Opinion
Case No. EDCV 22-876 JGB (KKx)
06-22-2023
AMERICAN GENERAL LIFE INSURANCE COMPANY v. Nguyet Minh LE
Maximillian Wolden Hirsch, Bronwyn F. Pollock, Mayer Brown LLP, Los Angeles, CA, for American General Life Insurance Company. Cory T. Salisbury, Erik Charles Fritz, Robert J. McKennon, Nicholas Adam West, McKennon Law Group APC, Newport Beach, CA, for Nguyet Minh Le.
Maximillian Wolden Hirsch, Bronwyn F. Pollock, Mayer Brown LLP, Los Angeles, CA, for American General Life Insurance Company. Cory T. Salisbury, Erik Charles Fritz, Robert J. McKennon, Nicholas Adam West, McKennon Law Group APC, Newport Beach, CA, for Nguyet Minh Le. Proceedings: Order (1) DENYING Plaintiff and Counterclaim Defendant's Motion for Judgment on the Pleadings (Dkt. No. 24); and (2) VACATING the June 26, 2023 Hearing (IN CHAMBERS) JESUS G. BERNAL, UNITED STATES DISTRICT JUDGE
Before the Court is a motion for judgment on the pleadings filed by Plaintiff and Counterclaim Defendant American General Life Insurance Company. ("Motion," Dkt. No. 24.) The Court finds this matter appropriate for resolution without a hearing. See Fed. R. Civ. P. 78; L.R. 7-15. After considering the papers filed in support of and in opposition to the Motion, the Court DENIES the Motion and VACATES the June 26, 2023 hearing.
I. BACKGROUND
On May 25, 2022, Plaintiff American General Life Insurance Company ("American General") filed a complaint against Defendant Nguyen Minh Le ("Ms. Le") ("Complaint," Dkt. No. 1.) The Complaint asserts four causes of action: (1) conversion; (2) common counts for money had and received; (3) common counts for mistaken receipt; and (4) unjust enrichment and restitution. (Id. ¶¶ 33-54.)
On August 22, 2022, Ms. Le answered and filed a counterclaim against American General. ("Counterclaim," Dkt. No. 12.) The Countercomplaint asserts three causes of action: (1) negligence; (2) negligent misrepresentation; and (3) fraud. (Id. at ¶ 15-33.)
On January 13, 2023, American General filed this motion for judgment on the pleadings. (Motion.) Ms. Le opposed on February 13, 2023. ("Opposition," Dkt. No. 25.) American General replied on February 21, 2023. ("Reply," Dkt. No. 26.)
II. FACTUAL ALLEGATIONS
Ms. Le alleges the following facts, which are assumed to be true for the purposes of this Motion. See Swift v. California, 384 F.3d 1184, 1188 (9th Cir. 2004).
On December 24, 2021, Ms. Le's husband, Michael Hong Le ("Decedent") passed away. (Counterclaim ¶ 3.) Prior to his death, Decedent told his wife about an annuity that he had obtained though his employment. (Id.) Due to his medical condition at the time, he was unable to provide Ms. Le with details related to the annuity. (Id.)
During the last week of December 2021 or the first week of January 2022, Ms. Le visited the website of the National Association of Insurance Commissioners ("NIAIC") to find more information about the annuity. (Id. ¶ 4.) Ms. Le submitted a request via the locator service provided on the NAIC website. (Id.)
On January 20, 2022, Ms. Le received an email from American General that acknowledged the death of an insured named "Michael Le." (Id. ¶ 5.) Ms. Le called American General within days of receiving the email and spoke to a company representative. (Id. ¶ 6.) The representative asked Ms. Le for the life insurance policy number, which she did not have. (Id.) The representative asked for Decedent's full name, date of birth, and social security number ("SSN") instead. (Id.) Ms. Le provided the representative with the accurate information. (Id.) The representative was able to locate the policy and requested more information to process the claim. (Id.)
On or about January 25, 2022, Ms. Le received an email from American General that included a Claimant's Statement form enclosed for her to complete and a list of documents to provide. (Id. ¶ 7.) Ms. Le contacted American General to ask how she should answer certain questions on the form. (Id.) Ms. Le provided her late husband's SSN to another company representative. (Id.) The representative told her that they could not locate the policy based on Decedent's SSN, but found one with his name and date of birth. (Id.) The representative assisted Ms. Le with the form and confirmed that she had properly completed the form. (Id.) Ms. Le then sent the Claimant's Statement form to American General, along with copies of her driver's license and her late husband's Social Security card and death certificate. (Id.) Ms. Le also noted at the top of the Claimant's Statement form that she did not have the contract or policy number. (Id.)
