Opinion
20-17422
10-01-2021
CHATTANOOGA PROFESSIONAL BASEBALL LLC, DBA Chattanooga Lookouts; et al., Plaintiffs-Appellants, v. NATIONAL CASUALTY COMPANY; et al., Defendants-Appellees.
NOT FOR PUBLICATION
Argued and Submitted August 11, 2021 San Francisco, California
Appeal from the United States District Court No. 2:20-cv-01312-DLR for the District of Arizona Douglas L. Rayes, District Judge, Presiding
Before: CHRISTEN and FORREST, Circuit Judges, and ANELLO, [**] District Judge.
MEMORANDUM [*]
Owners and operators of several professional baseball teams (collectively, the Teams) appeal the district court's order granting National Casualty Company, Scottsdale Indemnity Company, and Scottsdale Insurance Company's (collectively, the Insurers) motion to dismiss the Teams' claims for breach of contract and anticipatory breach of contract. We review de novo an order granting a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Autotel v. Nev. Bell Tel. Co., 697 F.3d 846, 850 (9th Cir. 2012). We review only the complaint, materials incorporated by reference into the complaint, and judicially noticeable matters. Karasek v. Regents of the Univ. of Cal., 956 F.3d 1093, 1104 (9th Cir. 2020). "A complaint will not survive a motion to dismiss unless it 'contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
Chattanooga Professional Baseball LLC; Agon Sports and Entertainment LLC; Boise Hospitality and Food Services LLC; Boise Professional Baseball LLC; Bowie Baysox Baseball Club LLC; Columbia Concessions & Catering LLC; Columbia Fireflies LLC; Eugene Emeralds Baseball Club Inc.; Fort Wayne Professional Baseball LLC; Frederick Keys Baseball Club LLC; Fredericksburg Baseball LLC; Frisco Roughriders LP; Greenjackets Baseball LLC; Greenjackets Hospitality Food & Beverage Services LLC; Idaho Falls Baseball Club Inc.; Inland Empire 66ers Baseball Club of San Bernardino Inc.; Jethawks Baseball LP; Myrtle Beach Pelicans LP; Panhandle Baseball Club Inc.; SAJ Baseball LLC; San Antonio Missions Baseball Club Inc.; Swing Batter Swing LLC; West Virginia Baseball LLC; and 7th Inning Stretch LLC.
Because the parties are familiar with the facts, we recite only those necessary to decide this appeal.
1. The Teams filed their complaint in the district court in Arizona. Thus, Arizona's choice-of-law rules apply. See Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000). For insurance contract disputes, Arizona law applies the law of the "state which the parties understood was to be the principal location of the insured risk." Beckler v. State Farm Mut. Auto. Ins. Co., 987 P.2d 768, 772 (Ariz.Ct.App. 1999) (emphasis omitted) (citation omitted). Because the Teams' insured risks are their ballparks, the laws of the ten states where they are located apply, respectively, to the individual claims of the owners and operators.
The baseball teams are located in the following ten states: California, Idaho, Indiana, Maryland, Oregon, South Carolina, Tennessee, Texas, Virginia, and West Virginia.
The Teams argue that the virus exclusion in their policies does not preclude all coverage for their claimed losses because they alleged their losses were attributable to other causes not implicated by the virus, including the attendant disease, resulting pandemic, governmental responses to the pandemic, and Major League Baseball (MLB) not supplying players. The virus exclusion in the Teams' policies excludes:
loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.
Whether this exclusion bars coverage for the Teams' claimed losses turns on how the laws of the states implicated in this appeal determine causation.
The Teams argue that the lack of an anti-concurrent clause applicable to or within the virus exclusion allows coverage for multiple contributing causes. Because the Teams did not make this argument in the district court, we decline to consider it. See In re Am. W. Airlines, Inc., 217 F.3d 1161, 1165 (9th Cir. 2000).
Three of the ten relevant states-California, Oregon, and West Virginia-have expressly held that the proper method to determine causation is the efficient proximate cause analysis. Five of the other seven states-Idaho, Indiana, Maryland, Tennessee, and South Carolina-have either applied or been persuaded by this analysis. The two remaining states, Texas and Virginia, use other methods to determine causation.
See, e.g., Sabella v. Wisler, 377 P.2d 889, 895 (Cal. 1963); Naumes, Inc. v. Landmark Ins. Co., 849 P.2d 554, 555 (Or. Ct. App. 1993); W.Va. Fire & Cas. Co. v. Mathews, 543 S.E.2d 664, 668 (W.Va. 2000) (per curiam).
