settle the Dias claim and that the amount of the settlement, $3.8 million, was reasonable. Compl., Prayer for Judgment.
The legally relevant question is whether there exists a "local interest in having localized controversies decided at home" — not whether there is an exclusively local interest in the controversy. Decker, 805 F.2d at 843. Accordingly, while the present controversy may have connections with more than one state, there is nevertheless a distinct local interest in the controversy.
Indeed, whether the settlement paid by Lincoln was appropriate under California's bad faith law is distinctly an issue that deals with California's insurance law and the interests protected by it.
6. Relative Court Congestion
While this court has the heaviest caseload per active judge in the United States, this factor does not weigh significantly on either side of the motion to transfer. This court has a median of 10.9 months to resolve cases and 26 months to trial compared to 9.1 months to resolve cases and 24.8 months to trial for the Georgia court. A difference of one or two months is not sufficient to demonstrate the propriety of transfer.
In sum, Access has shown that transfer would promote its own convenience and improve ease of its access to evidence. Nevertheless, Access has not shown that transfer would promote the convenience of the witnesses, that a California court would be less familiar with the applicable law, or that there is significantly greater court congestion here relative to Georgia. Furthermore, both California and Georgia appear to have some interest in the controversy: on the one hand, the controversy arose from Lincoln's agreement with Access to adjust its California insurance policies, and the settlement of the Dias lawsuit occurred in California, but, on the other hand, the alleged mishandling of the Dias lawsuit apparently occurred in Georgia at Access' offices. Accordingly, this factor does not weigh in favor of or against transfer. While a close issue, the court finds that this Access has not made the required "strong showing," Decker, 805 F.2d at 843, and denies the motion to transfer.
B. Motion to Dismiss
1. Choice of Law
In adjudicating Access' motion to dismiss, the first issue to be addressed is the applicable state law. A federal court sitting in diversity applies the choice of law rules of the forum state.Klaxon v. Stentnor Elec. Mfg. Co., 313 U.S. 487 (1941). Under California's choice of law rules, a choice of law provision is enforceable where the designated state has a substantial connection to the parties or the dispute, or where there is some other reasonable basis for the choice. Nedlloyd Lines B.V. v. Superior Ct., 3 Cal. 4th 459, 466 (1992). If the chosen state's law conflicts with a fundamental policy of California, the court must also determine whether California has materially greater interests than the chosen state in the determination of the particular issue. Id. at 466.
Here, the agreement between the parties provides that "[t]his Agreement shall be interpreted and construed in accordance with the laws of the State of Pennsylvania." Ex. A, Section III. Access argues that this clause indicates that the parties intended for Pennsylvania law to apply in the event of a dispute arising from the contract. Lincoln, however, maintains that the terms "interpret" and "construe" mean that Pennsylvania law applies in the interpretation and construction of the agreement, but not claims that might otherwise arise.
Accordingly, the court must determine the meaning and scope of the choice of law clause. In conducting this analysis, the court is bound by Pennsylvania law. See Nedlloyd, 3 Cal. 4th at 469, n. 7 (noting that choice of law clause applies in interpreting clause itself). Here, there is no Pennsylvania case law directly on point. The one case cited by Access involved a choice of law provision similar to the one at issue here, but that court merely assumed (and the parties did not appear to dispute) that Pennsylvania law should apply to the claims. See Bishop v. GNC Franchising LLC, 403 F. Supp. 2d 411, 415 (W.D. Pa. 2005) (applying Pennsylvania law to claims where agreement was to be "interpreted and construed under the laws of the Commonwealth of Pennsylvania").
Several courts that have confronted a similar issue, however, have held that the words "construe" and "interpret" are narrow, and apply only to the construction and interpretation of the contract. For example, in America's Favorite Chicken Company, the court found that a choice of law provision stating that the agreement was to be "interpreted and construed under the laws of the State of Louisiana" did not require application of Louisiana law to the plaintiff's claims. America's Favorite Chicken Co. v. Cajun Enterprises, Inc., 130 F.3d 180, 182 (5th Cir. 1997) ("On its face, the choice of law clause is restricted to theinterpretation or construction of the agreements. . . . Since the claims do not implicate the interpretation or construction of the agreements, they are not governed by the narrow choice of law clause present here.") (emphasis in original). See also Caton v. Leach Corp., 896 F.2d 939, 942-43 (5th Cir. 1990) (provision that agreement shall be "construed under the Laws of State of California" was narrow and did not govern claims for tort that did not arise out of contract).
