Opinion
No. 2:18-cv-02066-TLN-CKD
05-26-2020
ZURICH AMERICAN INSURANCE COMPANY OF ILLINOIS, Plaintiff, v. VFORCE INC.; CORTECH, LLC; and Does 1 to 100, inclusive, Defendants. VFORCE INC., Cross-Claimant, v. CORTECH, LLC, Cross-Defendant. VFORCE INC., Third-Party Plaintiff, v. BEAN TEAM NETWORK 2 LLC; CAPSERV, INC.; KAISERKANE CONSULTING, LLC; MICHAEL DiMANNO; RICHARD GARDNER; CHARLES MUSGROVE; MELISSA OGLESBY; HYBRID FINANCIAL GROUP, LLC; CHARLES FORBES; and Roes 1 through 30 inclusive, Third-Party Defendants.
ORDER
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This matter is before the Court on Cross-Defendant CorTech, LLC ("CorTech") and Third-Party Defendants Accuire, LLC ("Accuire"), CapServ, Inc. ("CapServ"), KaiserKane, Michael DiManno ("DiManno"), Richard Gardner ("Gardner"), Charles Musgrove ("Musgrove"), Melissa Oglesby ("Oglesby"), and Charles Adam Forbes's ("Forbes") separate Motions to Dismiss Defendant/Cross-Complainant/Third-Party Plaintiff VForce Inc.'s ("VForce") Cross-Complaint and Third-Party Complaint. (ECF Nos. 21, 38, 40, 61.) VForce opposed all motions. (ECF Nos. 28, 45, 46, 62.) Only Forbes filed a Reply. (ECF No. 63.)
Also before the Court is VForce's Motion for Leave to Amend its Cross-Complaint and Third-Party Complaint and for Permissive Joinder. (ECF No. 51.) Eight of the Third-Party Defendants filed an Opposition to the Motion and VForce filed a Reply. (ECF Nos. 54-55.)
Lastly before the Court is Cory Barnwell of Barnwell Law Group, P.C.'s ("Barnwell") uncontested Motion to Withdraw as counsel for seven of the eight Third-Party Defendants he represents. (ECF No. 48.)
For the reasons stated herein, VForce's Motion to Amend and for Permissive Joinder (ECF No. 51) is GRANTED. The Motions to Dismiss the Cross-Complaint and Third-Party Complaint filed by CorTech, Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby (ECF Nos. 21, 38, 40) are DENIED as moot. Forbes's Motion to Dismiss the Third-Party Complaint (ECF No. 61) is GRANTED with leave to amend. Further, Barnwell's Motion to withdraw (ECF No. 48) is GRANTED.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Zurich American Insurance Company of Illinois ("Plaintiff") initiated this action against Defendants VForce and CorTech (collectively, "Defendants") on July 28, 2018. (ECF No. 1.) Immediately thereafter, the Court issued an Initial Pretrial Scheduling Order. (ECF No. 5.)
On January 30, 2019, Plaintiff filed a First Amended Complaint ("FAC"). (ECF No. 6.) The FAC generally alleges that Plaintiff entered into an agreement to issue a workers' compensation insurance policy (the "Policy") to Defendants in exchange for an initial premium payment, plus a supplemental payment in an amount to be determined by a post-remuneration audit of the Policy (the "Zurich Agreement"). (Id. at 3.) However, after Plaintiff completed the remuneration audit, Defendants failed to pay the additional amount owed, despite multiple requests. (Id.) Plaintiff further alleges VForce merged with and became the wholly-owned subsidiary of CorTech on or about April 23, 2018. (Id.) The FAC asserts a single cause of action against Defendants for breach of contract. (Id. at 3-4.) On March 12, 2019, VForce filed an Answer to the FAC. (ECF No. 14.)
That same day, VForce also filed a Cross-Complaint and Third-Party Complaint seeking express and equitable indemnification, and breach of contract damages from CorTech and ten Third-Party Defendants: Bean Team Network 2, LLC ("Bean Team"); Kaiserkane Consulting, LLC ("Kaiserkane"); Hybrid Financial Group, LLC ("Hybrid"); Accuire; CapServ; Gardner; Oglesby; Forbes; Musgrove; and DiManno (collectively, the "Third-Party Defendants"). (ECF No. 15.) The Cross-Complaint/Third-Party Complaint alleges that VForce and Bean Team entered into an asset purchase agreement on December 22, 2014 ("VForce Agreement"). (Id. at 10-16 (Ex. A).) Pursuant to a defense and indemnification clause in the VForce Agreement, Bean Team agreed to indemnify VForce for any additional amounts due to Plaintiff under the Zurich Agreement for the Policy. (Id. at 5, 11-12.) According to the Cross-Complaint/Third- Party Complaint, Bean Team breached the VForce Agreement when it failed to pay Plaintiff the supplemental payment owed on the Policy and failed to defend and indemnify VForce. (Id. at 6-7.) As to the other Third-Party Defendants, VForce alleges Accuire later merged with or acquired Bean Team, and CapServ, Kaiserkane, DiManno, Gardner, Musgrove, and Oglesby were "Members" of Bean Team. (Id. at 3.) Bean Team subsequently dissolved and these Third-Party Defendants, as successors-in-interest to Bean Team, became responsible for Bean Team's obligations to VForce under the VForce Agreement. (Id. at 3-6.) Lastly, VForce alleges that Forbes and Hybrid were the insurance broker and agent for VForce and Bean Team "with regards to the purchase from Zurich of [the Policy]." (Id. at 3, 6.)
