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In Fine, the court upheld a conversion claim where the plaintiff paid premiums on a life insurance policy sold by the defendant.
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Case No. 2:22-cv-02071-SSS-PDx
2022-09-14
Robert R. FINE, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. KANSAS CITY LIFE INSURANCE COMPANY, Defendant.
Patrick J. Stueve, Pro Hac Vice, David A. Hickey, Pro Hac Vice, Ethan M. Lange, Pro Hac Vice, Lindsay T. Perkins, Pro Hac Vice, Stueve Siegel Hanson LLP, Kansas City, MO, Matthew W. Lytle, Pro Hac Vice, John J. Schirger, Pro Hac Vice, Joseph M. Feierabend, Pro Hac Vice, Miller Schirger LLC, Kansas City, MO, E. Scott Palmer, Katelyn B. Hunter, Palmer Hunter and Hall, Los Angeles, CA, for Plaintiff. Adam R. Fox, Hannah Justine Makinde, Squire Patton Boggs US LLP, Los Angeles, CA, Francisco J. Rolon, Pro Hac Vice, James R. Evans, Pro Hac Vice, Squire Patton Boggs US LLP, Atlanta, GA, John William Shaw, Pro Hac Vice, Lauren Tallent, Pro Hac Vice, Berkowitz Oliver LLP, Kansas City, MO, for Defendant.
Patrick J. Stueve, Pro Hac Vice, David A. Hickey, Pro Hac Vice, Ethan M. Lange, Pro Hac Vice, Lindsay T. Perkins, Pro Hac Vice, Stueve Siegel Hanson LLP, Kansas City, MO, Matthew W. Lytle, Pro Hac Vice, John J. Schirger, Pro Hac Vice, Joseph M. Feierabend, Pro Hac Vice, Miller Schirger LLC, Kansas City, MO, E. Scott Palmer, Katelyn B. Hunter, Palmer Hunter and Hall, Los Angeles, CA, for Plaintiff. Adam R. Fox, Hannah Justine Makinde, Squire Patton Boggs US LLP, Los Angeles, CA, Francisco J. Rolon, Pro Hac Vice, James R. Evans, Pro Hac Vice, Squire Patton Boggs US LLP, Atlanta, GA, John William Shaw, Pro Hac Vice, Lauren Tallent, Pro Hac Vice, Berkowitz Oliver LLP, Kansas City, MO, for Defendant.
ORDER ON DEFENDANT KANSAS CITY LIFE INSURANCE COMPANY'S MOTION TO DISMISS FIRST AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM [Dkt. 74]
SUNSHINE S. SYKES, United States District Judge
Before the Court is Defendant Kansas City Life Insurance Company's ("KCL") Motion to Dismiss Plaintiff Robert Fine's ("Plaintiff") First Amended Complaint ("FAC") [Dkt. 65] in its entirety. [Dkt. 74]. For the reasons set forth below, KCL's motion to dismiss is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
This is a class action for breach of contract and conversion. [Dkt. 65 ¶ 1]. Plaintiff brings this case as a class action on behalf of himself and a class of similarly situated persons who own or owned certain universal and variable universal life insurance policies issued by KCL in the State of California. [Id. ¶ 5].
Plaintiff's Flexible Premium Adjustable Death Benefit Life Policy ("the Policy") [Dkt. 65-1] includes both a death benefit and an accumulated value, which is an investment, savings, or interest-bearing component that accumulates value over time. [Id. ¶ 21]. According to the Policy, in relevant part, Plaintiff, the insured policyholder, pays monthly premiums that are deposited into the accumulated value. [Id. ¶ 22]. Each month, KCL deducts certain charges from the accumulated value as permitted by the Policy, including in relevant part, a cost of insurance ("COI") and expense charges. [Id. ¶¶ 25-32].
Count I alleges KCL breached the contract with Plaintiff by improperly calculating cost of insurance charges using factors not authorized by the Policy. [Id. ¶¶ 62-71]. Count II alleges KCL breached the contract by deducting unauthorized expense charges from the accumulated value. [Id. ¶¶ 72-75]. Count III alleges KCL breached the contract by failing to reduce the cost of insurance rates despite improved expectations of future mortality experience, by which the Policy requires KCL to determine cost of insurance. [Id. ¶¶ 76-79]. Count IV alleges KCL converted Plaintiff's property interest in the accumulated value by deducting charges exceeding the amounts authorized by the Policy. [Id . ¶¶ 81-89]. Count V is a claim for declaratory and injunctive relief, seeking a declaration of the parties' respective rights and duties under the Policy and an injunction enjoining KCL from breaching the Policy. [Id. ¶¶ 90-94].
