Opinion
Case No. 20-cv-07074-WHO
2021-10-05
BOOBULI'S LLC, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, et al., Defendants.
Daniel Louis Rottinghaus, Fredrick Arthur Hagen, Berding & Weil LLP, Walnut Creek, CA, Robert Steven Robinson, Law Office of Robert S. Robinson, San Ramon, CA, David Michael Birka-White, Birka-White Law Offices, Danville, CA, for Plaintiff. Anna S. McLean, Sheppard Mullin Richter & Hampton LLP a Limited Liability Partnership, Including Professional Corp, San Francisco, CA, Jennifer Marie Hoffman, Sheppard Mullin Richter Hampton LLP, Los Angeles, CA, for Defendants State Farm General Insurance Company, State Farm Mutual Automobile Insurance Company.
Daniel Louis Rottinghaus, Fredrick Arthur Hagen, Berding & Weil LLP, Walnut Creek, CA, Robert Steven Robinson, Law Office of Robert S. Robinson, San Ramon, CA, David Michael Birka-White, Birka-White Law Offices, Danville, CA, for Plaintiff.
Anna S. McLean, Sheppard Mullin Richter & Hampton LLP a Limited Liability Partnership, Including Professional Corp, San Francisco, CA, Jennifer Marie Hoffman, Sheppard Mullin Richter Hampton LLP, Los Angeles, CA, for Defendants State Farm General Insurance Company, State Farm Mutual Automobile Insurance Company.
ORDER DENYING MOTION TO DISMISS
Re: Dkt. No. 35
William H. Orrick, United States District Judge
In March 2020, all nonessential California business were required to substantially reduce or shut down their business operations in an effort to slow the spread of COVID-19. Plaintiff Boobuli's LLC ("Boobuli's") shut down its business, a coffee shop and restaurant located in Walnut Creek, California, for at least three months and was unable to reopen until June 2020, with reduced hours and employees. Despite a decrease in its business operations, Boobuli's alleges that defendant State Farm, from which it purchased business risk insurance in June 2019, has failed to make premium adjustments and returns and has continued to collect premiums on rates approved prior to the unforeseen pandemic-related reduction in business operations. Boobuli's brings this action on behalf of itself and all other similarly situated California business owners insured by State Farm, seeking to remedy State Farm's alleged unfair business practice of collecting and/or failing to return excess premiums in violation of California's public policy.
State Farm moves to dismiss the Complaint on grounds that California's Insurance Commissioner has exclusive original jurisdiction over the matter and that State Farm is immune from this type of suit challenging the application of rates approved by the Commissioner. Boobuli's responds that is it not challenging State Farm's rates as approved by the Commissioner, but is instead challenging the excessive premiums charged to it and other similarly situated businesses due to State Farm's misapplication of the approved rates given circumstances caused by the pandemic.
Following the oral argument on State Farm's motion, I advised the parties that I would "review any information received from the Insurance Commissioner" requested by the Honorable Edward M. Chen in the Rejoice! Coffee Company, LLC v. The Hartford Financial Services Grp. case, Case No. 20-cv-06789-EMC. Dkt. No. 49. State Farm opposed waiting on the Insurance Commissioner's opinion in Rejoice! , contending that the claim here – that State Farm did not adjust premiums enough or issue sufficient rebates under the Insurance Commissioner's COVID-related bulletins – was different than the question submitted to the Commissioner in Rejoice! (challenging an insurer's "refusal to adjust" insurance premiums). Compare Dkt. No. 52 with Dkt. No. 61 in Case No. 20-cv-06789. State Farm proposed that I submit a different question to the Commissioner, concerned with an insurer's alleged failure to adjust enough. Dkt. No. 52. Having now read the Insurance Commissioner's response in Rejoice! (filed September 17, 2021), as well as the briefs filed in this case, I find that the claims asserted by Boobuli's are not within the exclusive jurisdiction of the Insurance Commissioner, although the relief available under the claims may be impacted by future actions by the Commissioner.
Turning to the merits of the claims alleged, most of State Farm's remaining arguments regarding the sufficiency of Boobuli's claims do not warrant dismissal. Even if there is a valid contract between the parties, Boobuli's is allowed to plead an unjust enrichment claim in the alternative under Rule 8. Boobuli's implied covenant claims are sufficiently pleaded based on State Farm's alleged failure to use its discretion to adjust premiums in good faith under the circumstances. However, State Farm's motion to dismiss claims against the parent company of State Farm General that issued the Policies, State Farm Mutual, is GRANTED with leave to amend. Boobuli has insufficiently pleaded these claims: it simply names State Farm Mutual as a party but fails to allege its role in the unfair practices or whether it retained something to which it was not entitled. The motion to dismiss is otherwise DENIED.
BACKGROUND
I. BOOBULI'S 2019 AND 2020 POLICIES
Boobuli's is a California limited liability company that operates a café, Caffé California, in Walnut Creek, California. First Amended Complaint ("FAC") [Dkt. No. 25] ¶ 13. State Farm General Insurance Company ("State Farm General") and State Farm Mutual Automobile Insurance Company ("State Farm Mutual") (collectively "State Farm") are engaged in the business of marketing and selling insurance products in California and other states. Id. ¶¶ 14-17. In June 2019, Boobuli's purchased business risk insurance form State Farm to insure its business operations and its commercial premises. Id. ¶ 34; see Defendant's Request for Judicial Notice ("RJN") [Dkt. No. 24], Ex. A (copy of policy number 97-BU-J516-6 for the time period June 1, 2019 to June 1, 2020, including all declarations pages, forms and endorsements) ("2019 Policy").
Boobuli's named State Farm Fire and Casualty Company in its original Complaint. That entity is not named in the FAC.
The premium collected on the 2019 Policy was set prior to the COVID-19 pandemic. Id. ¶ 35. Boobuli's alleges that the 2019 Policy terminated on June 1, 2020, the day that the 2020 Policy went into effect, covering June 1, 2020 through May 31, 2021. Id. ¶¶ 41, 50; RJN, Ex. B (copy of policy number 97-BU-J516-6 for the time period June 1, 2020 to June 1, 2021, including all declarations pages, forms and endorsements) ("2020 Policy"). Pursuant to California law, State Farm General filed the rates it used to calculate premiums under the Policies with the Insurance Commissioner and the California Department of Insurance ("DOI") approved those rates effective December 15, 2018. RJN, Ex. C (State Farm General Insurance Company's Rate Revision filing for its California Commercial Multi-Peril Mercantile/Service Program with the DOI); RJN, Ex. D (DOI's approval of State Farm General Insurance Company's Rate Revision filing for its California Commercial Multi-Peril Mercantile/Service Program with the DOI effective as of December 15, 2018).