On April 3, 2019, CorTech filed a Motion to Dismiss the Cross-Complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). (ECF No. 21.) Thereafter, Third-Party Defendants Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby moved to dismiss the Third-Party Complaint, also pursuant to Rule 12(b)(6). (ECF Nos. 38, 40.) Bean Team and Hybrid answered the Third-Party Complaint. (ECF Nos. 39, 44.) Though filed separately, each motion to dismiss similarly challenges the Cross-Complaint and Third-Party Complaint on the grounds that VForce fails to allege facts establishing each moving Defendant's liability where it was not a party to either the VForce Agreement or the Zurich Agreement. VForce filed separate Oppositions to each Motion to Dismiss. (ECF Nos. 28, 45, 46.) No replies were filed.
On August 6, 2019, attorney Barnwell filed a Motion to Withdraw as counsel for the Third-Party Defendants Bean Team, CapServ, Kaiserkane, DeManno, Gardner, Musgrove, and Oglesby. (ECF No. 48.) Barnwell seeks to withdraw on the basis that the Third-Party Defendants voluntarily terminated him and hired another attorney to represent them. Barnwell's Motion is unopposed.
On August 22, 2019, VForce filed a "Motion for Leave to Amend Its Crossclaim and Third-Party Complaint and for Permissive Joinder" pursuant to Rules 15 and 20. (ECF No. 51.) By that Motion, VForce seeks to join eight of the current Third-Party Defendants as Cross-Defendants to the Cross-Complaint and proposes additional allegations to support its existing three claims, plus six new causes of action: (1) breach of the implied covenant of good faith and fair dealing; (2) false promise; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) conspiracy; and (6) unfair competition. (Id.) On September 5, 2019, CorTech and the same eight Third-Party Defendants opposed the Motion to Amend on the basis of undue delay. (ECF No. 54.) The Third-Party Defendants further opposed the Motion for Permissive Joinder on the basis that the proposed crossclaims against them are not related to Plaintiff's allegations in the Complaint. (Id.) VForce filed a reply. (ECF No. 55.)
On November 26, 2019, Forbes filed a Motion to Dismiss the Third-Party Complaint pursuant to Rule 12(b)(6). (ECF No. 61.) Forbes argues that VForce's claim for equitable indemnity fails as a matter of law because California law does not permit equitable apportionment of damages for breach of contract claims and Forbes is not jointly and severally liable to Plaintiff. (ECF No. 61 at 5-8.) VForce opposed Forbes's Motion to Dismiss and Forbes filed a Reply. (ECF Nos. 62-63.)
The Court will address each motion in turn.
II. MOTION TO AMEND THE CROSS-COMPLAINT AND THIRD-PARTY COMPLAINT AND FOR PERMISSIVE JOINDER
Defendant/Cross-Complainant/Third-Party Plaintiff VForce seeks to amend the Cross-Complaint and Third-Party Complaint to include additional facts and claims against Cross-Defendant CorTech and the Third-Party Defendants based on recently discovered facts supporting these new claims that arise out of the same transaction and/or occurrence as the original claims. VForce additionally seeks to join eight of the ten current Third-Party Defendants as Cross-Defendants pursuant to Rule 20. (ECF No. 51.) CorTech and the eight identified Third-Party Defendants oppose the Motion. (ECF No. 54.) ///
VForce seeks to join Third-Party Defendants Bean Team, Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby (and not Hybrid or Forbes) as Cross-Defendants in its First Amended Cross-Complaint and Third-Party Complaint. For purposes of discussion regarding this motion only, these eight Third-Party Defendants will be referred to collectively as the Third-Party Defendants.