On or around the second week of February 2022, Le received a check in the mail from American General, made out to her, for $1,003,398.39. (Id. ¶ 9.) She deposited the check into her bank account. (Id.) Once the death benefit was in Ms. Le's account, she quit her job, paid off debts, and made certain purchases that she would not have made but for receiving the check, including the purchase of a new car and paying for travel. (Id. ¶ 10.)
On June 30, 2022, Ms. Le was served with the Complaint. (Id. ¶ 11.) Prior to the service of the Complaint, Ms. Le had not been contacted by American General regarding its contentions that the policy proceeds had been paid erroneously. (Id.) Ms. Le had not received any emails, mail, or phone calls from American General demanding the return of all policy proceeds. (Id. ¶¶ 13-14.) Upon reading the Complaint, Ms. Le was shocked that it accused her of conversion and unjust enrichment because she had done nothing wrong. (Id. ¶ 12.) As a result, Ms. Le experienced immense emotional anxiety and stress. (Id.)
III. LEGAL STANDARD
American General moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) ("Rule 12(c)"). Fed. R. Civ. P. 12(c) ("After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings."). Like a Rule 12(b)(6) motion, a Rule 12(c) motion challenges the legal sufficiency of the opposing party's pleadings. For purposes of a Rule 12(c) motion, the allegations of the non-moving party must be accepted as true. Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989) (citing Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir. 1984)). Further, all allegations of the non-moving party must be construed in favor of that party. Gen. Conf. Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir. 1989). Judgment on the pleadings is proper when the moving party establishes that no material issue of fact remains to be resolved and it is entitled to judgment as a matter of law. Hal Roach, 896 F.2d at 1550.
When granting a motion for judgment on the pleadings, a court should grant leave to amend if the complaint can be cured by additional factual allegations. Somers v. Apple, Inc., 729 F.3d 953, 960 (9th Cir. 2013). However, "dismissal without leave to amend is proper if it is clear that the complaint [cannot] be saved by amendment." Id. (citation omitted).
IV. DISCUSSION
American General moves for judgment on the pleadings on the grounds that (1) Ms. Le's claims are barred by the doctrine of litigation privilege; (2) Ms. Le's fraud claim fails because she does not and cannot allege that American General knowingly made false statements with the intent to defraud her; (3) Ms. Le's negligence claims fail because an insurance company owes no duty to a non-insured as a matter of law; and (4) Ms. Le fails to plausibly allege that the purported misrepresentation harmed or damaged her. (Motion.) The Court considers each argument in turn.
A. Litigation Privilege
American General argues that Ms. Le's counterclaims are barred by the doctrine of litigation privilege. (Motion at 6-8.) The litigation privilege, as codified in California Civil Code section 47, "precludes liability arising from a publication or broadcast made in a judicial proceeding or other official proceeding." Fremont Reorganizing Corp. v. Faigin, 198 Cal.App.4th 1153, 131 Cal. Rptr. 3d 478, 493 (2011); see Cal. Civ. Code § 47(b). "The usual formulation is that the privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Chaffey Joint Union High Sch. Dist. v. Fieldturf USA, Inc., 2016 WL 11674265, at *2 (C.D. Cal. May 19, 2016) (quoting Rusheen v. Cohen, 37 Cal.4th 1048, 39 Cal.Rptr.3d 516, 128 P.3d 713, 718 (2006)). "Thus, 'communications with some relation to judicial proceedings' are 'absolutely immune from tort liability' by the litigation privilege." Id. (quoting Rusheen, 39 Cal.Rptr.3d 516, 128 P.3d at 718-19).
Since the litigation privilege protects only publications and communications, a "threshold issue in determining the applicability of the privilege is whether the defendant's conduct was communicative or noncommunicative." Rusheen, 39 Cal.Rptr.3d 516, 128 P.3d at 719 (internal quotation marks and citation omitted). The distinction between communicative and noncommunicative conduct "hinges on the gravamen of the action" or, in other words, "whether the injury allegedly resulted from an act was communicative in its essential nature." Id. (citations omitted).