II. DOI BULLETINS
On April 13, 2020, the DOI issued a bulletin to insurers recognizing that "the COVID-19 pandemic caused an unprecedented challenge for California's businesses" and had "severely curtailed activities of policyholders in both personal and commercial lines," so that "projected loss exposures of many insurance policies have become overstated or misclassified." FAC ¶ 42; id. , Ex. A (2020-3 Bulletin) at 1.
"To protect consumers and to provide consistent direction to the insurance industry regarding misclassifications of risk resulting from the COVID-19 pandemic," Insurance Commissioner Ricardo Lara ordered "insurers to make an initial premium refund for the months of March and April to all adversely impacted California policyholders," including those in commercial liability insurance, "as quickly as practicable, but in any event no later than 120 days after the date of this Bulletin," i.e. , August 11, 2020. 2020-3 Bulletin at 1-2. Commissioner Lara "grant[ed] each insurer reasonable flexibility in determining how best to quickly and fairly accomplish the refund of premium to policyholders," adding that "[i]nsurers may comply with the premium refund order by providing a premium credit, reduction, return of premium, or other appropriate premium adjustment." Id. at 2. "Insurers may refund premium without prior approval by the [DOI] if they apply a uniform premium reduction for all policyholders in an individual line of insurance, for recent, current, and upcoming policy periods or any portion thereof." Id.
"Alternatively, insurers may refund premium without prior approval by the [DOI] by reassessing the classification and exposure bases of affected risks on a case-by-case basis for recent, current, and upcoming policy periods or any portion thereof." 2020-3 Bulletin at 2. "Whether choosing one of the above-described approaches, or an alternative approach, insurers shall, no later than 120 days after the date of this Bulletin, provide each affected policyholder, if applicable, with a notification of the amount of the refund, a check, premium credit, reduction, return of premium, or other appropriate premium adjustment." Id. at 3. Commissioner Lara also ordered every insurer "to report to the [DOI] within 60 days ... all actions taken and contemplated future actions to refund premiums in response to or consistent with this Bulletin." Id.
On May 15, 2020, the DOI issued a second bulletin, extending "the directives set forth in Bulletin 2020-3 to reduce premium in the affected lines of insurance where the projected loss exposures have become overstated or misclassified ... through May 31, 2020." FAC, Ex. C (2020-4 Bulletin) at 2. The 2020-4 Bulletin also required insurers to report to the DOI "information with respect to any premium adjustments for May 2020." Id.
On June 25, 2020, the DOI issued a third bulletin, extending the directives and reporting requirements of the previous two bulletins to June 2020 and to "any months subsequent to June if the COVID-19 pandemic continues to result in projected loss exposures remaining overstated or misclassified." FAC, Ex. D (2020-8 Bulletin) at 2. The 2020-8 Bulletin clarified that, "[t]he extension of reporting required by this Bulletin 2020-8 does not change the previous deadline for insurers to provide direct relief to policyholders for March, April, and May premiums by no later than August 11, 2020." Id.
On December 3, 2020, the DOI amended Bulletin 2020-8 to extend the directives and reporting requirements set forth in Bulletins 2020-3 and 2020-4 "to include premium relief for any months subsequent to June as conditions warrant." FAC, Ex. F (Amended Bulletin 2020-8) at 1.
On March 11, 2021, the DOI issued Bulletin 2021-3, reporting that "[t]o date, private passenger automobile insurance companies have returned more than $1.75 billion in premium for 2020 to California drivers," but "based on extensive analysis of data received, the Department's review of this loss data demonstrates the premium relief that insurance companies provided to their policyholders was insufficient, leaving consumers paying inflated premiums while they continue to experience reduced risk of loss." Plaintiff's Supplemental Request for Judicial Notice in Opposition to Defendants' Motion to Dismiss [Dkt. No. 45] Ex. A (2021-3 Bulletin) at 1. Thus, the 2021-3 Bulletin "directs insurance companies," not just auto insurance companies, "to take the following actions: (i) "Do more to return additional premium relief from March 2020 forward, and report these additional premium returns to the Department"; (ii) "Communicate with their policyholders about how they will return premiums, as well as options available to consumers to reduce their ongoing premium"; and (iii) "Consult this bulletin when seeking clarification regarding the directives and reporting requirements set forth here and in Bulletins 2020-3, 2020-4, and 2020-8." Id.
Boobuli's request for judicial notice of the 2021-3 bulletin is GRANTED. See Intri-Plex Techs., Inc. v. Crest Grp., Inc. , 499 F.3d 1048, 1052 (9th Cir. 2007) ("A court may take judicial notice of ‘matters of public record’ without converting a motion to dismiss into a motion for summary judgment," as long as the facts noticed are not "subject to reasonable dispute.").
III. STATE FARM'S RESPONSES TO THE BULLETINS AND ALLEGED CONTINUATION OF EXCESSIVE PREMIUMS
In response to the 2020-3 Bulletin, State Farm General reported to the DOI that, among other things, it will apply a "uniform reduction of 40% of the rated liability exposure amount for all [businessowner] customers, for one annual renewal cycle," with "a target effective date of September 15, 2020 for new and renewal business." FAC, Ex. B (State Farm Response to 2020-3 Bulletin) at 2. "In addition for all customers whose policies terminate between March 20 and August 31, 2020, [State Farm General] will return 25% of the premium owed for coverage that was in force during the period of March 20 to May 31." Id. It reiterated the same in response to the 2020-8 Bulletin. See id. , Ex. E (State Farm Response to 2020-8 Bulletin) at 2 ("[State Farm General] is applying a uniform reduction of 40% of the rated liability exposure amounts to all customers, for one annual renewal cycle," and "[f]or all customers whose [businessowners] policies terminated between March 20 and August 31, 2020, [it] is refunding 25% of the premium owed for coverage that was in force during the period of March 20 to May 31.")
Boobuli's alleges that, despite having renewed coverage on the expiration of the 2019 Policy, it had received no premium reduction, as indicated in State Farm's Response to the 2020-3 Bulletin. FAC ¶¶ 51, 57; id. , Ex. B (State Farm Response to 2020-3 Bulletin) at 2 ("uniform reduction of 40% of the rated liability exposure amount for all [businessowner] customers, for one annual renewal cycle," with "a target effective date of September 15, 2020 for new and renewal business"). It further alleges that the 2019 Policy "terminated" on June 1, 2020, but State Farm nonetheless failed to return to it any portion of the premium paid for coverage between March 20 and May 31, 2020. Id. ¶¶ 45, 50; id. , Ex. B (State Farm Response to 2020-3 Bulletin) at 2 ("In addition for all customers whose policies terminate between March 20 and August 31, 2020, [State Farm General] will return 25% of the premium owed for coverage that was in force during the period of March 20 to May 31.").