A. Standards of Law
i. Amendment Under Federal Rules of Civil Procedure 15 and 16
Granting or denying leave to amend a complaint rests within the sound discretion of the trial court. Foman v. Davis, 371 U.S. 178, 182 (1962). When a court issues a pretrial scheduling order that establishes a timetable to amend the complaint, Rule 16 governs any amendments to the complaint. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). To allow for amendment under Rule 16, a plaintiff must show good cause for not having amended the complaint before the time specified in the pretrial scheduling order. Id. This standard "primarily considers the diligence of the party seeking the amendment." Johnson, 975 F.2d at 609. Although the existence or degree of prejudice to the party opposing the modification might supply additional reasons to deny a motion, the focus of the inquiry is on the reasons why the moving party seeks to modify the complaint. Id. If that party was not diligent, the inquiry should end. Id. Ultimately, a district court has "broad discretion" to alter the schedule. United States v. Flynt, 756 F.2d 1352, 1358 (9th Cir. 1985).
If good cause exists, the moving party must next demonstrate that the proposed amendment is permissible under Rule 15. Johnson, 975 F.2d at 608 (citing Forstmann v. Culp, 114 F.R.D. 83, 85 (M.D.N.C. 1987). Under Rule 15(a)(2), a party may amend its pleading only with the opposing party's written consent or the Court's leave. However, "[t]he court should freely give leave [to amend] when justice so requires," bearing in mind "the underlying purpose of Rule 15 ... [is] to facilitate decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc). Whether leave to amend should be granted is generally determined by considering the following factors: (1) undue delay; (2) bad faith or dilatory motive on the part of the movant; (3) repeated failure to cure deficiencies by amendments previously allowed; (4) undue prejudice to the opposing party by allowing amendment; and (5) futility of amendment. See Foman, 371 U.S. at 182; Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990)). Of these considerations, "it is the consideration of prejudice to the opposing party that carries the greatest weight." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (per curiam). "Absent prejudice, or a strong showing of any of the remaining Foman factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend." Id. (emphasis in original). A proposed amendment is futile "only if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense." Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988); United States v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir. 2011). However, denial of leave to amend on this ground is rare. See Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003). Ordinarily, "courts will defer consideration of challenges to the merits of a proposed amended pleading until after leave to amend is granted and the amended pleading is filed." Id.
ii. Permissive Joinder Under Federal Rule of Civil Procedure 20
Permissive joinder is to be liberally construed in order to promote trial convenience and to expedite the final determination of disputes, thereby preventing multiple lawsuits. Cuprite Mine Partners LLC v. Anderson, 809 F.3d 548, 552 (9th Cir. 2015). The purpose of Rule 20(a) is to address the "broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged." United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966).
Under Rule 20, joinder of defendants is proper if: "(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all the defendants will arise in the action." Fed. R. Civ. P. 20(a)(2); see League to Save Lake Tahoe v. Tahoe Regl. Plan. Agency, 558 F.2d 914, 917 (9th Cir. 1977).
The first prong, the "same transaction" requirement, refers to similarity in the factual background of a claim. Coughlin v. Rogers, 130 F.3d 1348, 1350 (9th Cir. 1997). Courts assess the facts of each case individually to determine whether joinder is sensible in light of the underlying policies of permissive party joinder. See id. Although there might be different occurrences, where the claims involve enough related operative facts, joinder in a single case may be appropriate. Accordingly, all "logically related" events entitling a person to institute a legal action against another generally are regarded as comprising a transaction or occurrence. See Mosley v. Gen. Motors Corp., 497 F.2d 1330, 1333 (8th Cir. 1974) (citing 7 C. WRIGHT, FEDERAL PRACTICE AND PROCEDURE § 1653 at 270 (1972)).
The second prong of the joinder test addresses commonality. Commonality under Rule 20(a)(1)(B) is not a particularly stringent test. See Robinson v. Geithner, No. 1:05-cv-01258-LJO-SKO, 2011 WL 66158, at *5 (E.D. Cal. Jan. 10, 2011). The Rule requires only a single common question, not multiple common questions. See Fed. R. Civ. P. 20. Further, the common question may be one of fact or of law and need not be the most important or predominant issue in the litigation. See Mosley, 497 F.2d at 1333.
Finally, once the first two requirements are met, a district court must examine whether permissive joinder would "comport with the principles of fundamental fairness ...." Coleman, 232 F.3d at 1296. This may include consideration of factors such as the possible prejudice that may result to any of the parties in the litigation, the delay of the moving party in seeking an amendment to his pleadings, the motive that the moving party has in seeking such amendment, the closeness of the relationship between the new and the old parties, the effect of an amendment on the court's jurisdiction, and the new party's notice of the pending action. Desert Empire Bank v. Insurance Co. of North America, 623 F.2d 1371, 1375 (9th Cir. 1980).