American General argues that Ms. Le's counterclaims are based on its Complaint and therefore barred by the litigation privilege. (Motion at 8.) Specifically, American General points to Ms. Le's allegation in the Counterclaim that she "suffered extreme emotional distress, including anxiety, stress, and mental anguish, and nausea, due to [American General's] allegations against her." (Id. (citing Counterclaim ¶¶ 19, 26, 33 (emphasis added).) Ms. Le responds that American General filing the Complaint "was but one act in a course of tortious conduct" that caused her harm. (Opposition at 8 (quoting Mancini & Associates v. Schwetz, 39 Cal.App.5th 656, 252 Cal. Rptr. 3d 315, 320 (2019)).) Ms. Le argues that her claims arise not from the allegations in the Complaint, but from American General's negligent and reckless conduct prior to the filing of the Complaint. (Id.) That is, Ms. Le's injuries stem from American General's mishandling of her life insurance claim. (See id. at 8-12.)
The Court finds that although Ms. Le's Counterclaim is inartfully pled, the gravamen of the Counterclaim is nevertheless based on American General's noncommunicative conduct unrelated to any judicial or quasi-judicial proceeding. Specifically, Ms. Le alleges that American General repeatedly misrepresented to her that she was the beneficiary of a life insurance policy issued by the company. (Counterclaim ¶ 20.) Yet American General knew or should have known that she was not the proper beneficiary. (Id. ¶ 22.) "It was negligent, careless and reckless for [American General] to pay her over a million dollars on a life insurance policy without confirming that the SSN provided by [Ms.] Le matched the SSN [on] the policy[.]" (Id.) American General failed to "take even the most basic and effortless steps to confirm that [Ms.] Le was in fact the beneficiary of the policy." (Id. ¶ 18.) As a direct and proximate result of American General's actions, Ms. Le made significant changes to her life. (Id. ¶ 25.) Ms. Le "suffered injury in that she gave up her employment and made certain expenditures with the money that she would not have made if she had not received the money." (Id. ¶ 19.) In construing the facts in the light most favorable to Ms. Le, the Court finds that none of American General's actions are "communications with some relation to judicial proceedings." See Chaffey Joint Union High Sch. Dist., 2016 WL 11674265, at *2 (internal quotation marks and citation omitted). As alleged, American General's conduct precedes and gives rise to the current litigation. Finding otherwise would put the cart before the horse.
Vinetz v. Wolpoff & Abramson, LLP is instructive. 2008 WL 11411374 (C.D. Cal. May 15, 2008). In Vinetz, the court held that the plaintiff's abuse of process claim was barred by the litigation privilege. Id. at *3. The abuse of process claim was based on the plaintiff's allegations that the defendants filed an improper state court lawsuit against him and used the judicial process to harass, intimidate, coerce, and cause him emotional distress. (Id.) The court reasoned that because the defendants' actions in filing the lawsuit were "clearly communicative acts within the ambit of the litigation," the abuse of process claim was barred. (Id.) However, the court held that the plaintiff's remaining claims, including for intentional and negligent infliction of emotional distress, were not barred. (Id.) The remaining claims were based not on the state court lawsuit, but on allegations that the defendants had unreasonably harassed the plaintiff by using obscene and profane language during repeated phone calls. (Id.) The defendants took such actions "in connection with the collection of the debt" purportedly owed by the plaintiff. (Id.) Thus, the court concluded that the defendants' "alleged harassing acts were not communications made in a judicial proceeding or in connection with a judicial proceeding" and "do not qualify for the application of the litigation privilege." (Id.)
Similarly, American General's alleged negligent and reckless acts were not communications made in a judicial proceeding or in connection with a judicial proceeding, and do not qualify for the litigation privilege. See Chaffey Joint Union High Sch. Dist. v. Fieldturf USA, Inc., 2016 WL 11674265, at *3 (C.D. Cal. May 19, 2016) ("[T]he litigation privilege bars Defendants from bringing tort claims based on communications made by Plaintiff's counsel in furtherance of anticipated or actual litigation." (emphasis added).). As discussed above, American General's mishandling of Ms. Le's life insurance claim preceded any anticipated or actual litigation. Logically then, it cannot be said that American General's conduct qualifies as "communication," "made in a judicial proceeding," and "in furtherance" of litigation. See id. Accordingly, the Court DENIES the Motion on the grounds of litigation privilege.