II. PROCEDURAL HISTORY
Plaintiff filed this action on March 29, 2022. [Dkt. 1]. On May 12, 2022, Plaintiff filed the FAC. [Dkt. 65]. On May 26, 2022, KCL filed the instant motion to dismiss all counts in the FAC. [Dkt. 74].
III. LEGAL STANDARD
"It is axiomatic that the motion to dismiss . . . is viewed with disfavor and is rarely granted." Ernst & Haas Mgmt. Co., Inc. v. Hiscox, Inc., 23 F.4th 1195, 1199 (9th Cir. 2022) (citation omitted). Dismissal under Rule 12(b)(6) is proper only when a complaint exhibits either a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). In reviewing a motion to dismiss under Rule 12(b)(6), the Court must assume the truth of all factual allegations and must construe all inferences from them in the light most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996).
As this Court exercises diversity jurisdiction over this matter, California law governs the parties' dispute. See Sonner v. Premier Nutrition Corp., 971 F.3d 834, 839 (9th Cir. 2020). In California, "[i]nterpretation of an insurance policy is a question of law and follows the general rules of contract interpretation." MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003).
Under California law, "[r]esolution of contractual claims on a motion to dismiss is proper if the terms of the contract are unambiguous." Bedrosian v. Tenet Healthcare Corp., 208 F.3d 220 (9th Cir. 2000) (citations omitted). But where a contract is ambiguous, the motion to dismiss must be denied. Ellsworth v. U.S. Bank, N.A., 908 F. Supp. 2d 1063, 1084 (N.D. Cal. 2012) (citing Consul Ltd. v. Solide Enters., Inc., 802 F.2d 1143, 1149 (9th Cir. 1986)). "A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable." MacKinnon, 31 Cal. 4th at 648, 3 Cal.Rptr.3d 228, 73 P.3d 1205.
Additionally, "[c]ourts may dismiss breach of contract claims when the agreement is not reasonably susceptible to any meaning that could support the plaintiff's legal theories." Anthony v. Yahoo Inc., 421 F. Supp. 2d 1257, 1260 (N.D. Cal. 2006) (citing Martinez v. Socoma Companies, Inc., 11 Cal. 3d 394, 397, 113 Cal.Rptr. 585, 521 P.2d 841 (1974)).
IV. COUNT I (BREACH OF CONTRACT - COST OF INSURANCE CHARGE) AND COUNT III (BREACH OF CONTRACT - IMPROVING EXPECTATIONS AS TO FUTURE MORTALITY EXPERIENCE)
KCL moves to dismiss Counts I and III of the FAC, arguing that Plaintiff's legal theories are premised on an unreasonable construction of the Policy. [Dkt. 74 at 5]. Count I alleges KCL breached the contract by improperly calculating the COI charge, using unauthorized non-mortality factors. [Dkt. 65 ¶¶ 66-69]. Plaintiffs claim KCL must calculate COI using only KCL's expectations as to future mortality experience and not unlisted non-mortality factors. [Id.]. Count III alleges KCL breached the contract because it failed to reduce the COI rates to reflect improved expectations of future mortality experience. [Dkt. 65 ¶¶ 76-80].
KCL argues Plaintiff's construction of the contract ignores the contractual definition of "cost of insurance," which KCL contends does not prohibit KCL from considering unlisted non-mortality factors to calculate COI. [Dkt. 74 at 6]. But in order to succeed on its motion to dismiss, KCL must demonstrate that there is no reasonable interpretation of the agreement that supports Plaintiff's theory. Anthony, 421 F. Supp. 2d at 1260. The contractual definition of "cost of insurance" is "[t]he charge we make for providing pure insurance protection using the current cost of insurance rates for this policy." [Dkt. 65-1 at 9, Sec. 5.10]. While KCL is correct that the plain language of this definition does not expressly prohibit the use of non-mortality factors in calculating the COI, the COI definition does not go so far as to expressly permit the use of such factors. At best, the definition is silent as to which factors may be used when calculating the COI and thus does not foreclose the reasonableness of Plaintiff's interpretation of the agreement.