B. Analysis
i. Motion to Amend
VForce argues leave to amend is proper because the pleadings are not yet settled (CorTech and the Third-Party Defendants' Motions to Dismiss are still pending) and therefore there has been no undue delay and no prejudice to any of the parties. (ECF No. 51-1 at 4.) VForce further argues amendment promotes judicial economy because it will permit VForce to avoid pursuing its additional claims against CorTech and the Third-Party Defendants in a separate state court action and therefore will prevent a multiplicity of lawsuits. (Id.) The only apparent basis for CorTech and the Third-Party Defendants' Opposition is that VForce "unduly delayed" in bringing the motion until six months after filing its initial Cross-Complaint/Third-Party Complaint and should have asserted the proposed additional facts and claims in its original Cross-Complaint/Third-Party Complaint. (ECF No. 54 at 2, 4-5.)
As an initial matter, the Court notes it issued an Initial Pretrial Scheduling Order on July 30, 2018, establishing a deadline for joinder of parties and amendments to pleadings. (ECF No. 5 at 2.) Consequently, VForce's motion is governed by the requirements set forth under Rule 16, and VForce is required to establish "good cause" exists to modify the Scheduling Order before it may seek leave to amend under Rule 15. Johnson, 975 F.2d at 608. However, VForce did not specifically request that the Court modify its Scheduling Order; it merely moved to amend the Cross-Complaint/Third-Party Complaint. (ECF No. 50.) For this reason alone, Ninth Circuit case law supports a district court's denial of a motion to amend as untimely. See Johnson, 975 F.2d at 608-09 (citing Jauregui v. City of Glendale, 852 F.2d 1128, 1133-34 (9th Cir.1988); U.S. Dominator, Inc. v. Factory Ship Robert E. Resoff, 768 F.2d 1099, 1104 (9th Cir.1985), superseded by statute on other grounds, Simpson v. Lear Astronics Corp., 77 F.3d 1170 (9th Cir. 1996); Dedge v. Kendrick, 849 F.2d 1398 (11th Cir.1988).
Nevertheless, the Ninth Circuit also indicated a court may treat a motion to amend as a de facto motion to amend the scheduling order, Johnson, 975 F.2d at 608-09, and the Court finds the circumstances of this case warrant doing so here. Construing the instant motion as one to amend the scheduling order, the Court finds good cause exists to grant VForce leave to amend.
First, the Court notes the "Joint Scheduling Report" filed by Plaintiff, Defendants VForce and CorTech, and Third-Party Defendants CapServe, Kaiserkane, DiManno, Gardner, Musgrove, and Oglesby indicates the parties were still evaluating the need for joinder and amendment as of June 12, 2019, and proposed a deadline of November 1, 2019, for joining parties. (ECF No. 41 at 3, 5.) Thus, in light of the parties' self-imposed deadline, VForce's Motion to Amend and for Permissive Joinder, filed on August 22, 2019, appears timely and demonstrates appropriate diligence in attempting to adhere to the pretrial schedule. Further, because motions to dismiss the original Cross-Complaint/Third-Party Complaint are still pending, the Court finds the initial pretrial schedule could not reasonably be met despite VForce's diligence. The Court therefore finds good cause exists to amend the Initial Pretrial Scheduling Order to allow VForce to seek leave to amend its Cross-Complaint/Third-Party Complaint. ///
Having established good cause exists under Rule 16, the Court turns to the parties' arguments under Rule 15. On balance, the Court finds the Foman factors support granting leave to amend. See Foman, 371 U.S. at 182. Here, VForce seeks leave to amend its Cross-Complaint/Third-Party Complaint for the first time, the pleadings are not yet settled as to all parties, discovery has not been completed, and no trial dates have been set by the Court. By contrast, the cases relied upon in the Opposition are easily distinguishable, as amendment in those cases was sought at a much later stage in the litigation and after several previous attempts to amend. See, e.g., Texaco Inc. v. Ponsoldt, 939 F.2d 794, 798-99 (9th Cir. 1991) (affirming denial of motion to amend due to undue delay where amendment was sought after discovery ended, eight months after summary judgment was granted, and four and a half months before trial); Allen, 911 F.2d at 373-74 (affirming denial of leave to file fourth amended complaint where further amendment would be futile). Further, granting VForce's Motion to Amend, which was filed after the pending Motions to Dismiss and appears to address the deficiencies identified in those Motions, would promote judicial economy rather than cause any undue delay. For these reasons, the Court also finds the risk of prejudice to the parties, if any, is minimal. Finally, the Opposition raises no argument that amendment would be futile. (See ECF No. 54); see also Netbula, LLC, 212 F.R.D. at 539. Accordingly, VForce's Motion to Amend the Cross-Complaint/Third-Party Complaint is GRANTED.