At the time that the 2020 Policy went into effect, on June 1, 2020, Boobuli's business had already been adversely impacted by mandatory closure during the latter part of March and for all of April and May 2020. FAC ¶ 58. The business was still mandatorily closed on June 1, 2020, and thus "providing a concrete demonstration of a policy whose projected loss exposures have become overstated or misclassified." Id. ¶ 59. Nevertheless, Boobuli's alleges, State Farm General "failed to appropriately adjust [the] premiums under the 2020 Policy" and instead "actually raised [the] premium under the 2020 Policy, from $1,610 to $1,634." Id. ¶ 60.
"State Farm General [ ] also failed to notify [Boobuli's] of any intention or obligation to make a premium adjustment reflecting the overstated projected loss exposures on the basis of which Plaintiff's current premiums were calculated. In fact, State Farm's only communication to Plaintiff concerning the recent directives from the Department of Insurance was a May 4, 2020, letter informing Plaintiff that State Farm could provide additional coverage for pandemic-related use of personal vehicles." FAC ¶ 62.
"Given the fact that [Boobuli's] business is still severely impacted by the pandemic and the projected loss exposures underlying the calculation of [the] premiums therefore remain significantly overstated," the FAC alleges that "State Farm General was obligated to adjust [the] premium due under the 2020 Policy and/or to return excess premium amounts paid between June 2020 and the present." FAC ¶ 65. To date, however, it asserts that "State Farm General has failed to adjust [the] premiums due under the 2020 Policy," and has also "failed to return any premium amounts paid under this Policy." Id. ¶ 66. It "seeks to restore excessive, unfair premiums (and the earnings thereon), through disgorgement, restitution and a constructive trust, and enjoin State Farm from continuing to charge and retain excessive, unfair premiums." Id. ¶ 67.
Based on these allegations, Boobuli's brings the following four causes of action ("COA"): breach of the covenant of good faith and fair dealing on the 2019 and 2020 Policies (COA 1 and 2); (violation of business and Professions Code § 17200, et seq. ("UCL") (COA 3); and unjust enrichment/restitution (COA 4). It brings these claims on behalf of "All persons who paid insurance premiums to State Farm for property and casualty insurance policies, covering any period from March 16, 2020, through the present, whose business operations were substantially reduced or eliminated due to the COVID-19 pandemic." FAC ¶ 68. Boobuli's seeks: (i) an order certifying the proposed class; (ii) an order declaring that State Farm violated its and class members' rights; (iii) an order enjoining State Farm "from charging premiums in excess of a fair rate of return based on pre-COIVD-19, Shelter-in-Place rate calculations"; and (iv) equitable relief, including restitution for unjust enrichment and/or disgorgement, restitution, and a constructive trust for the unearned premiums and State Farm's investment returns on those unearned premiums. Id. , Prayer for Relief ¶¶ A–D.
LEGAL STANDARD
A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(1) is a challenge to the court's subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). "Federal courts are courts of limited jurisdiction," and it is "presumed that a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). The party invoking the jurisdiction of the federal court bears the burden of establishing that the court has the requisite subject matter jurisdiction to grant the relief requested. Id. A challenge pursuant to Rule 12(b)(1) may be facial or factual. White v. Lee , 227 F.3d 1214, 1242 (9th Cir. 2000). In a facial attack, the jurisdictional challenge is confined to the allegations pled in the complaint. Wolfe v. Strankman , 392 F.3d 358, 362 (9th Cir. 2004). The challenger asserts that the allegations in the complaint are insufficient "on their face" to invoke federal jurisdiction. Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). To resolve this challenge, the court assumes that the allegations in the complaint are true and draws all reasonable inference in favor of the party opposing dismissal. Wolfe , 392 F.3d at 362.
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss if a claim fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the claimant must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when the plaintiff pleads facts that "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). There must be "more than a sheer possibility that a defendant has acted unlawfully." Id. While courts do not require "heightened fact pleading of specifics," a claim must be supported by facts sufficient to "raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 570, 127 S.Ct. 1955.
DISCUSSION
I. EXCLUSIVE JURISDICTION
State Farm contends that none of Boobuli's claims can proceed in this court because California law, specifically sections 1860.1 and 1860.2 of the California Insurance Code, confer exclusive original jurisdiction over insurance rate issues to the Insurance Commissioner. As State Farm interprets the FAC, Boobuli's complaint is that State Farm General's premiums based on the rates previously approved by the Insurance Commissioner are too high, and thus this lawsuit directly implicates the Commissioner's exclusive original jurisdiction over rates. To understand State Farm's argument, some background regarding insurance regulation in California is required.
Prior to the passage of Proposition 103 in 1988, California was a so-called "open rate" state, where rates were set by insurers without prior or subsequent approval by the Insurance Commissioner. Walker v. Allstate Indem. Co. , 77 Cal. App. 4th 750, 752, 92 Cal.Rptr.2d 132 (2000). "The Commissioner was empowered to prohibit an insurance rate only if a reasonable degree of competition did not exist in the area and the rate was found to be excessive, inadequate or unfairly discriminatory." Id. (citations and formatting omitted). The passage of Proposition 103 made numerous fundamental changes in the regulation of automobile and other types of insurance, retaining some sections of the Insurance Code and modifying others. Id. Now, "[i]nsurance rates subject to this chapter," including the type of insurance at issue in this case, "must be approved by the commissioner prior to their use." Cal. Ins. Code. § 1861.01(c). An insurer "cannot charge a rate unless the rate is part of a rate plan which has been approved in advance by the [DOI]." MacKay v. Superior Ct. , 188 Cal. App. 4th 1427, 1431, 115 Cal.Rptr.3d 893 (2010), as modified (Oct. 20, 2010), as modified (Oct. 22, 2010).
The Insurance Code bars the Commissioner from approving rates that are "excessive, inadequate, unfairly discriminatory, or otherwise in violation of this chapter." Cal. Ins. Code § 1861.05(a). Members of the public may challenge rates both before and after approval in administrative proceedings from which judicial review is available. See Cal. Ins. Code §§ 1858, 1858.6, 1861.05(c). Once an insurance rate is approved, an insurer must charge the approved rates or face substantial penalties. See Cal. Ins. Code §§ 1858.07(a), 1861.01(c).