These two Fifth Circuit cases did not address a seemingly contradictory Fifth Circuit decision, where the court stated that it was "aware that the term `construe in accordance with' is technically distinguishable from the term `governed by', but doubts that such a fine distinction was intended by the parties."C.A. May Marine Supply Co. v. Brunswick Corp., 557 F.2d 1163, 1165 (5th Cir. 1977). These contradictory holdings might be reconciled by the fact that the court was applying the contract law of a different state or, perhaps more realistically, that the court has simply adopted a new position in recent history.
Similarly, in Dollar Systems, the Ninth Circuit held that where the choice of law provision stated that it would be "construed in accordance with" the laws of a particular state, but the claims at issue did not depend on the construction of the agreement, the choice of law provision had no force. Dollar Systems, Inc. v. Avcar Leasing Systems, Inc., 890 F.2d 165, 170 (9th Cir. 1989).
When contracting parties wish that all disputes arising from their relationship be subject to a particular state's law, they must use language indicating as much. In Nedlloyd, the California Supreme Court noted that "[t]he phrase `governed by' is a broad one signifying a relationship of absolute direction, control, and restraint. Thus, the clause reflects the parties' clear contemplation that `the agreement' is to be completely and absolutely controlled by [the foreign jurisdiction's] law."Nedlloyd, 3 Cal. 4th at 469. See also Boat Town U.S.A., Inc. v. Mercury Marine Division of Brunswick, 364 So. 2d 15, 17 (Fla.App. 1978) ("The difference between `interpretation' and `govern' is more than a technical distinction. It goes to the very heart of the purpose underlying a contract."). Here, however, those critical words were missing from the choice of law provision.
Nevertheless, not all courts have come to the same conclusion as America's Favorite Chicken, Caton, Dollar Systems, Nedlloyd, and Boat Town. The Sixth Circuit in particular has rejected the view that there is a distinction between "interpreted and construed" on the one hand and "governed by" on the other. See Boatland, Inc. v. Brunswick Corp., 558 F.2d 818, 821-22 (6th Cir. 1977) (describing distinction between "interpreted and construed" and "governed by" as strained and narrow); Kipin Industries, Inc. v. Van Deilen Int'l, Inc., 182 F.3d 490, 494 (6th Cir. 1999) (citing Boatland with approval). See also Hammel v. Ziegler Financing Corp., 113 Wis. 2d 73, 76 (1983) (describing distinction as "a trick interpretation or twist on one word").
Of course, all of these authorities are merely persuasive, given that the interpretation of the agreement between Access and Lincoln, including the choice of law provision, is a question of Pennsylvania law. Nevertheless, the court adopts the approach embraced by the majority of courts and concludes that the words employed in the choice of law provision refer only to the construction and interpretation of the agreement, not the substantive law that applies to any dispute arising from the parties' relationship.
This is in accord with "the well-settled rule that when interpreting a contract, a court must construe it as it is written, giving effect to the clear language and plain meaning of the words." Solomon v. U.S. Healthcare Systems of Pennsylvania, Inc., 797 A.2d 346, 349 (Pa.Super. 2002). Furthermore, Pennsylvania "[c]ourts do not assume that a contract's language was chosen carelessly, nor do they assume that the parties were ignorant of the meaning of the language they employed." Murphy v. Duquesne Univ. of the Holy Ghost, 565 Pa. 571, 591 (2001). This is particularly the case where, as here, the contracting parties are both sophisticated commercial entities. Finally, adopting the narrow meaning of the phrase "interpreted and construed" increases the number of options available to the contracting parties, because they may choose to apply one state's laws to interpret the contract and another state's laws to govern disputes between them.
In C.A. May Marine Supply Co., the Fifth Circuit case in tension with more recent decisions, the court discounted this possibility because it could "conceive of few circumstances where resort must be had to state law to determine the meaning of ambiguous terms, but not to impose state substantive law upon the parties." 557 F.2d at 1165. Even if there are few circumstances in which the parties may choose to divide the choice of law provision across two jurisdictions, the court's ruling preserves the freedom for the parties to enter into such arrangements.
The question remains as to what law applies in adjudicating Access' motion to dismiss in the absence of an effective choice of law provision. "[G]enerally speaking the forum will apply its own rule of decision unless a party litigant timely invokes the law of a foreign state [and] . . . demonstrate[s] that the latter rule of decision will further the interest of the foreign state and therefore that it is an appropriate one for the forum to apply." Washington Mutual Bank, FA v. Superior Court, 24 Cal. 4th 906, 919 (2001) (internal quotation marks omitted); see also ABF Capital Corp. v. Grove Props. Co., 126 Cal. App. 4th 204, 215 (2005).
This analysis involves three steps. Washington Mutual Bank, 24 Cal. 4th at 919-20. First, the court must determine whether the proposed foreign rule differs from the forum rule. Second, if there is a difference, the court must determine what interest, if any, each state has in having its own law applied to the case. Third, the court must select the law of the state whose interests would be "more impaired" if its law were not applied.