The Court acknowledges that Third-Party Defendant Forbes filed a motion to dismiss the Cross-Complaint/Third-Party Complaint after the instant motion to amend was fully briefed, seeking dismissal on the basis that any amendment to the claim asserted against him would be futile. The Court will separately address Forbes's motion to dismiss herein.
ii. Motion for Permissive Joinder
By way of the same Motion, VForce additionally seeks to join eight Third-Party Defendants as Cross-Defendants. More specifically, VForce proposes amended allegations demonstrating CorTech and the Third-Party Defendants conspired to commit certain torts and therefore became jointly and severally liable to VForce for the indemnity obligations owed to VForce by Bean Team, pursuant to the VForce Agreement. (ECF No. 51-1 at 5.) VForce argues these claims therefore involve the same transaction, occurrence, or series of transactions and occurrences: Bean Team's indemnity obligation to VForce and the issue of which parties became responsible for that obligation after Bean Team was dissolved. (Id. at 6.) The Third-Party Defendants oppose the joinder on the basis that Plaintiff does not pursue any claims against the Third-Party Defendants and there are no common questions of law or fact between Plaintiff and the Third-Party Defendants. (ECF No. 54 at 2.)
The Court agrees with VForce. The relevant part of the VForce Agreement concerns the defense and indemnification clause under which Bean Team agreed to indemnify VForce for any additional amounts due to Plaintiff under the Zurich Agreement for the Policy. Since Plaintiff is suing VForce for the additional amounts due on the Policy pursuant to the Zurich Agreement, VForce's claims for indemnification naturally arise from the same series of transactions. See Coughlin, 130 F.3d at 1350. Similarly, VForce's tort claims relate to wrongful actions purportedly taken by the Cross-Defendant and Third-Party Defendants to avoid these indemnification obligations and are therefore part of the same series of transactions and occurrences. The determination of whether/which parties are liable for the remaining amounts due on Plaintiff's Policy is also a question of law or fact sufficiently common to all parties, satisfying the second prong of the Rule 20 analysis. See Mosley, 497 F.2d at 1333-34. The Third-Party Defendants' argument that joinder should be denied because Plaintiff does not pursue any claims against them (ECF No. 54 at 2) is unavailing. The Third-Party Defendants identify no legal authority in support of such a narrow application of the permissive joinder rule.
Finally, for the same reasons that support granting VForce's Motion to Amend, the Court finds the proposed joinder is not prejudicial to any of the parties, but rather promotes judicial efficiency and prevents the risk of conflicting or overlapping judgments. Desert Empire Bank, 623 F.2d at 1375; League to Save Lake Tahoe, 558 F.2d at 917-18. Accordingly, the Court GRANTS VForce's Motion for Permissive Joinder as to Third-Party Defendants Bean Team, Accuire, CapServe, Kaiserkane, DiManno, Gardner, Musgrove, and Oglesby. (ECF No. 51.) /// /// ///
III. MOTIONS TO DISMISS THE CROSS-COMPLAINT/THIRD-PARTY COMPLAINT (ECF NOS. 21, 38, 40)
Cross-Defendants/Third-Party Defendants CorTech, Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby's Motions to Dismiss the Cross-Complaint/Third-Party Complaint (ECF Nos. 21, 38, 40) were filed prior to Defendant/Third-Party Plaintiff VForce's Motion to Amend the Cross-Complaint and Third-Party Complaint, and the arguments raised therein were adequately addressed by the Motion to Amend and proposed amendments (see ECF No. 51-2). Accordingly, the Motions to Dismiss the Cross-Complaint/Third-Party Complaint filed by CorTech, Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby are hereby DENIED as moot. (ECF Nos. 21, 38, 40.)
IV. FORBES'S MOTION TO DISMISS THE THIRD-PARTY COMPLAINT (ECF NO. 61)
Defendant/Third-Party Plaintiff VForce alleges Third-Party Defendant Forbes was VForce and Bean Team's insurance broker who facilitated the purchase of the workers' compensation Policy from Plaintiff Zurich. VForce asserts one claim against Forbes for equitable indemnity, based on Forbes's purported "wrongful actions" during facilitation of the "purchase from Zurich of the [Policy]." (ECF No. 15.) Forbes moves to dismiss on the basis that California law does not permit equitable apportionment of damages for breach of contract claims and Forbes is not jointly and severally liable to Plaintiff. (ECF No. 61.)
A. Standard of Law
A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Rule 8(a) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim . . . is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).
On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give the plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).
Nevertheless, a court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."). Moreover, it is inappropriate to assume that the plaintiff "can prove facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).
Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 697 (quoting Twombly, 550 U.S. at 570). Only where a plaintiff has failed to "nudge[] [his or her] claims . . . across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 680. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 678. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. ///
If a complaint fails to state a plausible claim, "[a] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez, 203 F.3d at 1130 (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)); see also Gardner v. Marino, 563 F.3d 981, 990 (9th Cir. 2009) (finding no abuse of discretion in denying leave to amend when amendment would be futile).
