Atwal v. NortonLifeLock, Inc.

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EPHRAIM ATWAL, M.D., Plaintiff, v. NORTONLIFELOCK, INC., Defendant.

No. 20-CV-449S

United States District Court, W.D. New York

February 3, 2022

DECISION AND ORDER

WILLIAM M. SKRETNY, United States District Judge.

I. Introduction

This is a removed diversity action for breach of contract. Plaintiff is a New York doctor and Defendant NortonLifeLock is a Delaware corporation with its principal place of business in Arizona (Docket No. 1, Notice of Removal ¶¶ 7.a 7). NortonLifeLock issued Plaintiff a policy for identity loss protection (see Docket No. 1, Notice of Removal, Ex. A, Compl. ¶ 14, Ex. A). Plaintiff alleges that Defendant breached its contract by not covering his losses from his cryptocurrency account after a third-party stole his credentials to that account and looted it (see Id. ¶¶ 9-10, 12, 22-24).

Before this Court is Defendant's Motion to Dismiss (Docket No. 6^[1]). This Court concludes that Plaintiff alleges a breach of Defendant's Policy. For the reasons stated below, this Motion is granted in part (dismissing the Third Cause of Action for breach of the duty of good faith and fair dealing and Fourth Cause of Action for unjust enrichment) and denied in part (upholding the First Cause of Action for declaratory judgment and Second Cause of Action for breach of contract). Therefore, Plaintiff shall file an Amended Complaint within twenty-one (21) days of entry of this Order. Defendant shall file its Answer or Motion within fourteen (14) days of service of the Amended Complaint.

II. Background

A. Plaintiff's Cryptocurrency Account

From June 26, 2017, Plaintiff maintained a private EOS^[2] cryptocurrency account, operating on blockchain technology and accessible through private key credentials (Docket No. 1, Notice of Removal, Ex. A, Compl. ¶¶ 7-8). On or about August or September 2018, a third-party misappropriated his key credentials and stole all of Plaintiff's EOS funds in his cryptocurrency account (id. ¶¶ 9-10; see also Id. ¶ 12 (unauthorized use of key credentials)). Plaintiff alleges that approximately 2.09 million EOS funds (valued at approximately $12 million USD) were in his account prior to the misappropriation (id. ¶ 11). Plaintiff unsuccessfully sought to recover the account's funds from cryptocurrency exchanges where the unauthorized third-party transferred his EOS funds (id. ¶ 13).

B. Defendant's LifeLock Identify Theft Program

On or about July 11, 2018, Defendant issued Plaintiff a LifeLock Ultimate Plus policy for a one-year period (id. ¶ 14, Ex. A, “Certificate of Insurance Stolen Identity Event Insurance, ” hereinafter the “Policy”). Pursuant to the Policy, Defendant agreed to pay up to $1 million coverage for remediation, stolen funds reimbursement, personal expenses, and coverage for lawyers and experts for a “Stolen Identity Event” (id. ¶ 16, Ex. A, Policy at 3).

A “Stolen Identity Event” is defined in the Policy as a theft of personal information without the insured's express authorization to establish or use a deposit, credit, or other Account (id. ¶ 20, Ex. A, Policy § VI., Definitions U., “Stolen Identity Event, ” at 10). That personal information includes “personal identification, social security number, or other method of identifying you, or one or more uses of such stolen information without your express authorization to establish or use a deposit, credit or other Account, secure a loan, . . . enter into a contract or commit a crime” (Docket No. 1, Ex. A, Compl. Ex. A, Policy § VI., Definitions U., at 10 (emphasis added)).

A covered victim of a Stolen Identity Event also may obtain remediation coverage from Defendant including reimbursement of stolen funds, remediation coverages, and coverage of “direct financial loss arising from a Stolen Funds Loss incurred as a direct result of a Stolen Identity Event” (id. ¶ 17, Ex. A, Policy § I.C., at 4-5, ¶ 18, Ex. A, Policy § I.B., at 4). “Stolen Funds Loss, ” in turn, is defined in this Policy as “the principal amount, incurred by [the insured] and caused by an Unauthorized Funds Transfer” (id. ¶ 19, Ex. A, Policy § VI., Definitions T., “Stolen Funds Loss, ” at 10). “Unauthorized Funds Transfer” means “a Funds Transfer from your Account initiated by a person other than [the insured] without the actual authority to initiate the transfer and from which you and your immediate family members receive no benefit” (id., Ex. A, Policy § VI., Definitions X., “Unauthorized Funds Transfer, ” at 10).