Most relevant to State Farm's exclusive jurisdiction argument, section 1860.1 of the Insurance Code states: "[n]o act done ... pursuant to the authority conferred by this chapter shall constitute a violation of or grounds for prosecution of civil proceedings under any law of this State heretofore or hereafter enacted which does not specifically refer to insurance." Cal. Ins. Code § 1860.1. The statute was part of the McBride–Grunsky Insurance Regulatory Act of 1947, enacted, in the first instance, in order to immunize insurers from antitrust laws. See Donabedian v. Mercury Ins. Co. , 116 Cal. App. 4th 968, 980, 11 Cal.Rptr.3d 45 (2004), as modified on denial of reh'g (Mar. 30, 2004); see Villanueva v. Fid. Natl. Title Co. , 11 Cal. 5th 104, 121, 276 Cal.Rptr.3d 209, 482 P.3d 989 (2021) ("As this history reveals, and as numerous courts have observed over time, the language of these statutes was originally drafted to ensure that insurers would not be subject to antitrust liability for consulting with each other before establishing their rates.").
However, a different section of the Insurance Code, added by Proposition 103, provides that "[t]he business of insurance shall be subject to the laws of California applicable to any other business, including, but not limited to ... unfair business practices laws." Cal. Ins. Code § 1860.03(a). "The weight of authority in this district and the California Court of Appeals harmonizes Sections 1860.1 and 1860.03(a) by narrowly construing the Section 1860.1 immunity upon which [State Farm] relies." Ellsworth v. U.S. Bank, N.A. , 908 F. Supp. 2d 1063, 1082 (N.D. Cal. 2012) (citing MacKay , 188 Cal. App. 4th at 1449–50, 115 Cal.Rptr.3d 893 and Wahl v. Am. Sec. Ins. Co. , C 08-0555 RS, 2010 WL 4509814, at *2-3 (N.D. Cal. Nov. 1, 2010) ). As harmonized, "challenges to the reasonableness of an approved rate fall within the exclusive ambit of the chapter and are exempt from the requirements of other laws." Wahl , 2010 WL 4509814, at *3 (discussing the statutory construction articulated in MacKay ). On the other hand, " Insurance Code section 1860.1 protects from prosecution under laws outside the Insurance code only acts done, actions taken and agreements made pursuant to the authority conferred by the ratemaking chapter. It does not extend to insurer conduct not taken pursuant to that authority." Wahl , 2010 WL 4509814, at *3 (quoting MacKay , 188 Cal. App. 4th at 1449, 115 Cal.Rptr.3d 893 ) (alterations and internal quotation marks omitted). In short, where a plaintiff's claim does not involve a challenge to a rate approved by the DOI or DOI's ratemaking authority, the claim does not fall within the exclusive jurisdiction of the DOI and the plaintiff may bring the claim in court in the first instance. MacKay , 188 Cal. App. 4th at 1449, 115 Cal.Rptr.3d 893.
State Farm analogizes Boobuli's claims to the ones at issue in Walker and MacKay , where exclusive jurisdiction over ratemaking precluded suits against insurers challenging premiums as excessive. Walker , 77 Cal. App. 4th at 756, 92 Cal.Rptr.2d 132 ; MacKay , 188 Cal. App. 4th at 1443, 115 Cal.Rptr.3d 893. Boobuli's responds that State Farm mischaracterizes the lawsuit as challenging approved rates and the ratemaking process. It contends that this lawsuit challenges State Farm's unfair post-COVID-19 conduct in the application of its rate plan, much like the claims at issue in Donabedian and Wahl , which did not fall within the Insurance Commissioner's exclusive jurisdiction. Donabedian , 116 Cal. App. 4th at 993, 11 Cal.Rptr.3d 45 ; Wahl , 2010 WL 4509814, at *3. I will address each of those cases in turn.
In Walker , a class of automobile insurance customers filed suit against multiple insurers and the Insurance Commissioner seeking damages or disgorgement of allegedly excessive premiums that the insurers had been authorized to collect. The complaint supported its claim of "excessive" premiums "with numerous factual allegations regarding industry trends and rates of return earned by individual insurers." Walker , 77 Cal. App. 4th at 753, 92 Cal.Rptr.2d 132. "Each cause of action against the insurers sought the redetermination of the premium rates in effect since September 1994 in accordance with certain statutory and regulatory criteria and a refund of the premiums collected in excess of the redetermined amounts." Id. The trial court dismissed the action against the insurers on the basis of Insurance Code section 1860.1. Id. at 752, 92 Cal.Rptr.2d 132. The California Court of Appeal affirmed, finding that "an insurer's action of collecting premiums consistent with an approved rate" did not provide a basis for liability. Id. at 757, 92 Cal.Rptr.2d 132.
Similarly, in MacKay , the plaintiff challenged certain rating factors used by an automobile insurer. After the record revealed that the rating factors were approved by the DOI, the California Court of Appeal addressed "whether the approval of a rating factor by the DOI precludes a civil action against the insurer challenging the use of that rating factor," concluding "that it does." MacKay , 188 Cal. App. 4th at 1434, 1443, 115 Cal.Rptr.3d 893. MacKay noted the "limited nature" of its holding, cautioning that section 1860.1 "protects from prosecution under laws outside the Insurance Code only ‘act[s] done, action[s] taken [and] agreement[s] made pursuant to the authority conferred by’ the ratemaking chapter. It does not extend to insurer conduct not taken pursuant to that authority." Id. at 1449, 115 Cal.Rptr.3d 893 (emphasis in original).
MacKay cited Donabedian as an example of a case not barred by exclusive jurisdiction. Donabedian acknowledged that actions challenging ratemaking authority of DOI fall within Insurance Commissioner's exclusive jurisdiction pursuant to section 1860.01, but concluded that the provision did not apply because the UCL claim before it did not involve ratemaking. Donabedian , 116 Cal. App. 4th at 995, 11 Cal.Rptr.3d 45. Instead, plaintiff's UCL claim challenged the insurer's practice of using lack of prior car insurance as a factor in determining eligibility for the Good Driver rate. Id. Quoting from the Insurance Commissioner's amicus brief describing the two-step ratemaking process, the court explained:
[Plaintiff's] claim does not involve any of these ratemaking steps. A separate concern is whether the optional rating factors, as applied , comply with the Insurance Code. This is a critical distinction, and it is the issue that was before the trial court in the present case. It is possible for an insurance carrier to file with the Department a rate filing and class plan that satisf[y] all of the ratemaking components of the regulations, and still result in a violation of the Insurance Code as applied. Such a [situation] would not involve a question of rates, but rather, it could easily involve the very separate, factual question of how the components of the class plan are applied toward members of the public.
Id. at 993, 11 Cal.Rptr.3d 45 (emphasis in original).
The Hon. Richard Seeborg reached a similar conclusion in Wahl. In that case, plaintiff alleged that the insurer had unfairly charged additional force-placed insurance premiums during a period of time when the insured homeowners would have had sufficient coverage without paying the additional premiums. Wahl , 2010 WL 4509814, at *3. Judge Seeborg rejected the insurer's argument that the UCL claim improperly attacked an insurance rate approved by the Commissioner. He found that a "fair reading of Wahl's UCL claim as alleged and as defended in her many opposition motions supports her argument that the claim is directed at [the insurer's] allegedly unfair conduct and not at the Commissioner's rate." Id. MacKay and Walker "were limited to situations where a plaintiff challenged a charged rate as excessive per se, and effectively asked the Court to calculate an alternative rate it deemed more ‘fair,’ " and that was "not the situation" in Wahl . Id.