KCL also argues that Plaintiff's interpretation conflicts with express limitations that exist elsewhere in the Policy. [Dkt. 74 at 6-7]. According to KCL, the absence of a prohibition regarding the use non-mortality factors to calculate COI indicates permission to use non-mortality factors to calculate COI. [Id.]. Although not stated as such, the crux of KCL's argument is similar to the logic of expressio unius est exclusio alterius, the statutory interpretation doctrine under which the inclusion of one thing excludes the other. See Wheeler v. City of Santa Clara, 894 F.3d 1046, 1054 (9th Cir. 2018) ("[T]he 'doctrine of expressio unius est exclusio alterius "as applied to statutory interpretation creates a presumption that when a statute designates certain persons, things, or manners of operation, all omissions should be understood as exclusions." ' ") (citations omitted). That is, KCL asserts that because the agreement included some express prohibitions but did not include the prohibition against using non-mortality factors to calculate COI, the agreement intended not to prohibit the use of non-mortality factors.
But there are at least two problems with KCL's approach. First, KCL's logic "has force only when the items expressed are members of an 'associated group or series,' justifying the inference that items not mentioned were excluded by deliberate choice, not inadvertence." Barnhart v. Peabody Coal Co., 537 U.S. 149, 168, 123 S.Ct. 748, 154 L.Ed.2d 653 (2003). The prohibitions cited by KCL are not associated with or related to whether KCL may use non-mortality factors to calculate COI. [See Dkt. 74 at 14 (mentioning prohibitions preventing KCL from exceeding contract maximums, altering rates to recover past losses, and contesting the Policy)]. Second, KCL's logic cuts against KCL's position. In Section 4, the agreement states the COI will be based on "the Insured's age, sex and risk class," and that the COI rates will be based on "[KCL's] expectations as to future mortality experience." [Dkt. 56-1 at 7]. Thus, the mention of age, sex, risk class, and expectations as to future mortality, which are an "associated group or series" of factors used to calculate COI, could be interpreted to exclude all other factors from the COI calculation, including non-mortality factors. But the Court does not and need not make such a determination at the motion to dismiss stage and only finds the agreement is not unambiguous regarding whether non-mortality factors may be used to calculate COI.
Moreover, despite the existence of express prohibitions elsewhere in contract, the Court will not craft from those an express permission to use non-mortality factors to calculate COI. See California Union Square L.P. v. Saks & Co. LLC, 71 Cal. App. 5th 136, 146, 286 Cal.Rptr.3d 115 (2021) ("Courts will not add a term about which a contract is silent."). In the absence of such an express permission, the agreement is ambiguous as to whether non-mortality factors may be used to calculate COI, and it cannot be said that Plaintiff's interpretation is unreasonable.
KCL also points to the Disability Continuance of Insurance Rider and argues that because the maximum monthly cost of disability continuance remains constant for males aged 15-20 and females aged 15-20, that there is no one-to-one relationship between KCL's rates and the Insured's age, sex, and risk class. [Dkt. 74 at 7-8]. But KCL's argument is flawed in many respects. First, the disability continuance rates are not the subject of the instant dispute. Second, the maximum monthly cost of disability continuance is merely a maximum which the actual rate will not exceed and are irrelevant to the calculation of the actual rate charged. [Dkt. 65-1 at 21]. Third, Plaintiff's theory is not that there is a one-to-one relationship between KCL's rates and the Insured's age, sex, and risk class. Even if the disability continuance rates were relevant to the COI and even if the maximum rate were relevant to the calculation of the actual rates charged, the contract could be interpreted to permit KCL to consider age in terms of groups of ages or in a non-linear fashion. Thus, the lack of a one-to-one relationship between the maximum disability continuance rate and the Insured's age does not necessarily and unambiguously mean that Plaintiff's interpretation regarding the COI calculation is unreasonable.
KCL's additional argument that "[p]laintiff does not allege—and no reasonable person would believe—that the Insured's 'age, sex and risk class' are so-called 'disability factors' that prohibit KCL from 'taking non-[disability] factors into account' " [Dkt. 74 at 7] is irrelevant to the claims at issue and unsupported by any authority or explanation.