B. Harm
American General also argues that Ms. Le has not plausibly alleged that she was harmed by its conduct. (See Motion at 13.) Harm or damage is an essential element of each of Ms. Le's counterclaims. See, e.g., Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1163 (9th Cir. 2012) (elements of a fraud claim under California law include "resulting damage"); In re Ambry Genetics Data Breach Litig., 567 F. Supp. 3d 1130, 1141 (C.D. Cal. 2021) (elements of a negligence claim under California law are duty, breach, causation, and injury); UMG Recordings, Inc. v. Glob. Eagle Ent., Inc., 117 F. Supp. 3d 1092, 1111 (C.D. Cal. 2015) ("The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage." (citation omitted)).
In the Counterclaim, Ms. Le alleges that "[a]s a direct and proximate cause of [American General's] breach of its duty of care to [Ms.] Le, [Ms.] Le has suffered injury in that she gave up her employment and made certain expenditures with money that she would not have made if she had not received the money." (Counterclaim ¶ 19; see also id. ¶¶ 26, 33.) Specifically, she alleges:
Once the check cleared and the death benefit was in [Ms.] Le's account, in reliance of receiving the check, she quit the job at which she had been working, she paid off debts, and made certain purchased that she would not have made but for receiving the check.(Id. ¶ 10.) Meanwhile, American General retorts that "getting a new car, becoming debt-free, and going on a vacation are not cognizable 'harms' or 'damages' under the law." (Motion at 13.)
Despite American General's indignation, the Court finds that Ms. Le has sufficiently pled harm. Ms. Le undertook financial obligations that she otherwise would not have in justifiable reliance on American General's misrepresentations and actions. See, e.g., Lorentzen v. Kroger Co., 532 F. Supp. 3d 901, 907 (C.D. Cal. 2021) (holding that the plaintiff's allegation that "she would either have paid less for the product or not bought it at all had she known the truth" was enough to establish economic harm at the pleading stage); In re Toyota Motor Corp., 790 F. Supp. 2d 1152, 1164-65 (C.D. Cal. 2011) (holding that the plaintiffs' allegations of overpayment for their allegedly defective vehicles was enough to establish economic harm at the pleading stage). Ms. Le expressly states that she has paid money that she otherwise would not have paid. (See Counterclaim ¶¶ 19, 26, 33.) This is economic harm. Taking her allegations as true, as the Court must on a Rule 12(c) motion, Ms. Le has sufficiently pled resulting damage. Accordingly, the Court DENIES the Motion on the grounds that Ms. Le has not alleged harm.
C. Fraud
American General next challenges Ms. Le's fraud claim. (See Motion at 8-11.) Under California law, the elements of a cause of action for fraud are: "(a) misrepresentation (false representation, concealment, or nondisclosure ); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Davis, 691 F.3d at 1163 (quoting Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009)); accord Robinson Helicopter Co. v. Dana Corp., 34 Cal.4th 979, 22 Cal.Rptr.3d 352, 102 P.3d 268, 274 (2004).
Fraud claims are subject to the heightened pleading standard of Federal Rule of Civil Procedure 9(b) ("Rule 9(b)"). See Fed. R. Civ. P. 9(b). Under Rule 9(b), "a party must state with particularity the circumstances constituting fraud or mistake." Id. However, "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Generally, the allegations must "be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong." Kearns, 567 F.3d at 1124 (alteration in original) (internal quotation marks omitted). "Averments of fraud must be accompanied by 'the who, what, when, where, and how' of the misconduct charged." Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).
Here, the parties dispute whether Ms. Le's fraud claim satisfies the Rule 9(b) pleading standard. (Compare Motion at 8-11 with Opposition at 12-14.) Specifically, the parties dispute whether Ms. Le has adequately alleged facts to support two elements: knowledge of falsity, i.e., scienter, and intent to defraud, i.e., to induce reliance. See Davis, 691 F.3d at 1163. American General argues that Ms. Le does not and cannot plausibly allege that American General knowingly misrepresented that she was the beneficiary of the life insurance policy with the intent to defraud her by paying her over a million dollars. (Motion at 9.) Meanwhile, Ms. Le argues that her fraud claim is proper because American General made the statements with reckless disregard for the truth of the matter and intended for Ms. Le to rely on the statements. (See Opposition at 13.)