That is not the situation here either. The underlying challenged conduct is not State Farm's charging of an approved rate. Rather, it is State Farm's unfair application of its approved rate plan during a specific period, aligning this case with the circumstances in Donabedian and Wahl. Boobuli's alleges that "State Farm is aware that the shelter-in-place orders, social distancing guidelines, and resulting reduction in business activity has substantially reduced or eliminated insured business operations through California," yet "State Farm continued to collect and retain excessive, unfair premiums from Boobuli's and other businesses." FAC ¶¶ 26 – 27. Boobuli's contends that "State Farm's conduct contravenes the law and public policy, is unfair to policyholders, results in arbitrary insurance practices, interferes with a competitive insurance marketplace, and denies fair, available, and affordable insurance for all Californians." Id. ¶ 11 (emphasis added).
State Farm attempts to distinguish Donabedian , Wahl , and other cases in that line, on grounds that those cases involved allegedly unlawful conduct separate from and independent of the charging of premiums based on approved rates. Reply 7. In Donabedian , plaintiff challenged the insurer's practice that was prohibited by the Insurance Code (reliance on the absence of prior insurance for determining eligibility for a Good Driver discount). 116 Cal. App. 4th at 992, 11 Cal.Rptr.3d 45. In Wahl , plaintiff challenged the insurer's practice of force-placing insurance when other coverage may have been in place. 2010 WL 4509814 at *3. Another case in this District similarly involved force-placed insurance and alleged "kickbacks" received by the insurer. See Ellsworth v. U.S. Bank, N.A. , 908 F. Supp. 2d 1063, 1082 (N.D. Cal. 2012).
While I agree that those cases involved a more clearly distinctive act challenged under the UCL, I am not convinced that necessarily sets the bar higher for what plaintiffs can bring to court and what falls within the exclusive jurisdiction of the DOI. Notably, in rejecting the insurer's argument that plaintiff "really is challenging the premiums," the Hon. Laurel Beeler in Ellsworth emphasized that "[j]ust because the damages are based on increased costs incurred as a result of the alleged kickback scheme does not transform a challenge to conduct and practices into a challenge to the premiums." Ellsworth , 908 F. Supp. 2d at 1083. In this case, damages based on State Farm's alleged misapplication of the approved rates during a specific time period (post-COVID) does not transform Boobuli's challenge into one about the premiums itself. That may be a thin line in State Farm's view, but courts have repeatedly held that section 1860.1 must be "narrowly constru[ed]." Id. at 1082 ; MacKay , 188 Cal. App. 4th at 1443, 115 Cal.Rptr.3d 893 ("Our task, therefore, is to harmonize a broad statute, subjecting the entirety of the business of insurance to all California laws governing business, and a very narrow one, exempting from other California laws acts done and actions taken pursuant to the ratemaking authority conferred by the ratemaking chapter.").
The California Supreme Court's recent analysis of a similar Insurance Code provision is instructive. See Villanueva v. Fid. Nat'l Title Co. , 11 Cal. 5th 104, 276 Cal.Rptr.3d 209, 482 P.3d 989 (2021) ; Statement of Recent Decision [Dkt. No. 44]. Section 12414.26 of the Insurance Code, governing title insurance, mirrors the language in section 1860.1. See id. at 116, 276 Cal.Rptr.3d 209, 482 P.3d 989 (" Section 12414.26 is not the only provision of its kind; it is one of four nearly identical immunity provisions scattered through the Insurance Code that supplement limited state regulation with partial immunity for specific categories of insurance.") (citing Cal. Ins. Code, §§ 795.7, 1860.1, 11758, 12414.26 ). Plaintiffs in Villanueva alleged that "the delivery, courier, and draw deed fees added to the [their] escrow statement were illegal because they had never been filed with the Insurance Commissioner." Id. at 111, 276 Cal.Rptr.3d 209, 482 P.3d 989 (citing Cal. Ins. Code §§ 12401.17 and Bus & Prof Code § 17200 et seq. ). Fidelity argued that it was immune from suit under section 12414.26 (analogous to section 1860.1 ) because other sections of the Insurance Code regulate rates for the business of title insurance and thus the act of charging rates, including unfiled rates, is an act done pursuant to the authority conferred by the Insurance Code. Id. at 110, 276 Cal.Rptr.3d 209, 482 P.3d 989.
The California Supreme Court rejected that argument, finding that courts have "consistently understood the language of these provisions to immunize acts affirmatively authorized by the relevant provisions of the Insurance Code, as opposed to acts that are merely regulated under those provisions."). Id. at 116, 276 Cal.Rptr.3d 209, 482 P.3d 989 (emphasis added). It found "nothing in the plain language of section 12414.26 that supports Fidelity's expansive view of its immunity from suit," holding that "statutory immunity does not extend to the charging of unfiled rates because those articles confer no such authority; on the contrary, the referenced articles expressly prohibit the charging of unfiled rates." Id. at 117, 276 Cal.Rptr.3d 209, 482 P.3d 989.
Boobuli's and State Farm agree that Boobuli's pre-pandemic premiums were properly charged in accordance with State Farm's approved rate plan; the DOI approved those rates effective December 15, 2018. RJN, Ex. D at 5–11. But this lawsuit challenges State Farm's misapplication of approved rates in the present COVID-19 circumstances, an act not affirmatively authorized by the Insurance Commissioner. The series of Bulletins issued by the Insurance Commissioner, discussed more fully below, indicate that misapplication or misclassification of approved rates is an issue that can be addressed without changes to the underlying approved rate plans. See FAC, Ex. A (2020-3 Bulletin) at 1.
State Farm points out that Villanueva distinguished "the automobile insurance rates at issue in Walker and MacKay ," because "title insurance rates need not receive formal approval from the Commissioner, but need only be filed in order to become, after a waiting period, effective. Villanueva , 11 Cal. 5th at 125, 276 Cal.Rptr.3d 209, 482 P.3d 989 (citing Cal. Ins. Code. § 12401.1, 12401.2, 12401.7 ). Unlike Villanueva , which involved premiums based on unfiled rates, State Farm contends that the premiums here are based on filed and approved rates. Villanueva 's holding is not as limiting as State Farm reads it. Villanueva did not hold that the immunity provision only allows suits challenging conduct that is expressly prohibited in the Insurance Code. Instead, it held that suits challenging conduct not authorized by the Insurance Code do not receive the cloak of immunity; if the conduct is affirmatively authorized by the Insurance Code, then immunity applies. That the conduct in Villanueva was not only unauthorized but also specifically prohibited, was an added reason why statutory immunity did not extend to Fidelity's conduct. See Villanueva , 11 Cal. 5th at 116, 276 Cal.Rptr.3d 209, 482 P.3d 989 ("Far from being authorized, [the rates charged by Fidelity] are expressly prohibited.").