Here, however, aside from the fact that plaintiff is a Pennsylvania corporation and that the agreement contains a choice of law provision specifying Pennsylvania law for purposes of contract interpretation, Pennsylvania has little or no interest in the controversy. California's interest in the controversy is greater than any Pennsylvania might possess; as noted above with regard to the motion to remand, the contract's subject matter pertains to California. Moreover, plaintiffs' tort claims are governed by California's unique laws. Furthermore, even if the injury to plaintiff was not specifically felt in California, the claim arose from Access' relationship with California as a licensed claims adjuster. Accordingly, I conclude California law applies to all the claims at issue, except insofar as they deal with the construction or interpretation of the contract.
Although it might be plausible to apply Georgia law to the claims at issue, Access has not requested that the court do so. Accordingly, the only issue before the court is whether it should stray from the default application of California law and apply Pennsylvania law.
2. Claims
In light of the foregoing, the court need not resolve arguments premised upon Pennsylvania law. Instead, the remainder of this order addresses arguments premised upon California law.
For example, Access argues that Lincoln's tort claims are barred by the gist of the action doctrine under Pennsylvania law,Williams v. Hilton Group, PLC, 261 F. Supp. 2d 324, 327-28 (E.D. Pa. 2003), but concedes that the doctrine is not recognized in California.
Access also argues that Lincoln's claims are barred because it was not legally obligated to settle the Dias claim and that it was therefore acting as a volunteer. Access then cites Pennsylvania law indicating that where an indemnitee settles an underlying claim without litigation, there is no claim for indemnification. Again, California law applies, and Access has not shown that a similar rule exists in California.
a. Negligence Negligent Misrepresentation
First, Access argues that the economic loss rule bars Lincoln's negligence and negligent misrepresentation claims. Under California law, purely economic losses due to disappointed expectations do not constitute cognizable injury. See Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988 (2004). "Quite simply, the economic loss rule `prevent[s] the law of contract and the law of tort from dissolving one into the other.'" Id. If a plaintiff cannot "demonstrate harm above and beyond a broken contractual promise," the economic loss rule bars the claim. Id. If, however, there is an independent duty that the defendant has breached, the rule does not bar the claim. Here, two of Lincoln's claims — negligence and negligent misrepresentation — are barred by the economic loss rule. The allegations made with regard to the breach of contract claim closely parallel those made with regard to the negligence and negligent misrepresentation claims. For example, in the breach of contract claim, Lincoln alleges that Access failed to properly investigate liability, prepare reports, handle claims in accordance with established claims procedures, and coordinate litigation activity. Compl. ¶ 21. In the negligence claim, Lincoln alleges that Access failed to respond to Dias' demand letter, notify Lincoln of the Dias claim, and obtain legal counsel to adequately represent Lincoln. Compl. ¶ 33. In short, the breach of contract claim subsumes the negligence and negligent misrepresentation claims.
The economic loss rule also exists in Pennsylvania. See Werwinski v. Ford Motor Co., 286 F.3d 661, 671 (3d Cir. 2002) (interpreting Pennsylvania law).
Lincoln argues that economic damages should be recoverable because it shared a special relationship with Access that imposed a heightened duty of care. See Ott v. Alfa-Laval Agri, Inc., 31 Cal. App. 4th 1439, 1448 (1995) (noting that "economic damages, standing alone, can be recovered under some circumstances in an action for negligence" where a "special relationship" exists between the plaintiff and defendant"). Here, however, the factors for a special relationship are not present: among other things, there is no indication that Access' failure to respond to the time-limited demand letter was "intended to affect" Lincoln. Id. at 1455-56 ("The absence of this foundation precludes a finding of `special relationship'").
To the extent that Lincoln relies upon Access' alleged intentional concealment of the mishandling of the Dias claim as a basis for a "special relationship," the fraud/intentional deceit claim already alleges a tort, and there is no need for a belt and suspenders approach. Accordingly, the "special relationship" factor aimed at preventing future harm is lacking, because the alleged misconduct is already deterred by existing tort claims.
The Claims Service Agreement between the parties provides that Access shall, among other things, "[i]nvestigate liability, damages and coverages, evaluate, negotiate claims through settlement or final disposition," "[p]repare and file all reports and handle all claims in accordance with established claims procedures and state guidelines . . .," and "[c]oordinate, direct and manage litigation activity." Ex. A to Mot. to Dismiss.