B. Analysis
Forbes argues VForce's claim for equitable indemnity must fail because California law does not permit equitable apportionment of damages for breach of contract claims and the underlying suit in this action is a single cause of action for breach of contract. (ECF No. 61 at 2, 5-7.) Further, Forbes argues equitable indemnity is only available among tortfeasors who are jointly and severally liable for the plaintiff's injury, which Forbes is not. (Id. at 2, 8-9.) In opposition, VForce argues Forbes's motion is premised on a "fundamental misunderstanding of the differences between implied contractual indemnity and traditional equitable indemnity under California law," and that VForce's claim against Forbes is viable under implied contractual indemnity principles. (ECF No. 62 at 3-4.) The Court disagrees.
Equitable indemnity is an equitable doctrine that apportions responsibility among tortfeasors responsible for the same indivisible injury on a comparative fault basis. American Motorcycle Assn. v. Superior Court, 20 Cal. 3d 578, 598 (1978). "[T]he equitable indemnity doctrine originated in the common sense proposition that when two individuals are responsible for a loss, but one of the two is more culpable than the other, it is only fair that the more culpable party should bear a greater share of the loss." Id. at 593. Historically, the obligation of indemnity took three forms: (1) indemnity expressly provided for by contract (express indemnity); (2) indemnity implied from a contract not specifically mentioning indemnity (implied contractual indemnity); and (3) indemnity arising from the equities of particular circumstances (traditional equitable indemnity). Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th 1151, 1157 (2009) (citing PPG Industries, Inc. v. Transamerica Ins. Co., 20 Cal. 4th 310, 318 (1999).) Currently, the California Supreme Court recognizes only two basic categories of indemnity: express indemnity and equitable indemnity. Prince, 45 Cal. 4th at 1157. Implied contractual indemnity is considered "a form of equitable indemnity." Id. (citing E. L. White, Inc. v. City of Huntington Beach, 21 Cal. 3d 497, 506-07 (1978)).
Within the category of equitable indemnity, traditional equitable indemnity and implied contractual indemnity differ to the extent that traditional equitable indemnity is "rooted in principles of equity" and "requires no contractual relationship between an indemnitor and an indemnitee," whereas implied contractual indemnity presupposes a contractual relationship that supports a right to indemnification not rooted in an express contract term. See Prince, 45 Cal. 4th at 1158-59; Exxess Electronixx v. Heger Realty Corp., 64 Cal. App. 4th 698, 714 (1998); E. L. White, Inc., 21 Cal. 3d at 506-07. However, both forms of equitable indemnity share a key feature that distinguishes them from express indemnity: unlike express indemnity, neither traditional equitable indemnity nor implied contractual indemnity is available "in the absence of a joint legal obligation to the injured party." Prince, 45 Cal. 4th at 1160-61. Under this principle, the indemnitee and indemnitor must share liability for the injury. See Children's Hospital v. Sedgwick, 45 Cal. App. 4th 1780, 1787 (1996) ("there can be no indemnity without liability.") Therefore, no indemnity may be obtained from an entity that has no pertinent duty to the injured third party, that is immune from liability, or that has been found not to be responsible for the injury. Prince, 45 Cal. 4th at 1159-61, 1166 n.10, 1168-69; Children's Hospital, 45 Cal. App. 4th at 1787.
VForce's equitable indemnity claim against Forbes — premised on a theory of implied contractual indemnity — fails for two reasons. First, VForce has not alleged the existence of a contractual relationship between itself and Forbes that would suggest express or implied contractual indemnity is appropriate. As VForce correctly notes, the right to implied contractual indemnity is predicated on the indemnitor's breach of contract. See Bay Dev., Ltd. v. Superior Court, 50 Cal. 3d 1012, 1029 (1990) (noting an implied contractual indemnity claim is based on "contractual language not specifically dealing with indemnification"). Yet, glaringly absent from /// /// VForce's Cross-Complaint/Third-Party Complaint are allegations showing any contractual relationship between VForce and Forbes. For this reason alone, VForce's claim fails.
In opposition to Forbes's motion, VForce argues its equitable indemnity claim survives under the implied contractual indemnity theory because VForce alleged, "in Paragraphs 27 to 30 ... that: (1) Forbes acted under an agreement to represent VForce as its insurance agent; (2) Forbes performed his duties negligently; and (3) such conduct caused any liability that VForce may owe to Zurich in this case." (ECF No. 62 at 5.) However, absolutely none of this language appears in the Cross-Complaint/Third-Party Complaint (or the proposed Amended Cross-Complaint/Third-Party Complaint) and VForce's egregious misrepresentation to this Court is not well-taken.