Relatedly, Villanueva rejected Fidelity's interpretation of another insurance case, Quelimane Co. v. Stewart Title Guar. Co. , 19 Cal. 4th 26, 77 Cal.Rptr.2d 709, 960 P.2d 513 (1998), as holding that "so long as the alleged conduct relates to ratemaking in some way, it automatically is immunized by section 12414.26." Villanueva , 11 Cal. 5th at 124, 276 Cal.Rptr.3d 209, 482 P.3d 989. The court found it "simply a logical fallacy to infer from Quelimane 's holding — if conduct does not relate to ratemaking, it cannot be immunized by section 12414.26 — that if conduct does relate to ratemaking, it necessarily is immunized by section 12414.26. Quelimane said no such thing, and overreading it in this fashion would lead to results Quelimane surely did not intend." Id. ; see Quelimane , 19 Cal. 4th at 42–55, 77 Cal.Rptr.2d 709, 960 P.2d 513 (statute applicable to title insurer, similar to section 1860.1, did not preclude UCL action alleging restraint of trade and false advertising). Villanueva supports the conclusion that immunity provisions like section 1860.1 must be narrowly construed. Even if State Farm's alleged conduct relates to ratemaking in some way, that does not mean it is necessarily immunized by 1860.1.
This conclusion is supported, although not dictated by, the Insurance Commissioner's response in the Rejoice! case. There, the Commissioner confirmed that a suit challenging an insurer's refusal to adjust its premiums to account for changed circumstances posted by the COVID-19 pandemic "does not implicate California Insurance Code section 1860.1" Insurance Commissioner Response ("IC Response"), Dkt. No. 61 in Case No. 20-cv-06789-EMC at 2. The Commissioner explained that section 1860.1 "does not protect unauthorized or unlawful conduct that results in allegedly excessive rates, unfair practices, or misapplied approved rates. As a result, a civil action alleging such conduct is not subject to the Commissioner's exclusive jurisdiction." Id. The Commissioner also affirmed "the narrow application of section 1860.1" immunity and explained that section 1860.1 "does not bar private actions to enforce the Unfair Competition Law ( Cal. Bus. & Prof. Code §§ 17200 et seq. (UCL)) because a claim under the UCL is originally cognizable in the courts, and section 1860.1 should be interpreted consistently with section 1861.03(a), which subjects insurers to the UCL." Id.
Villanueva , 11 Cal. 5th at 132, 276 Cal.Rptr.3d 209, 482 P.3d 989 (according "weight to the Commissioner's view").
The Insurance Commissioner went further, explaining his view that section "1860.1 establishes a narrow immunity that only protects certain antitrust activities." Id. at 2. I do not address that issue or rely on that conclusion as persuasive analysis in support of this Order.
In sum, State Farm's exclusive jurisdiction argument fails because Boobuli's is not seeking to challenge the rate itself, but the misapplication of the rate in light of changed circumstances given the COVID-19 pandemic. There, is, however, an additional wrinkle given the series of Bulletins issued by the Insurance Commissioner. Boobuli's dismisses the notion that it seeks to "enforce the Commissioner's bulletins," although parts of its FAC appear that way. Oppo. 22; see, e.g. , FAC ¶ 102 (alleging State Farm breached it duty of good faith by "failing to abide by the directives issued by the California Department of Insurance"). Instead, it argues that the Bulletins are directed toward the misapplication of existing rates rather than the ratemaking process, and actually direct insurers to remedy this misapplication by adjusting premiums without departing from their existing approved rate plans. The parties dispute whether the Bulletins show that the Insurance Commissioner is exercising its authority over the misclassification and misapplication issue presented in this case or if the issue can and should be decided in a judicial setting.
In some respects, the Bulletins can be read as providing guidance without maintaining authority. The Insurance Commissioner "grant[ed] each insurer reasonable flexibility in determining how best to quickly and fairly accomplish the refund or premium to policyholders" and stated that "insurers may take the following actions," i.e. , "[r]eclassification of exposure to comport with current exposure" or "reduction of the exposure base," "without obtaining prior approval of rates or rules by the [DOI] if done consistent with the insurer's existing rating plan." FAC, Ex. A (2020-3 Bulletin) at 2. On the other hand, the series of Bulletin read together show that the Insurance Commissioner is actively engaged in COVID-19-related premium adjustment, requiring reports from insurers, including State Farm, about their efforts. Id. at 3. In his most recent March 2021 Bulletin, the Insurance Commissioner stated that "[m]y prior bulletins [ ] relied upon insurance companies' judgment to reasonably determine which lines were overcharged premium and the amount of premium to return to policyholders," but "evidence now shows that many insurance companies fell short." Suppl. RJN, Ex. A (2021-3 Bulletin) at 2-3. In particular, data collected from automobile insurance companies showed that they "did not return enough premiums to drivers." Id. at 3. Thus, the Insurance Commissioner "direct[ed] insurance companies to report to the Department information about the additional premium relief that they provide to consumers as our state recovers from this unprecedented economic crisis and global pandemic," with the next report due April 30, 2021. Id. at 4.
Boobuli's cites to the Insurance Commissioner's amicus brief in Villanueva in support of its contention that the Commission would not be in a position to manage and oversee the implementation of the refunds for all insurers. See Application and Proposed Amicus Curiae Brief by California Department of Insurance in Support of Appellants, in Villanueva et al. v. Fidelity National Title Company , 2020 WL 1979401 at *23 ("The Department regulates more than 1,400 insurance companies with over $310 billion in premium revenue. In connection with its regulatory function, it annually reviews over 200,000 complaints and inquiries and over 8,000 rate filings. Given the reality that the Department must budget its resources, private actions under the UCL serve an important role to buttress the Department's enforcement efforts."). While the brief goes on to distinguish why private UCL actions are particularly helpful in the title insurance context, not as issue here, it is still notable that the Insurance Commissioner has taken this position about UCL actions in general. See id. ("This is particularly so in the context of title insurance, which is not subject to Proposition 103's extensive rate review system. (See § 1851, subd. (d).) Unlike the rate review system in Proposition 103, title insurance operates under a system the industry colloquially refers to as "file-and-use": rates may be used thirty days after being filed with the Department. (§ 12401.1.) Accordingly, in the title insurance context, because there is less regulatory oversight for title insurers, a greater public participatory oversight benefits consumers.").