See, e.g., ABK, LLC v. Mid-Century Ins. Co., 454 P.3d 1175, 1185 (Idaho 2019); Hartford Cas. Ins. Co. v. Evansville Vanderburgh Pub. Libr., 860 N.E.2d 636, 647 (Ind.Ct.App. 2007); Hartford Steam Boiler Inspection & Ins. Co. v. Henry Sonneborn & Co., 54 A. 610, 611-12 (Md.Ct.App. 1903); Travelers Ins. Co. v. Aetna Cas. & Sur. Co., 491 S.W.2d 363, 367 (Tenn. 1973); Unisun Ins. v. Hawkins, 537 S.E.2d 559, 563 (S.C. Ct. App. 2000).
The Efficient Proximate Cause Analysis. The term "efficient proximate cause" generally refers to the cause "that sets the other causes in motion," 7 Couch on Ins. § 101:55 (3d ed. 2021), or "the cause to which the loss is to be attributed, though the other causes may follow it, and operate more immediately in producing the disaster," Sabella, 377 P.2d at 895 (quoting 6 Couch on Ins. § 1466 (1930)). Some courts, in defining "efficient proximate cause," have explained that "coverage would not exist if the covered risk was simply a remote cause of the loss, or if an excluded risk was the efficient proximate (meaning predominant) cause of the loss" and "the fact that an excluded risk contributed to the loss would not preclude coverage if such a risk was a remote cause of the loss." Garvey v. State Farm Fire & Cas. Co., 770 P.2d 704, 707 (Cal. 1989) (in bank); see also Leavitt v. Stamp, 293 P. 414, 416 (Or. 1930); W.Va. Fire & Cas. Co., 543 S.E.2d at 668.
For the states that determine causation according to the efficient proximate cause analysis, the Teams' argument that the virus exclusion does not apply fails. Although the "attendant disease, resulting pandemic, and governmental responses" might have affected the Teams' claimed losses, the Teams do not plausibly allege that any of these other causes, and not the spread of the COVID-19 virus, were the "efficient proximate cause" that set others in motion, Sabella, 377 P.2d at 895, and predominated, Garvey, 770 P.2d at 707. So too for governmental inaction or actions taken in response to the virus. The Teams have not plausibly alleged that the need for the government to act in the first place-i.e., the context in which any alleged governmental inaction or action arose-was something other than the COVID-19 virus. The Teams also fail to plausibly allege that MLB did not supply them with players for a reason independent of the spread of COVID-19. In fact, the Teams' allegations suggest the opposite by noting that 2019 was the first year in more than 100 years that minor-league baseball was not played. For the states implicated in this appeal that determine causation according to the efficient proximate cause analysis, the district court correctly concluded the virus exclusion bars coverage.
Texas and Virginia. In Texas, "when a loss is caused by concurrent perils, one of which is covered and one of which is excluded, the burden is on the insured to identify the portion of her loss attributable to the covered peril." Wong v. Monticello Ins. Co., No. 04-02-00142-CV, 2003 WL 1522938, at *1 (Tex. App. Mar. 26, 2003) (citing Travelers Indem. Co. v. McKillip, 469 S.W.2d 160, 162 (Tex. 1971)). The Teams' causation argument fails under Texas law because the Teams do not plausibly allege or argue on appeal that there were concurrent causes of the Teams' claimed losses that are susceptible to allocation. The Teams' alleged causes all patently flow from the COVID-19 virus.
In Virginia, the "proximate cause" analysis has been applied in the insurance context, see, e.g., Erie Ins. Co. Exch. v. Jones, 448 S.E.2d 655, 658-59 (Va. 1994), and "[t]he proximate cause of an event is that act or omission which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces the event, and without which that event would not have occurred," Kellermann v. McDonough, 684 S.E.2d 786, 793 (Va. 2009) (quoting Beverly Enterprises-Virginia, Inc. v. Nichols, 441 S.E.2d 1, 4 (Va. 1994)). The Teams' causation argument fails under Virginia law because the Teams do not plausibly allege that the other alleged causes of their losses were "efficient intervening cause[s]" that broke the causal chain stemming from the COVID-19 virus.