Although Lincoln correctly notes that the economic loss rule is applied most often in the context of products liability cases, it is not confined to this context. See County of Santa Clara v. Atlantic Richfield, 137 Cal. App. 292, 318 (2006) (economic loss rule applies generally to negligence cases). Nevertheless, Lincoln's remaining claims, including breach of the covenant of good faith and fair dealing and fraud/intentional deceit, are not barred by the economic loss rule. See Robinson, 34 Cal. 4th at 989 (noting that claims for fraud, deceit, and breach of good faith and fair dealing in contract cases are still cognizable despite the economic loss rule).
b. Fraud and Intentional Deceit
i. Statute of Limitations
Access argues that California's choice of law with respect to statutes of limitation is governed by a "borrowing statute," which requires adoption of the statute of limitations in the state where the action arose. Cal. Code Civ. Proc. § 361. It then asserts, ipse dixit, that the alleged fraud arose in Pennsylvania and would therefore be subject to Pennsylvania's two-year statute of limitation. 42 Pa. C.S. § 5524(7) (two-year statute of limitation for fraud).
In its reply, Access introduces the new argument (not briefed in its motion) that the fraud arose in Pennsylvania because, pursuant to the parties agreement, Access' reports were to be submitted to a computer in Lincoln's home office. Even if true, however, this would not negate the possibility that part of the fraud also arose in California. Just as venue may be appropriate in more than one district, Rodriguez v. California Highway Patrol, 89 F. Supp. 2d 1131, 1136 (N.D. Cal. 2000), so too might a cause of action arise in more than one forum.
Lincoln purported to discover the Dias claim and Access' alleged fraud "on or about January 28, 2005." Compl. ¶ 14. Lincoln then filed its complaint approximately two years and two months later. Given that Access allegedly concealed information concerning a California claim, at least part of the fraud could be said to arise out of California. Because California's statute of limitations regarding fraud claims is three years, Cal. Code Civ. Proc. § 338, the court finds that the complaint was timely filed.
Arguably, the fraud might have also partially arisen out of Georgia, the place where Access administered its claims. Again, however, no party has requested application of Georgia law and the burden of applying a foreign jurisdiction's law rests with the party who requests it. Washington Mutual Bank, 24 Cal. 4th at 919.
ii. Pleading with Particularity
Access next argues that the fraud claim has not been alleged with particularity because Lincoln has not identified the individual or individuals who made fraudulent statements. Because of the nature of the fraud alleged in this case, however, in which the alleged misconduct stemmed from Access' purposeful silence, it would be illogical to demand that Lincoln identify the specific individuals who perpetrated the fraud.
c. Breach of Contract
Finally, Access maintains that the breach of contract claim ought to be dismissed because Lincoln was insured with respect to the Dias claim. Under California law, the collateral source rule, which normally permits suits against wrongdoers even where the plaintiff has obtained payment through an independent source, does not apply to contract claims. See Plut v. Fireman's Fund Ins. Co., 85 Cal. App. 4th 98, 107-09 (2001) ("The overwhelming weight of authority in California and other jurisdictions has rejected the extension of the collateral source rule to breach of contract."); Bramalea California, Inc. v. Reliable Interiors, Inc., 119 Cal. App. 4th 468, 472 (2004) ("The collateral source rule, if applied to an action based on breach of contract, would violate the contractual damage rule that no one shall profit more from the breach of an obligation than from its full performance.") (internal quotation marks omitted).
As noted above, the choice of law provision applying Pennsylvania law is only relevant to the extent that the court "interprets" or "construes" the parties' agreement. In this section, the court is not interpreting or construing the parties' agreement. Although the scope of the collateral source rule may be relevant to the issue of damages for an alleged breach of contract, the court is not applying contract law for the purposes of contract interpretation or construction. Accordingly, California law governs.
Here, Access has tendered Lincoln's Corporate Disclosure Statement and Statement of Financial Interest, filed in a different but related action between Lincoln and Access. In the statement, Lincoln states that Chubb Reinsurance, Inc. has an interest in the related action because of "their subrogation rights in connection with an insurance claim made on behalf of Chubb's re-insured, Lincoln General." Ex. 3. The document does not state, however, that Lincoln General was reimbursed in full for the settlement.
Access maintains that the court may take judicial notice of public records related to legal proceedings. Robinson Racheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992).
Accordingly, while the court might dismiss the breach of contract claim given that the benefit of the California collateral source rule does not extend to contract claims, there are nevertheless potential factual issues that might require discovery. In an abundance of caution, the court declines to grant the motion to dismiss with respect to the breach of contract claim.
IV. Conclusion
For the reasons set forth above, the court DENIES the motion to transfer. The court GRANTS the motion to dismiss with respect to the negligence and negligent misrepresentation claims and DENIES the motion to dismiss with respect to the breach of contract, breach of good faith and fair dealing, and fraud claims.
IT IS SO ORDERED.