Epstein v. USAA Gen. Indem. Co.

636 F.Supp.3d 1260

Eric EPSTEIN, Plaintiff, v. USAA GENERAL INDEMNITY COMPANY and United Services Automobile Association, Defendants.

CASE NO. C22-684 MJP

United States District Court, W.D. Washington, at Seattle

Signed October 19, 2022

Autumn Clarke, Pro Hac Vice, Jay Angoff, Pro Hac Vice, Michael Lieder, Pro Hac Vice, Mehri & Skalet, PLLC, Washington, DC, Beth E. Terrell, Elizabeth Anne Adams, Toby James Marshall, Terrell Marshall Law Group PLLC, Seattle, WA, Harvey Rosenfield, Pro Hac Vice, Ryan Mellino, Pro Hac Vice, Consumer Watchdog, Los Angeles, CA, for Plaintiff.

Adrienne Liu, Pro Hac Vice, James A. Tsouvalas, Pro Hac Vice, Kahn A. Scolnick, Pro Hac Vice, Roark Luskin, Pro Hac Vice, Gibson Dunn & Crutcher LLP, Los Angeles, CA, Kimberly Reppart, Paul S. Smith, III, Forsberg & Umlauf, Seattle, WA, for Defendants.

ORDER GRANTING MOTION TO DISMISS

Marsha J. Pechman, United States Senior District Judge

This matter comes before the Court on Defendants' Motion to Dismiss and/or Strike Portions of Class Action Complaint (Dkt. No. 28) and Request for Judicial Notice (RJN) (Dkt. No. 30). Having reviewed the Motion, the RJN, Plaintiff's Opposition to the Motion (Dkt. No. 33), the Reply (Dkt. No. 35), and all supporting materials, the Court GRANTS the Motion and RJN.

BACKGROUND

Plaintiff Eric Epstein has filed suit individually and on behalf of a proposed class against his former auto insurer, Defendants USAA General Indemnity Company (GIC) and its parent company, United Services Automobile Association (USAA). Epstein claims that Defendants have violated the Washington Law Against Discrimination (WLAD) and the Washington Consumer Protection Act (CPA) by forcing lower-ranking servicemembers to pay more for auto insurance than higher-ranking servicemembers. Defendants move to dismiss all of the claims and to strike the request for equitable relief. Defendants have also filed an unopposed Request for Judicial Notice (RJN) that asks the Court to take judicial notice of a "U.S. Military Rank Insignia" page from the Department of Defense's website. (RJN (Dkt. No. 30).) The Court takes judicial notice of the page, though it does not affect the outcome of the Motion.

USAA offers auto insurance to current and former servicemembers of the United States military. (Compl. ¶¶ 7, 29.) USAA "writes auto insurance through four different insurers that operate under common management and control" which Epstein calls the "USAA Group." (Id. ¶ 7.) Two of the related insurers relevant to this action are: (1) USAA, and (2) GIC. (Id.) USAA insures "commissioned officers as well as senior non-commissioned officers in pay grades E-7 or higher along with veterans whose highest pay grade was E-7 or higher." (Id. ¶ 8.) And "GIC insures enlisted personnel in pay grades E-6 or below along with veterans whose highest pay grade was E-6 or below." (Id.) The Complaint refers to enlisted personnel at pay grades E-7 or higher as "Officers Policyholders" and those in pay grades E-1 through E-6 as "Enlisted Policyholders." (Id. ¶ 1.)

As a former enlisted member of the Navy at a pay grade of E-1, Epstein qualified to obtain auto insurance from USAA Group. (Compl. ¶¶ 5, 7.) In August 2020, Epstein requested a quote for auto insurance from USAA Group. (Id. ¶¶ 30-31.) After applying, he then received a form letter explaining that he could obtain auto insurance from USAA Group. (Id. ¶ 30.) But he alleges that the letter did not tell him that "his status as enlisted would be used as a factor in determining his insurance rate or that he would be assigned to GIC, rather than to USAA, as a result of his military status." (Id.) As used in the Complaint, "military status" refers to Epstein's pay grade of E-1. Epstein then obtained insurance through GIC from August 2020 to April 2022. (Id. ¶ 31.) Epstein alleges that he would have paid roughly 20% less in premiums had he been insured through USAA and not GIC. (Id. ¶ 32.)

Epstein pursues three claims: (1) violations of the WLAD on the basis of his "military status"; (2) violations of the CPA for engaging in "unfair" discrimination by charging higher premiums based on pay grade; and (3) violations of the CPA by failing to disclose to lower pay-grade servicemembers that they will be insured by GIC and that they will pay higher premiums than higher pay-grade servicemembers. (Compl. ¶¶ 49-84.)