KCL also argues that Plaintiff's interpretation renders superfluous the Paid-up Insurance Benefit Endorsement because it contains almost identical language to the Monthly Cost of Insurance provision, that is both rates are based on KCL's expectations as to future mortality experience. [Dkt. 74 at 8]. KCL points to the guaranteed maximum rates for the Paid-up Insurance Benefit Endorsement and the COI maximum rates as evidence that Plaintiff's interpretation is "demonstrably erroneous." [Dkt. 74 at 16 (citing Dkt. 65-1 at 7-8, 23-24)]. But KCL's premise is flawed. First, as stated above, the guaranteed maximum rates are merely maximum rates which the actual rates will not exceed and have no demonstrated relevance to the calculation of the actual COI rates. Second, even if the guaranteed maximum rates were relevant, the discrepancy between different maximum rates for COI and the Paid-up Insurance Benefit Endorsement is easily remedied by an interpretation that allows KCL to use a different base number for COI than the Paid-up benefit such that the application of the same mortality factors results in a different final number.
KCL argues that Plaintiff's interpretation is unreasonable because the phrase "based on" permits the use of unlisted factors and does not indicate the list of mortality factors is intended to be exhaustive. [Dkt. 74 at 9-10]. In opposition, Plaintiff argues that the phrase "based on" in the context of determining a rate in an unbundled life insurance Policy supports Plaintiff's interpretation that KCL was not permitted to include undisclosed factors in COI rates. [Dkt. 83 at 13-16]. Although each Party cites cases in support of its position, neither Party cites controlling authority that carries the day. Thus, at best, the phrase "based on" is ambiguous, and at the motion to dismiss stage, it is not for this Court to determine which interpretation of "based on" is correct. Rather, the Court finds the term "based on" is ambiguous, and because Plaintiff's interpretation is not unreasonable, KCL's motion dismiss cannot be granted on this basis. Anthony, 421 F. Supp. 2d at 1260.
KCL asserts that the Policy sets forth that the Insured's age, sex, and risk class help decide the COI rate applicable to a particular insured as a matter of law. [Dkt. 74 at 18]. KCL also states that the agreement allows a reasonable policyholder to determine his or her guaranteed maximum rate. [Dkt. 74 at 18-19]. But these assertions do not conflict with or render unreasonable Plaintiff's interpretation of the agreement.
KCL also asserts that Plaintiff's construction of the agreement ignores "clear assignments of power" in the agreement and "impermissibly presumes that both parties enjoy the option to determine cost of insurance rates or cancel riders." [Dkt. 74 at 19]. But KCL's argument misses the mark. There is no dispute about whether KCL may determine COI rates; rather, the dispute is what factors KCL may use when determining such rates. That KCL is the party that calculates COI rates does not necessarily equate to unfettered discretion to use any and all factors when determining such rates.
Regarding Counts I and III, KCL has failed to demonstrate that the agreement is unambiguous or that Plaintiff's interpretation is unreasonable. Thus, KCL's motions to dismiss Counts I and III are DENIED.
V. COUNT II: BREACH OF CONTRACT (EXPENSE CHARGE)
KCL also moves to dismiss Count II, arguing that Plaintiff's theory is premised on an unreasonable construction of the term "expenses." [Dkt. 74 at 11]. Count II alleges KCL breached the agreement by loading monthly COI rates with unlisted expense factors, thereby exceeding the maximum expense charges authorized in the agreement. [Dkt. 65 ¶¶ 72-75].
KCL argues that Plaintiff's use of the term "expenses" in Count II conflicts with the provision regarding "Expense Charges" in the agreement. [Dkt. 65-1 at 9]. The Parties agree that only two expense charges are defined under the Policy: a premium expense charge and a monthly expense charge. [Dkt. 74 at 12; Dkt. 83 at 19]. KCL argues that Plaintiff's general allegations regarding "unlisted expense factors" and "unlisted expense loads" do not specifically identify the unauthorized expenses and are merely an effort to recharacterize the non-mortality factors about which Plaintiff complains in Count I. [Dkt. 74 at 11-12].