In a separate press release issued the same day as the 2021-3 Bulletin, not cited by the parties, the Insurance Commissioner added: "We know that for business owners, any savings matters while they are desperately trying to keep their doors open," said Commissioner Lara. "If the data shows that insurance companies overcharged our businesses, I am going to be mandating them to return premium, especially to small business that have borne the brunt of pandemic closures." See March 11, 2021 Press Release, available at https://www.insurance.ca.gov/0400-news/0100-press-releases/2021/release030-2021.cfm.
This issue was addressed by the Commissioner in the Rejoice ! Response. The Commissioner explained:
The bulletins do not affect the interpretation of section 1860.1 or address the application of exclusive jurisdiction in this case. They do not prevent policyholders from commencing an action against insurers for refusing to lower premiums in view of the pandemic. The bulletins arise from the Commissioner's independent authority to enforce the Insurance Code, but that authority, as discussed above, does not preclude the parties from seeking relief in a civil action
IC Response at 7. The Commissioner noted that he "may take action against one or more insurers to enforce his orders requiring the issuance of refunds" and his "review of the sufficiency of the refunds" provided "is ongoing" but that "review in no way precludes [a] Court from adjudicating a UCL claim against an insurer." Id.
What, if anything, the Commissioner does with respect to State Farm's reduction or refunds may impact the relief plaintiff or similarly situated policy holders might be able to receive from State Farm. But the scope of relief is premature to consider at this juncture. Defendants' motion to dismiss based on the Commissioner's exclusive jurisdiction is DENIED.
II. UNFAIR COMPETITION LAW
State Farm does not raise a separate dismissal argument with respect to the UCL claim other than the exclusive jurisdiction argument addressed above. As discussed above, Boobuli's UCL claim, challenging State Farm's misapplication of rates, is not within the Insurance Commissioner's exclusive jurisdiction over rate-setting.
The UCL creates a cause of action for business practices that are (1) unlawful, (2) unfair, or (3) fraudulent. Cal. Bus. & Prof. Code § 17200. Each "prong" of the UCL provides a separate and distinct theory of liability. Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007). Boobuli's asserts its UCL claim against State Farm under the unfair prong. It alleges that "California has a long-standing public policy limiting an insurer's ability to impose rates in excess of a fair rate of return on the insured risk, reflected in various statutes and regulations." FAC ¶ 108. State Farm's "conduct in collecting and retaining premiums for a risk that no longer exists, or has been substantially reduced, violates this vital public policy and the intent of the statutes and regulations designed to ensure that the rates collected by insurers relate to the risk insured and are limited to a fair rate of return on insuring that risk." Id. ¶ 109. As a result of these unfair practices, Boobuli's and other class members have allegedly "lost money or property and suffered injury in fact," particularly because "Defendants continue to collect and retain premiums in excess of the limitations imposed by California public policy, which rightfully belong to Plaintiff and the Class." Id. ¶ 110.
The UCL claim is plausibly pleaded in the FAC. State Farm's motion to dismiss the UCL claim is DENIED.
III. BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
The covenant of good faith and fair dealing is implied in every contract and, in most situations, prevents one party from "unfairly frustrating the other party's right to receive the benefits" of the contract. Ellsworth , 908 F. Supp. 2d at 1085. "The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith." Id. at 1086 (quoting Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. , 2 Cal.4th 342, 372, 6 Cal.Rptr.2d 467, 826 P.2d 710, (1992) ). "The exercise of discretionary powers is evaluated under the implied covenant to assure that the promises of the contract are effective and in accordance with the parties' legitimate expectations." Id. (quoting McNeary-Calloway v. JP Morgan Chase Bank, N.A. , 863 F. Supp. 2d 928, 956-57 (N.D. Cal. 2012) ). The covenant does not "prohibit a party from doing that which is expressly permitted by an agreement. On the contrary, as a general matter, implied terms should never be read to vary express terms." Carma , 2 Cal.4th at 374, 6 Cal.Rptr.2d 467, 826 P.2d 710.
Boobuli's alleges that State Farm breached the implied covenant of good faith and fair dealing "by, inter alia, (1) unreasonably failing to exercise its discretion to audit Plaintiff's policy at any time and to make adjustments to Plaintiff's premiums; (2) failing to return excess premium payments at the end of Plaintiff's policy year; (3) failing to take actions directed by the California Department of Insurance regarding the refund of Plaintiff's premiums; (4) failing to adhere to the representations State Farm itself made to the Department of Insurance; and (5) failing to provide Plaintiff with the directed notice of State Farm's obligation to provide premium relief." FAC ¶ 88 (allegations with respect to the 2019 Policy); see also id. ¶ 102 (similar allegations for the 2020 Policy) State Farm contends that Boobuli's claim rests on a false premise that the Policies allow for, or even require, downward adjustments to premium if circumstances change during the policy period. MTD 18. Unlike the policy at issue in Rejoice! , State Farm argues that Boobuli's Policies do not provide for an auditable premium; rather, the premium is fixed and not an estimate. It also disagrees that the "Examination of Your Books and Records" and "Premiums" provisions of the Policies support Boobuli's allegations.
Boobuli's responds that its claims do not depend on reading into the Policies' provisions or contractual requirements that are not there. Oppo. 17. As State Farm concedes, it "always has the discretion to make voluntary downward premium adjustments based on an insured's changed circumstances," and that is exactly what Boobuli's challenges here. MTD 19 n.11. That no provision in the Policies necessarily requires it to make a downward adjustment does not defeat Boobuli's breach of covenant claims. Relatedly, a dispute about whether certain provisions of the Policies necessarily allow State Farm's alleged conduct is not enough to warrant dismissal at the pleadings stage. See McNeary-Calloway , 863 F. Supp. 2d at 956 (because the court could "not say that the contracts' terms unambiguously authorize Defendants' alleged behavior, the Court denies Defendants' motion to dismiss the California Plaintiffs' breach of contract claim.").
State Farm distinguishes Parducci v. Overland Solutions, Inc. , 2019 WL 6311384 *8-9 (N.D. Cal. 2019) and King v. Nat'l Gen. Ins. Co. , 129 F. Supp. 3d 925, 940 (N.D. Cal. 2015) on grounds that both involved premium calculations alleged to be inconsistent with the relevant policies and/or rate filings. But here, Boobuli's admits that State Farm General charged premiums calculated pursuant to approved rates. Boobuli's claim is not simply that State Farm applied the approved rate, it is that State Farm applied the approved rate during changed circumstances, when it should have used its discretion, in good faith, to make the appropriate adjustments.