The Court finds that Ms. Le has alleged enough facts to meet the heightened pleading standard of Rule 9(b) for both elements for fraud. First, Ms. Le has alleged that American General recklessly misrepresented to her that she was the beneficiary of the policy, even though it had information readily available that would determine the truth of the matter. (Counterclaim ¶ 29.) Actual knowledge is not required "[i]f the defendant has no belief in the truth of the statement, and makes it recklessly, without knowing whether it is true or false." Bily v. Arthur Young & Co., 3 Cal.4th 370, 11 Cal.Rptr.2d 51, 834 P.2d 745, 773 (1992). The Court cannot overlook American General's failure to investigate the mismatching SSNs, or take further steps to confirm the identity of the claimant before dispersing more than a million dollars in funds. Thus, Ms. Le has alleged recklessness sufficient for the scienter element. Cf. San Diego Gulls Hockey Club, LLC v. ECHL, Inc., 2020 WL 2510519, at *3 (C.D. Cal. Jan. 29, 2020) (holding that the plaintiff satisfied the scienter element of fraud by alleging "that the representations present in the assignment agreement were made with either knowledge of falsity or reckless disregard as to their truth or falsity"). Second, Ms. Le has alleged that American General induced her to rely on its misrepresentation. (Counterclaim ¶ 30.) American General intended for Ms. Le to believe that she was the proper beneficiary and knew that she would spend the money in justifiable reliance on its statements. (Id. ¶¶ 32-33.) Thus, Ms. Le has alleged American General's intent to induce reliance. See also LeGrand v. Abbott Lab'ys, 655 F.Supp.3d 871, 896 (N.D. Cal. 2023) (holding that the plaintiff sufficiently pled the scienter and intent elements of a fraud claim when she alleged that "[Defendant] knew the statements were misleading or acted recklessly since Defendant is a 'large sophisticated company that holds itself out as hav[ing] expert knowledge regarding the impact of consuming the Products' and that [Defendant] intends consumers to rely on their misrepresentations 'as evidenced by the intentional and conspicuous placement' of the misrepresentations on the food labels").
Accordingly, the Court DENIES the Motion on the grounds that Ms. Le has not stated a claim for fraud.
D. Duty of Care
Finally, American General insists that an insurance company does not owe a duty of care to a non-insured, third-party as a matter of law. (See Opposition at 11-13.) Without a duty of care, Ms. Le cannot assert a negligence claim against American General. (See id. at 13); see Bily, 11 Cal.Rptr.2d 51, 834 P.2d at 760 ("The threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion."). California courts consider a variety of factors in assessing legal duty in the absence of privity of contract between a plaintiff and a defendant. Bily, 11 Cal.Rptr.2d 51, 834 P.2d at 761 (citing Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958)). The relevant factors are:
(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to him, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing future harm.Biakanja, 320 P.2d at 19.
In light of the Biakanja factors set forth above, the Court concludes that American General owed a duty of care to Ms. Le because it treated her as if she were the proper beneficiary under the insurance policy. All factors except the first weighs in favor of finding a duty of care. Although the original life insurance policy was not intended to affect Ms. Le, it was highly foreseeable that if American General made Ms. Le believe she was the proper beneficiary of the policy when she was not, she would be harmed by the misrepresentations. Ms. Le certainly suffered injury by undertaking financial obligations she would not have if she were not paid the insurance money. (See Opposition at 15-17.) American General's alleged conduct directly caused Ms. Le's injury. According to Ms. Le, she had done no more than request information of policies that matched her and her late husband's information, and it was American General that contacted her and informed her that she was a beneficiary. (Counterclaim ¶ 12.) American General's mess was of its own making. Public policy should incentivize insurance companies to handle claims with reasonable care, such as to confirm basic identifying information, before dispersing more than a million dollars in funds. The Court is confident that Ms. Le's circumstances are unusual enough that finding a duty of care here would not have an outsized "adverse impact on a class of defendants upon whom the duty is sought to be imposed." Cf. Adelman v. Assoc. Int'l Ins. Co., 90 Cal.App.4th 352, 108 Cal. Rptr. 2d 788, 796 (2001). Accordingly, the Court DENIES the Motion on the grounds that American General does not owe a duty of care to Ms. Le.
V. CONCLUSION
For the foregoing reasons, the Court DENIES the Motion. The Court VACATES the June 26, 2023 hearing.