KCL has not shown that Plaintiff's interpretation of KCL's unauthorized deductions as "expenses" is unreasonable. Although Plaintiff has not specifically identified the alleged unauthorized expense charges, Plaintiff has alleged that KCL deducts such unauthorized expenses from Plaintiff's accumulated value [Dkt. 65 ¶¶ 72-75], and the Court must accept these factual allegations as true at the motion to dismiss stage. See Thompson, 295 F.3d at 895. Moreover, although KCL argues that Plaintiff's allegations describing the unauthorized deductions as "expenses" is merely an attempt to recharacterize the unauthorized activity Plaintiff complains about in Count I, this potential redundancy or discrepancy in legal theories is not a sufficient basis to dismiss Count II. Indeed, Federal Rule of Civil Procedure 8 permits Plaintiff to allege inconsistent or alternative claims. See Fed. R. Civ. P. 8(d). KCL's motion to dismiss Count II is therefore DENIED.
VI. COUNT IV: CONVERSION
KCL moves to dismiss Count IV, Plaintiff's conversion claim, asserting three independent bases for dismissal.
A. Economic Loss Rule
KCL first argues California's economic loss rules bars a claim for conversion "for the breach of duties that merely restate contractual obligations." [Dkt. 74 at 13 (quoting Nguyen v. Stephens Institute, 529 F. Supp. 3d 1047, 1058 (N.D. Cal. 2021))]. Under California law, the economic loss rule requires a party "to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise." Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 988, 22 Cal.Rptr.3d 352, 102 P.3d 268 (2004). "Simply stated, the economic loss rule provides: [W]here a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only 'economic' losses." Id. (quotations omitted). "[C]onduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law." Id. at 989, 22 Cal.Rptr.3d 352, 102 P.3d 268.
KCL asserts that Plaintiff's conversion claim mirrors his breach of contract claims and does not allege a violation of a duty independent of the agreement. [Dkt. 74 at 13-15]. Whether the economic loss rule bars a conversion claim turns on "whether the ownership interest that formed the basis for the conversion claim preexisted the contract or arises from the contract. Where the interest preexisted the contract, a conversion claim will lie." Expedited Packages, LLC v. Beavex Inc., No. 15-00721, 2015 WL 13357436, at *4 (C.D. Cal. Sept. 10, 2015).
Here, KCL deducts the monthly deduction from the Policy's accumulated value. [Dkt. 1-1 § 5.12]. The accumulated value is comprised of net premiums Plaintiff paid and interest KCL paid pursuant to the Policy. [See Dkt. 1-1 § 11.2]. While Plaintiff's ownership interest in the interest paid by KCL arises from the contract, Plaintiff's ownership interest in the premiums he paid to KCL preexists the contract. Other courts have upheld conversion claims under similar circumstances.
In Expedited Packages, plaintiff's conversion claim which was based on businesses plaintiff entrusted to defendant pursuant to an agreement. Expedited Packages, 2015 WL 13357436, at *4. The court held the economic loss rule did not bar plaintiff's claim because his property interest in the businesses existed prior to and independent of its contract with defendant. Id. Similarly, in Schneider v. Bank of Am. N.A., No. S-11-2953, 2014 WL 2118327, at *13 (E.D. Cal. May 21, 2014), the court held plaintiff stated a claim for conversion where plaintiff asserted "that pursuant to the contract, he entrusted specific sums of money to defendants, which defendants were to use for a specific purpose," and "defendants instead took the money entrusted to them, used it to pay fees plaintiff did not owe, and are refusing to return it, or even any surplus after the fees are paid."
Here, Plaintiff's property interest in the funds he paid to KCL in the form of premiums existed prior to his contract with KCL, and thus his claim for conversion of those funds based on KCL's unauthorized taking or deduction of those paid premiums would not be barred by the economic loss rule. However, because the interest KCL added to the accumulated value of Plaintiff's account is a creature of contract, Plaintiff's claim for conversion may not be based on any unauthorized taking of the interest KCL added. See Expedited Packages, 2015 WL 13357436, at *4.