In a footnote, Boobuli's argues that State Farm's failure to adjust the renewal premium to comply with the Commissioner's Bulletins in itself constituted a breach of the implied covenant. Oppo. 18 n. 3. State Farm argues that this claim fails because the Bulletins are not part of Boobuli's Policies, and thus cannot be the basis for an implied contractual obligation between the parties, and to the extent that it can, its decision to apply a 40% reduction after September 2020 is appropriate under the "reasonable flexibility" granted by the Insurance Commissioner. Reply 10 n.3. I agree that Boobuli's cannot rest the implied breach of covenant claims based solely on the Bulletins because "any potential implied covenant claim must be based on the obligations and duties of the parties' contract." Hilario v. Allstate Ins. Co. , No. 20-CV-05459-WHO, 2020 WL 7643233, at *5 (N.D. Cal. Dec. 23, 2020).
State Farm's motion to dismiss the implied covenant claim is DENIED.
IV. UNJUST ENRICHMENT
To the extent that State Farm asserts that there is no standalone cause of action for unjust enrichment, I find that argument unconvincing. See Astiana v. Hain Celestial Group, Inc. , 783 F.3d 753, 762 (9th Cir. 2015) (courts may construe an unjust enrichment claim as a quasi-contract claim seeking restitution). Its alternative argument is that a claim for unjust enrichment "does not lie when an enforceable, binding agreement exists defining the rights of the parties," citing Paracor Fin., Inc. v. Gen. Elec. Capital Corp. , 96 F.3d 1151, 1167 (9th Cir. 1996). The alternative argument does not warrant dismissal at the pleadings stage either. State Farm's position was rejected in United States ex rel. Begole v. Trenkle , 2010 WL 11596170, at *11–12 (C.D. Cal. July 16, 2010), where the defendant similarly relied on Paracor to argue that an unjust enrichment claim must be dismissed at the pleadings stage. The court found that defendant's reliance on Paracor was misplaced because "[i]n Paracor , the court reviewed whether an unjust enrichment claim could be maintained when a summary judgment adjudication determined an enforceable contract existed between the parties." Id. The plaintiff in that case, as Boobuli's does here, "allege[d] a contract existed between the parties, but since the case [was] still in the initial pleading stage, there [had] been no finding that a contract exists." Id. "Accordingly, as there may not be an enforceable contract between Plaintiff and Defendants, Paracor does not apply, and Plaintiff can maintain her unjust enrichment claim." State Farm's "interpretation of Paracor effectively eliminates alternative pleadings under Federal Rule of Civil Procedure 8(d)(2) and inconsistent pleadings under Rule 8(d)(3)." Id. ; see also Professor Brainstorm, LLC v. Aronowitz , 2009 WL 10675891, at *3 (C.D. Cal. Dec. 8, 2009) ("However, unlike the cases above," including Paracor , "this case is at the pleading stage. At this stage, the Court has yet to determine what remedies are available. It would be improper to exclude the quasi contract claim on the basis that it cannot co-exist alongside a contract remedy because the Court has yet to determine whether a contract remedy is available to Plaintiff. Therefore, the Court DENIES Defendant's Motion to Dismiss Plaintiff's unjust enrichment claim.").
Judge Corley in Franklin EWC, Inc. v. Hartford Fin. Servs. Grp., Inc. , 488 F. Supp. 3d 904, 910 (N.D. Cal. 2020) cited Paracor in dismissing the unjust enrichment claims pleaded in that case. However, the unjust enrichment claim was primarily dismissed because "the Virus Exclusion applie[d] as a matter of law" and dismissed "for the additional reason that an action in quasi-contract does not lie ‘when an enforceable, binding agreement exists defining the rights of the parties.’ " Id. (quoting Paracor , 96 F.3d at 1167 ).
State Farm's motion to dismiss the unjust enrichment claim is DENIED.
V. STATE FARM MUTUAL AS A DEFENDANT
State Farm argues that Boobuli's has sued the correct insuring entity, State Farm General, in its FAC, but it improperly names its parent entity, State Farm Mutual, which is neither party to the Policies nor itself a contracting entity. MTD 21. Boobuli's responds that it is not required to plead that it paid funds directly to State Farm's parent entity to show entitlement to restitution as remedy under its UCL claim. Oppo. 24. Instead, "the notion of restoring something to a victim of unfair competition includes two separate components: the offending party must have obtained something to which it was not entitled and the victim must have given up something which he or she was entitled to keep." Day v. AT&T , 63 Cal.App.4th 325, 340, 74 Cal.Rptr.2d 55 (1998).
I agree that "[p]laintiffs simply need to allege that [defendants] obtained money (or property) and that plaintiffs lost money or property as a result of defendants' unfair practices." In re JUUL Labs, Inc., Mktg., Sales Practices, & Prod. Liab. Litig. , 497 F.Supp.3d 552, 639 (N.D. Cal. 2020) (citing Cabebe v. Nissan of N.A. , Inc., 2018 WL 5617732, at *5 (N.D. Cal. Oct. 26, 2018) ). The problem here is that Boobuli's has not alleged that State Farm Mutual obtained something to which it was not entitled. It only names State Farm Mutual as a party, defines "State Farm" as "State Farm General and State Farm Mutual" and then adds State Farm Mutual's name to the cause of action headings. See FAC ¶ 17.
Boobuli's relies on Troyk v. Farmers Grp., Inc. , 171 Cal. App. 4th 1305, 1342, 90 Cal.Rptr.3d 589 (2009), where the plaintiff filed a class action against Farmers Group, Inc. under the UCL, seeking restitution of undisclosed service charges paid to Farmer's subsidiary, Prematic. Farmers appealed the award of restitution under the UCL because Prematic, not Farmers, was the direct recipient of the service charges. Id. at 1338, 90 Cal.Rptr.3d 589. The California Court of Appeal affirmed, holding that it is not essential that money be paid directly to the recipient by the party seeking restitution. Id. at 1339, 90 Cal.Rptr.3d 589. Because Prematic was acting as Farmer's wholly owned subsidiary in collecting premiums and service charges, the trial court did not abuse its discretion in finding that Farmer's benefited from those payments. Id. at 1340-1341, 90 Cal.Rptr.3d 589.
By contrast, Boobuli's has not alleged that State Farm General was acting as State Farm Mutual's wholly owned subsidiary or that the two acted as a "single enterprise" or had an agency relationship. See id. at 1342, 90 Cal.Rptr.3d 589 ("Based on our review of the undisputed facts, we conclude there is substantial evidence to support the trial court's finding that FGI, FIE, and Prematic acted as a single enterprise and therefore FGI and FIE may be liable for UCL restitution"). It simply named State Farm General's parent entity as a defendant in the FAC and nothing else.
State Farm's motion to dismiss State Farm Mutual as defendant is GRANTED with leave to amend.
CONCLUSION
State Farm's motion to dismiss claims against State Farm Mutual is GRANTED with leave to amend by October 25, 2021. The motion is otherwise DENIED.