Second, as Forbes correctly notes, the underlying action is premised on Plaintiff's claim for breach of contract against CorTech and VForce with respect to payments owed on the Policy. (ECF No. 61-1 at 4; ECF No. 6.) Forbes did not contract with Plaintiff, therefore, Forbes is not jointly and severally liable to Plaintiff for breach of contract. (See id.) In its Opposition, VForce seems to all-but concede that Forbes is not jointly and severally liable by arguing that implied contractual indemnity claims are distinct from traditional equitable indemnity claims in that they do not require the indemnitor and indemnitee be joint tortfeasors. (ECF No. 62 at 7-8.) However, this argument is unavailing. Prince, 45 Cal. 4th at 1166 n.10 ("Our reiteration that indemnity is restitutionary in nature and our recognition of a shared liability requirement will avoid transforming a breach of contract claim into a vehicle for the recovery of tort damages.")
To that end, VForce's reliance on West v. Superior Court, 27 Cal. App. 4th 1625 (1994) for this contention is misplaced. The Court notes that West pre-dates Prince and was overruled to the extent it conflicts with Prince's holding that "implied contractual indemnity has always been subject to the rule that 'there can be no indemnity without liability.'" Prince, 45 Cal. 4th at 1165. "Indeed, [the Prince court's] recognition that 'a claim for implied contractual indemnity is a form of equitable indemnity subject to the rules governing equitable indemnity claims' . . . corrects any misimpression that joint liability is not a component of such claims." Id. at 1166. For this reason as well, VForce's claim fails.
In its Opposition, VForce requests leave to amend in the event the Court grants Forbes's Motion to Dismiss. VForce claims it can assert factual allegations demonstrating a contractual relationship between VForce and Forbes that affects liability to Plaintiff in this case. (ECF No. 62 at 9.) Notably, VForce's proposed First Amended Cross-Complaint/Third-Party Complaint is similarly devoid of allegations relating to a contract with Forbes. (See ECF No. 51-2 at ¶¶ 9, 19, 22, 27, 45.) Moreover, it is not clear from VForce's allegations whether Forbes purportedly facilitated the initial Zurich Agreement, the subsequent VForce Agreement, or both. Nor is it immediately clear to the Court that VForce's claim against Forbes has accrued. See Southern Pacific Transportation Co. v. Ohbayashi America Corp., 147 Cal. App. 3d 233, 238-39 (1983) (claims for equitable indemnity and implied contractual indemnity accrue "at the time the indemnity claimant suffers loss or damage—that is, at the time of payment of the underlying claim. [Citations.]"). Nonetheless, because the Court cannot determine at this stage that VForce's proposed amendments "could not possibly cure" the identified defects, in an abundance of caution, and because VForce has not yet had an opportunity to amend its Cross-Complaint/Third-Party Complaint, the Court will grant VForce leave to file an Amended Cross-Complaint/Third-Party Complaint. Lopez, 203 F.3d at 1130. Accordingly, Forbes's Motion to Dismiss the Third-Party Complaint is GRANTED with leave to amend. (ECF No. 61.)
V. MOTION TO WITHDRAW
Attorney Barnwell seeks to withdraw as counsel for Third-Party Defendants Bean Team, CapServ, Kaiserkane, DeManno, Gardner, Musgrove, and Oglesby. (ECF No. 48.) His Motion is unopposed. As an initial matter, it seems a substitution of attorney would have been sufficient in this instance to replace Mr. Barnwell with Mr. Hicks for all affected parties, except that a single party was unreachable and therefore did not consent as to the form of the filing. Indeed, Barnwell indicates the clients voluntarily terminated him and agreed to have Hicks represent them in this matter. A motion to withdraw is only necessary where the clients will be left to proceed pro se. Nonetheless, because a substitution of attorney was apparently not workable, and because Barnwell has met the requirements for withdrawal, the Court will address the Motion as such.
Barnwell's Motion seeks leave to withdraw as counsel for each of the Third-Party Defendants he represents, except Accuire. For purposes of this Motion only, the seven identified Third-Party Defendants will be collectively referred to as the "Third-Party Defendants."
Barnwell identifies Nathan W. Hicks, counsel for Defendant/Cross-Defendant CorTech in this action, as the alternative counsel that will represent the Third-Party Defendants if Barnwell's Motion to Withdraw is granted. (ECF No. 48 at 7.)
A. Standard of Law
In the Eastern District of California, attorneys representing parties to a civil case are subject to this Court's Local Rule 182(d) which provides:
Unless otherwise provided herein, an attorney who has appeared may not withdraw leaving the client in propria persona without leave of court upon noticed motion and notice to the client and all other parties who have appeared. The attorney shall provide an affidavit stating the current or last known address or addresses of the client and the efforts made to notify the client of the motion to withdraw. Withdrawal as attorney is governed by the Rules of Professional Conduct of the State Bar of California, and the attorney shall conform to the requirements of those Rules. The authority and duty of the attorney of record shall continue until relieved by order of the Court issued hereunder. Leave to withdraw may be granted subject to such appropriate conditions as the Court deems fit.L.R. 182(d).