The cases on which KCL relies are distinguishable. In Bally v. State Farm Life Ins. Co., 536 F. Supp. 3d 495, 513 (N.D. Cal. 2021), the court granted summary judgment against plaintiff's conversion claim under the economic loss rule because plaintiff had not demonstrated that State Farm engaged in actual "fraud or dishonesty" and found her tort claim amounted to "negligent breach of contract." However, fraud or dishonesty is not required to find an exception to the economic loss rule if defendant violates a duty independent of the contract. See Robinson, 34 Cal. 4th 979, 990, 22 Cal.Rptr.3d 352, 102 P.3d 268 (2004) (noting the economic loss rule does not apply where "the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm") (emphasis added) (citation omitted). Here, Plaintiff asserts conversion of monies over which he had an ownership interest prior to and independent of the existence of the contract. [Dkt. 65 ¶¶ 81-89]; see Expedited Packages, 2015 WL 13357436, at *4. Even assuming arguendo that fraud or dishonesty is required to find an exception to the economic loss rule, Bally is still irrelevant because KCL does not argue Plaintiff failed to allege fraud or dishonesty. Moreover, requiring a showing of dishonesty is incompatible with a conversion claim, which under California law "does not require bad faith, knowledge, or even negligence." See Voris v. Lampert, 7 Cal. 5th 1141, 1158, 250 Cal.Rptr.3d 779, 446 P.3d 284 (2019).
KCL also relies on Nguyen, where the court found plaintiff's conversion claim merely restated defendant's contractual obligations to provide in-person instruction and access to on-campus services. 529 F. Supp. 3d 1047, 1058 (N.D. Cal. 2021). The plaintiff claimed he had an ownership right to the in-person education services and defendant's failure to provide in-person services constituted conversion of plaintiff's tuition and fees he paid. Id. In contrast, Plaintiff's claim here is more direct and does not merely restate KCL's failure to fulfill its contractual duties. Rather, Plaintiff's conversion claim asserts that KCL took, without authorization, actual monetary funds over which Plaintiff had an ownership interest prior to and independent from his contract with KCL. Thus, the economic loss rule does not bar Plaintiff's conversion claim.
B. Sum Capable of Identification
KCL also argues Plaintiff's conversion claim must be dismissed because Plaintiff has failed to specify the monetary sum KCL allegedly converted. [Dkt. 74 at 15-17]. Under California law, "money cannot be the subject of an action for conversion unless a specific sum capable of identification is involved." Wells Fargo Bank, Nat'l Ass'n v. Transamerica Life Ins. Co., No. 19-cv-06478, 2020 WL 833518, at *13 (C.D. Cal. Feb. 19, 2020) (quoting Voris v. Lampert, 7 Cal. 5th 1141, 1151, 250 Cal.Rptr.3d 779, 446 P.3d 284, 291 (2019)).
However, "[a]t the pleading stage in federal court, it is only necessary for a plaintiff to allege an amount of money that is 'capable of identification,' rather than specifically identify the sum that would be required to prove the claim in a motion for summary judgment." Id. (quoting Andreoli v. Youngevity Int'l, Inc., No. 16-cv-02922, 2018 WL 1470264, at *10 (S.D. Cal. Mar. 23, 2018)). "[A]t this stage, plaintiffs need only describe the property allegedly converted sufficiently that defendants can answer and develop a defense." Id. (quoting Lennard v. Yeung, No. 10-cv-09322, 2011 WL 13217784, at *16 (C.D. Cal. June 7, 2011)).
Plaintiff "alleges he can identify a specific sum converted." [Dkt. 83 at 24]. Specifically, Plaintiff alleges "[a]lthough requiring expert testimony, the amounts of unauthorized cost of insurance charges and expense charges Defendant took from Plaintiff and the class are capable of determination, to an identified sum, by comparing Plaintiff's actual cost of insurance charge each month to a cost of insurance charge computed using a monthly cost of insurance rate determined based on Defendant's expectations as to future mortality experience." [Dkt. 65 ¶ 87]. Plaintiff therefore has alleged a sum capable of identification.
C. Immediate Possession
KCL also argues Plaintiff's conversion claim should be dismissed because Plaintiff does not allege any entitlement to immediate possession at the time of conversion. [Dkt. 74 at 17]. Under California law, a conversion claim "requires either actual possession or ownership with the right of possession." Brighton Trustees v. Transamerica Life Ins. Co., No. 19-cv-04210, 2020 WL 2036652, at *3 (C.D. Cal. Jan. 23, 2020) (citing Gen. Motors Acceptance Corp. v. Dallas, 198 Cal. 365, 370, 245 P. 184 (1926)). Where "plaintiff's conversion claim is based on [an] alleged interference with plaintiffs' ownership rights, . . . the Ninth Circuit has determined a right to immediate possession is required." Id. (citing In re Bailey, 197 F.3d 997, 1000 (9th Cir. 1999)).