2. The Teams argue that even if the virus exclusion applies, it is unenforceable pursuant to the doctrines of regulatory estoppel (under federal and state law) and equitable estoppel. We disagree. As for regulatory estoppel under federal law, the Teams cite no authority to adequately support the proposition that federal law recognizes regulatory estoppel. As for regulatory estoppel under state law, the Teams' argument fails for two reasons. First, the Teams acknowledge that of the ten states implicated in this appeal, only one has explicitly recognized the doctrine of regulatory estoppel (West Virginia), and the Teams fail to establish that the other nine states would adopt the doctrine if presented with the opportunity. Second, the West Virginia case recognizing the doctrine is distinguishable because the Teams do not allege that the Insurers, themselves, are attempting to rely on an interpretation of the virus exclusion that is contrary to one they earlier advocated. See Joy Techs., Inc. v. Liberty Mut. Ins. Co., 421 S.E.2d 493, 497 (W.Va. 1992).
The Teams further argue that they have alleged sufficient claims for equitable estoppel under the laws of the states implicated in this appeal. Although the test for equitable estoppel varies somewhat across the ten states, absent misrepresentations regarding the scope of coverage made to the insured, equitable estoppel cannot be used to expand the scope of coverage. The Teams do not allege that they relied on misrepresentations in their policies or misrepresentations made by the Insurers.
See, e.g., Rustico v. Intuitive Surgical, Inc., 993 F.3d 1085, 1096 (9th Cir. 2021) (California); Shoup v. Union Sec. Life Ins. Co., 124 P.3d 1028, 1030-31 (Idaho 2005); Ashby v. Bar Plan Mut. Ins. Co., 949 N.E.2d 307, 312-13 (Ind. 2011); St. Paul Mercury Ins. Co. v. Am. Bank Holdings, Inc., 819 F.3d 728, 739 (4th Cir. 2016) (Maryland); Spring Vegetable Co. v. Hartford Cas. Ins. Co., 801 F.Supp. 385, 392 (D. Or. 1992); Crescent Co. of Spartanburg, Inc. v. Ins. Co. of N. Am., 225 S.E.2d 656, 659 (S.C. 1976); Henry v. S. Fire & Cas. Co., 330 S.W.2d 18, 30 (Tenn. Ct. App. 1958); Monumental Life Ins. Co. v. Hayes-Jenkins, 403 F.3d 304, 311 (5th Cir. 2005) (Texas); Harris v. Criterion Ins. Co., 281 S.E.2d 878, 881 (Va. 1981); Potesta v. U.S. Fid. & Guar. Co., 504 S.E.2d 135, 150 (W.Va. 1998).
See, e.g., Manneck v. Laws. Title Ins. Corp., 33 Cal.Rptr.2d 771, 777 (Ct. App. 1994); Shoup, 124 P.3d at 1030-31; Ill. Farmers Ins. Co. v. Overman, 186 F.Supp.3d 938, 944 (N.D. Ind. 2016); Hartford Fire Ins. Co. v. Annapolis Bay Charters, Inc., 69 F.Supp.2d 756, 763 (D. Md. 1999); DeJonge v. Mut. of Enumclaw, 843 P.2d 914, 916 (Or. 1992) (en banc); Pitts v. N.Y. Life Ins. Co., 148 S.E.2d 369, 371 (S.C. 1966); Clark v. Sputniks, LLC, 368 S.W.3d 431, 438 (Tenn. 2012); SnyderGeneral Corp. v. Great Am. Ins. Co., 928 F.Supp. 674, 683 (N.D. Tex. 1996); Ins. Co. of N. Am. v. Atl. Nat'l Ins. Co., 329 F.2d 769, 775 (4th Cir. 1964) (Virginia); Blake v. State Farm Mut. Auto. Ins. Co., 685 S.E.2d 895, 900-01 (W.Va. 2009) (per curiam).
The Teams also argue that the district court erred by relying, in the alternative, on the Policies' exclusion of losses "caused by or resulting from . . . [s]uspension, lapse or cancellation of any . . . contract" as another basis for dismissing the Teams' complaint. We agree. The Teams' complaint alleged that MLB breached its contracts with the Teams by failing to supply them with players, not that any of their contracts with MLB had lapsed or were suspended or cancelled. Because we can affirm the district court on any basis supported by the record, this error does not change the outcome. See Dougherty v. City of Covina, 654 F.3d 892, 900 (9th Cir. 2011).
AFFIRMED.
[*] This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
[**] The Honorable Michael M. Anello, United States District Judge for the Southern District of California, sitting by designation.