Under the California Rules of Professional Conduct, an attorney may not withdraw unless he "has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, complying with rule 3-700(D), and complying with applicable laws and rules." Cal. R. Prof. Conduct 3-700(A)(2); see also CE Res., Inc. v. Magellan Group, LLC, No. 2:08-cv-02999-MCE-KJM, 2009 WL 3367489, at *1 (E.D. Cal. Oct. 14, 2009); McClintic v. U.S. Postal Serv., No. 1:13-cv-00439, 2014 WL 51151, at *2 (E.D. Cal. Jan. 7, 2014).
When considering a motion to withdraw as counsel, the Court will weigh four factors: (1) the reasons why withdrawal is sought; (2) the prejudice withdrawal may cause to other litigants; (3) the harm withdrawal might cause to the administration of justice; and (4) the degree to which withdrawal will delay resolution of the case. See e.g., CE Res., Inc., 2009 WL 3367489, at *2 (collecting cases). Ultimately, the Court's ruling must involve a balancing of the equities. The decision to grant or deny a motion to withdraw is within the Court's discretion. See United States v. Carter, 560 F.3d 1107, 1113 (9th Cir. 2009); McNally v. Eye Dog Found. for the Blind, Inc., No. 1:09-cv-01174-AWI-SKO, 2011 WL 1087117, at *1 (E.D. Cal. Mar. 24, 2011).
B. Analysis
First, the Court finds Barnwell has complied with the applicable California Rules of Professional Conduct in seeking to withdraw as counsel for the Third-Party Defendants. Specifically, the Third-Party Defendants were "notified" of Barnwell's proposed withdrawal as counsel when they voluntarily terminated his representation and indicated their intent to retain other counsel. (ECF No. 48 at 4, 6.)
For the same reason, the Court finds that on balance, the relevant factors for consideration favor withdrawal. First, the proposed withdrawal will not cause any prejudice to the Third-Party Defendants because they willingly terminated Barnwell's representation and retained another attorney. (Id. at 4, 6-7.) Further, the prospective new attorney already represents other Defendants in this case and should therefore not require any additional time to adjust to the absence of Barnwell as counsel. (Id.) Therefore, the Court finds the proposed withdrawal will cause neither prejudice to the other parties nor "unreasonable delay" in this case. Similarly, the proposed withdrawal also poses hardly any risk of harming the administration of justice. In sum, the Court finds Barnwell has sufficiently established good cause to withdraw from representation of the Third-Party Defendants. Therefore, the Motion to Withdraw is hereby GRANTED. (ECF No. 48.)
VI. CONCLUSION
For the foregoing reasons, the Court GRANTS VForce's Motion to Amend and for Permissive Joinder. (ECF No. 51.) Third-Party Defendants Bean Team, Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby are hereby joined as Cross-Defendants pursuant to Federal Rule of Civil Procedure 20. Cross-Defendants/Third-Party Defendants CorTech, Accuire, CapServ, KaiserKane, DiManno, Gardner, Musgrove, and Oglesby's Motions to Dismiss the Cross-Complaint/Third-Party Complaint are DENIED as moot. (ECF Nos. 21, 38, 40.) Third-Party Defendant Forbes's Motion to Dismiss the Third-Party Complaint is GRANTED with leave to amend. (ECF No. 61.)
Finally, Barnwell Law Group, P.C.'s Motion to Withdraw as counsel for the Third-Party Defendants is GRANTED. (ECF No. 48.) Barnwell is hereby withdrawn as counsel for Bean Team, CapServ, Kaiserkane, DeManno, Gardner, Musgrove, and Oglesby. The aforementioned Cross-Defendants/Third-Party Defendants are ordered to file a Notice of Substitution of Counsel — or, if such a substitution is not possible — file a status report not more than 20 days from the date of electronic filing of this Order.
VForce is directed to file a First Amended Cross-Complaint and Third-Party Complaint, consistent with this Court's rulings on the Motion to Amend and for Permissive Joinder and Forbes's Motion to Dismiss, not more than 20 days from the electronic filing of this Order. Cross-Defendants and Third-Party Defendants shall file a response to the First Amended Cross-Complaint and Third-Party Complaint within 21 days of the electronic filing of the First Amended Cross-Complaint and Third-Party Complaint.
IT IS SO ORDERED. DATED: May 26, 2020
/s/_________
Troy L. Nunley
United States District Judge