In Brighton, plaintiffs alleged they "had a property interest in the funds [defendant] deducted from their Accumulate Values in excess of the amounts permitted by the terms of the Policies" and "had the right to immediately possess the funds from their Accumulation Values[.]" Id. at *6. Defendant argued that because the life insurance policy permitted it to delay payments by six months, plaintiffs had no right of immediate possession of the Accumulation Values. Id. at *2, 4. The court analyzed California Insurance Code Section 10164.2, which requires an insurer to return as expeditiously as possible all moneys due to a policy owner who surrenders a life insurance policy (but in no event more than 45 days from the surrender date), and Section 10166, which prohibits any agreement between the insurer and policyholder from waiving such a requirement. Id. at *4. The court found that "[s]tatutes can provide a right to possession sufficient to support a conversion claim," id. at *5 (citations omitted), and found that plaintiffs' allegations were sufficient, at the pleading stage, to state a claim for conversion.
Here, Plaintiff alleges "[t]he funds held in the accumulated value are policy owner property that Defendant holds in trust for its policy owners," [Dkt. 65 ¶ 23], and that "[b]y deducting cost of insurance charges and expense charges in unauthorized amounts from the accumulated values of Plaintiff and the class, Defendant assumed and exercised ownership over, and misappropriated or misapplied, specific funds held in trust for the benefit of Plaintiff and the class, without authorization or consent and in hostility to the rights of Plaintiff and class members" [Dkt. 65 ¶ 83]. However, Plaintiff does not allege a right to immediate possession, which is required for his conversion claim. Plaintiff's conversion claim is therefore DISMISSED WITHOUT PREJUDICE.
Because Plaintiff's now-dismissed conversion claim was the sole basis for his punitive damages claim, his punitive damages claim is also DISMISSED WITHOUT PREJUDICE. Moreover, even if Plaintiff's conversion claim was not dismissed, his claim for punitive damages would still fail to state a claim because the FAC does not contain factual allegations establishing oppression, fraud, or malice, only a conclusory allegation [see Dkt. 65 ¶ 89]. See Balistreri, 901 F.2d at 699 (noting dismissal is appropriate where there is a "the absence of sufficient facts alleged under a cognizable legal theory").
VII. COUNT V: DECLARATORY AND INJUNCTIVE RELIEF
KCL moves to dismiss Plaintiff's claim for declaratory relief, arguing it duplicates Plaintiff's breach of contract claim. [Dkt. 74 at 18-19]. "Declaratory relief should be denied when it will neither serve a useful purpose in clarifying and settling the legal relations in issue nor terminate the proceedings and afford relief from the uncertainty and controversy faced by the parties." United States v. State of Wash., 759 F.2d 1353, 1357 (9th Cir. 1985). Where a breach of contract claim resolves all questions regarding contract interpretation, declaratory relief may be duplicative and inappropriate. See United Safeguard Distributors Ass'n, Inc. v. Safeguard Bus. Sys., Inc., 145 F. Supp. 3d 932, 961 (C.D. Cal. 2015); StreamCast Networks, Inc. v. IBIS LLC, No. CV 05-04239, 2006 WL 5720345 at *4 (C.D. Cal. May 2, 2006) (collecting cases). Ultimately, "[t]he decision to grant declaratory relief is a matter of discretion even when the court is presented with a justiciable controversy." State of Wash., 759 F.2d at 1356 (citations omitted).
Plaintiff argues his claims are not duplicative because his declaratory judgment claim is prospective while his contract claims are retrospective. [Dkt. 83 at 24]. A similar argument was rejected in Bauer v. State Farm Life Ins. Co., No. 21-CV-00464, 2022 WL 912687, at *4 (N.D. Ga. Mar. 28, 2022) because the court found plaintiff's declaratory judgment claim was not prospective and instead "depend[ed] primarily on past conduct by State Farm." The Bauer court also noted that although plaintiff alleged a declaratory judgment would prevent future controversies, plaintiff had also alleged that the breaches of contract were ongoing, "meaning that if she succeed[ed] on her breach of contract claims, all breaches up to that point [would] be remedied." Id. at *4. Here too, Plaintiff's declaratory judgment claim depends primarily on KCL's past conduct [Dkt. 65 ¶¶ 92-93], and Plaintiff also alleges KCL's breaches are ongoing. [Dkt. 65 ¶¶ 71; 74; 75; 80]. Plaintiff's declaratory judgment claim therefore is not solely prospective, and his contract claims are not solely retrospective.