C. Plaintiff Requests Coverage

Plaintiff alleges that he sought reimbursement on May 24 and June 21, 2019 (Docket No. 1, Ex. A, Compl. ¶¶ 22, 23), but on July 18 and November 18, 2019, Defendant denied Plaintiff's claim (id. ¶ 24). As of the filing of this action, Defendant has not paid this claim (id. ¶ 25). Defendant argues that Plaintiff's claimed account is not a defined “Account” under its Policy (Docket No. 6, Def. Memo. at 3-5). Under Defendant's Policy, an “Account” “is defined as ‘a U.S. regulated and domiciled checking, savings, money market, brokerage, or credit card Account of yours held directly or indirectly by a Financial Institution and established primarily for personal, family or household purposes. ‘Account' also includes a Retirement Account held in your name, or the name of your authorized representative.” (Id. at 3; Docket No. 1, Ex. A, Compl. Ex. A, Policy § VI., Definitions B., “Account, ” at 9 (emphasis added)). This “Account” applies to aspects of the Policy (e.g., Docket No. 1, Ex. A, Policy § VI., Definitions U., X.). “Financial Institution, ” in turn, is defined as a “bank, savings, association, credit union, credit institution or company issuing credit or any other person or entity that directly or indirectly holds an Account belonging to you” (id., Ex. A, Compl. Ex. A Policy § VI., Definitions G., at 9; see Docket No. 9, Pl. Memo. at 9). The Policy limits the coverage territory to pay losses “incurred in the United States or a branch or office abroad of a United States regulated Financial Institution” (Docket No. 1, Ex. A, Compl., Ex. A, Policy § VIII. C., at 11).

D. Complaint, Removal, and Defendant's Motion to Dismiss

Plaintiff initially sued Defendant in New York State Supreme Court, Erie County (Docket No. 1, Notice of Removal, ¶ 1, Ex. A, Compl. (Index No. 803782/2020)), alleging four causes of action (Docket No. 1, Ex. A). The First Cause of Action seeks declaratory judgment that Plaintiff was entitled to coverage from Defendant under the Policy (id. ¶¶ 28-30). The Second Cause of Action alleges breach of contract for failing to cover Plaintiff's loss (id. ¶¶ 32-36). The Third Cause of Action claims breach of the implied covenant of good faith and fair dealing (id. ¶¶ 38-41) and the Fourth Cause of Action alleges Defendant's unjust enrichment (id. ¶ 43). Plaintiff claims suffering damages he valued at least $80, 000 (id. ¶¶ 36, 41, 43, WHEREFORE Cl., b)). Defendant removed this action (Docket No. 1) and a month later filed the pending Motion to Dismiss (Docket No. 6). This Court deems this Motion to be submitted without oral argument.

III. Discussion

A. Applicable Standards

1. Motion to Dismiss

Defendant has moved to dismiss on the grounds that the Complaint fails to state a claim for which relief can be granted (id.). Under Rule 12(b)(6), the Court cannot dismiss a Complaint unless it appears “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), a Complaint must be dismissed pursuant to Rule 12(b)(6) if it does not plead “enough facts to state a claim to relief that is plausible on its face, ” Id. at 570 (rejecting longstanding precedent of Conley, supra, 355 U.S. at 45-46).

To survive a motion to dismiss, the factual allegations in the Complaint “must be enough to raise a right to relief above the speculative level, ” Twombly, supra, 550 U.S. at 555; Hicks, supra, 2007 U.S. Dist. LEXIS 39163, at *5. As reaffirmed by the Court in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009),

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' [Twombly, supra, 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. Id., at 556 . . . . The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of “entitlement to relief.”' Id., at 557 . . . (brackets omitted).”

Iqbal, supra, 556 U.S. at 678 (citations omitted).

A Rule 12(b)(6) motion is addressed to the face of the pleading. The pleading is deemed to include any document attached to it as an exhibit, Fed.R.Civ.P. 10(c), such as Defendant's Policy (Docket No. 1, Ex. A, Compl. Ex. A), or any document incorporated in it by reference. Goldman v. Belden, 754 F.2d 1059 (2d Cir. 1985).

In considering such a motion, the Court must accept as true all the well pleaded facts alleged in the Complaint. Bloor v Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57 (2d Cir. 1985). However, conclusory allegations that merely state the general legal conclusions necessary to prevail on the merits and are unsupported by factual averments will not be accepted as true. New York State...