Plaintiff also argues his declaratory judgment claim is useful because his declaratory judgment claim "could serve a useful purpose at class certification as an independent basis to support certification." [Dkt. 83 at 25]. Plaintiff relies on Vogt v. State Farm Life Ins. Co., No. 16-cv-04170, Dkt. 52 at 12, 2017 WL 471574 (W.D. Mo. Feb. 3, 2017), where the court found that although plaintiff's declaratory judgment "essentially duplicate[d]" its breach of contract claim, it was premature at the motion to dismiss stage to determine whether a declaratory judgment claim would serve a useful purpose during class certification. [See Dkt. 83 at 24-25]. However, given that the declaratory judgment claim is duplicative of the contract claims, any usefulness the declaratory judgment claim provides during class certification may be provided by Plaintiff's contract claims. See Bauer, 2022 WL 912687, at *5 ("Even if a declaratory judgment claim can serve as an independent basis for class certification, the Court disagrees that this adds utility to the claim here because it would still be duplicative of the breach of contract claims."); Ford v. Progressive Specialty Ins. Co., No. CV 21-04147, 588 F.Supp.3d 589, 598 (E.D. Pa. Mar. 2, 2022) ("If Plaintiff wishes to seek class certification, he may still may do so under the claim for breach of contract."); City of Perry, Iowa v. Procter & Gamble Co., 188 F. Supp. 3d 276, 286 (S.D.N.Y. 2016) ("[T]he state-law claims 'will necessarily settle the issues for which the declaratory judgment is sought,' meaning that the DJA claim 'will serve no useful purpose" and will not "serve to offer relief from uncertainty.' ") (citations omitted); Catalano v. BMW of N. Am., LLC, 167 F. Supp. 3d 540, 563 (S.D.N.Y. 2016) ("Regardless of whether Catalano intends to seek class certification for declaratory and injunctive relief pursuant to Rule 23(b)(2) and other relief pursuant to Rule 23(b)(3), dismissal is warranted where, as here, the declaratory relief he seeks is duplicative of his other causes of action."). Thus, Plaintiff's declaratory judgment claim serves no useful purpose.
KCL also moves to dismiss Claim V to the extent it seeks injunctive relief, arguing injunctive relief is merely a remedy, and not an independent cause of action. [Dkt. 74 at 19]. Plaintiff does not address this argument, and the Court agrees with KCL. Cox Commc'ns PCS, L.P. v. City of San Marcos, 204 F. Supp. 2d 1272, 1283 (S.D. Cal. 2002) ("Injunctive relief, like damages, is a remedy requested by the parties, not a separate cause of action."). Plaintiff's Count V is therefore DISMISSED WITH PREJUDICE.
However, plaintiff "remains free to seek declaratory and injunctive relief as a remedy." Podpeskar v. Makita U.S.A. Inc., 247 F. Supp. 3d 1001, 1013 (D. Minn. 2017); see also Campos v. BP Prod. N. Am., Inc., No. 13 CV 8376, 2014 WL 5858625, at *10 (N.D. Ill. Nov. 12, 2014) ("[T]he declarations sought . . . concern the remedies available if defendants are found liable under a substantive count, and are therefore duplicative of the complaint's common prayers for relief.").
VIII. CONCLUSION
For the foregoing reasons, the Court orders as follows:
1. KCL's motion to dismiss Count I (Breach of Contract - Cost of Insurance Charge) is DENIED.
2. KCL's motion to dismiss Count II (Breach of Contract - Expense Charges) is DENIED.
3. KCL's motion to dismiss Count III (Breach of Contract - Improving Expectations as to Future Mortality Experience) is DENIED.
4. KCL's motion to dismiss Count IV (Conversion) is GRANTED. Plaintiff's Count IV is DISMISSED WITHOUT PREJUDICE.
5. KCL's motion to dismiss Count V (Declaratory and Injunctive Relief) is GRANTED. Plaintiff's Count V is DISMISSED WITH PREJUDICE.
Regarding Count IV (Conversion), which is DISMISSED WITHOUT PREJUDICE, Plaintiff may file an amended complaint by September 28, 2022. If Plaintiff fails to file an amended complaint by September 28, 2022, Count IV will be dismissed with prejudice.
IT IS SO ORDERED.