Because the relief Epstein seeks is relevant to the analysis under the "filed rate doctrine," the Court reviews it in some detail. Epstein seeks:

(1) declaratory relief (Prayer for Relief ¶ C);

(2) injunctive relief "including but not limited to an order (i) requiring Defendants to use base rates and relativities that generate premiums that do not discriminate against Enlisted Policyholders and/or (ii) otherwise preventing Defendants from continuing to charge discriminatorily high premium rates to Enlisted Policyholders" (Prayer for Relief ¶ D);

(3) "disgorgement, restitution, or imposition of a constructive trust upon the ill-gotten gains derived by Defendants" (Prayer for Relief ¶ E);

(4) "damages, which are at least equal to the amounts that they paid in excess of the amounts that Defendants charged to similarly situated Officer Policyholders" (Prayer for Relief ¶ F);

(5) treble damages under the CPA; (Prayer for Relief ¶ G); and

(6) attorneys' fees and costs, pre-and post-judgment interest, and any other further relief the Court deems just (Prayer for Relief ¶¶ H-J).

(Compl. Prayer for Relief ¶¶ C-J.)

ANALYSIS

A. Legal Standard

Under Fed. R. Civ. P. 12(b)(6), the Court may dismiss a complaint for "failure to state a claim upon which relief can be granted." In ruling on a motion to dismiss, the Court must construe the complaint in the light most favorable to the non-moving party and accept all well-pleaded allegations of material fact as true. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005); Wyler Summit P'ship v. Turner Broad. Sys., 135 F.3d 658, 661 (9th Cir. 1998). Dismissal is appropriate only where a complaint fails to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

B. The Filed Rate Doctrine Bars Plaintiff's Claims

Defendants move to dismiss all three of Epstein's claims on the theory that they are barred by the filed rate doctrine. The Court first reviews the doctrine and then provides its analysis as to why it bars all of the claims Epstein pursues.

1. Legal Standard

Under Washington common law, the "filed rate doctrine" limits "consumers' power to challenge rates the Office of Insurance Commissions (OIC) has approved." McCarthy Fin., Inc. v. Premera, 182 Wash.2d 936, 942, 347 P.3d 872 (2015). The "doctrine provides, in essence, that any 'filed rate'—a rate filed with and approved by the governing regulatory agency—is per se reasonable and cannot be the subject of legal action against the private entity that filed it." Id. (citation and quotation omitted). So claims that directly challenge the reasonableness of a rate approved by the OIC are nonjusticiable and barred under the doctrine. See id. Ultimately, this serves two purposes: "(1) to preserve the agency's primary jurisdiction to determine the reasonableness of rates, and (2) to insure that regulated entities charge only those rates approved by the agency." Id. (citation and quotation omitted).

But the filed rate doctrine is not without its limits. Its application depends on whether the claims and requested damages "directly attack agency-approved rates" or are "merely incidental to agency-approved rates." McCarthy, 182 Wash.2d at 943, 347 P.3d 872. The doctrine applies "only if the claims and damages directly attacked agency rates and 'would necessarily require courts to reevaluate agency-approved rates.' " Alpert v. Nationstar Mortg., LLC, 198 Wash.2d 228, 235, 494 P.3d 419 (2021) (quoting McCarthy, 182 Wash.2d at 942-43, 347 P.3d 872). And the doctrine will not apply when the agency-approved rates are " 'merely incidental' to the claims" and damages or where "general damages" are sought. Id. (quoting McCarthy, 182 Wash.2d at 942, 347 P.3d 872).

The Washington Supreme Court has only once applied this distinction between "direct" and "incidental" claims to determine whether the filed rate doctrine barred the claims at issue. See McCarthy, 182 Wash.2d at 942-43, 347 P.3d 872; see also Alpert, 198 Wash.2d at 235, 494 P.3d 419 (noting that McCarthy is the only Washington Supreme Court case to apply the doctrine). In McCarthy, the plaintiffs argued that the defendants had overcharged them and violated the CPA by misrepresenting how health insurance premiums were negotiated and the rates would increase. McCarthy, 182 Wash.2d at 940, 347 P.3d 872. They sought damages in the form of: (1) the "sum of the excess premiums paid to the defendants," and (2) a refund of any surplus the court found to be "excessive and unreasonable." Id. at 940, 347 P.3d 872. The Court held the damages requested directly attacked the approved rates because they required the Court to "determine what health insurance premiums would have been reasonable for the Policyholders to pay as a baseline for calculating the amount of damages . . . ." Id. at 943, 347 P.3d 872. As such, the filed rate doctrine barred the claims. Id.

Two cases from this District highlight scenarios in which the filed rate doctrine has been found to bar CPA claims. In Benanav v. Healthy Pays Pet Ins., LLC, the court found the filed rate doctrine barred CPA claims premised on allegations that defendant misrepresented how it would calculate premium increases. 495 F. Supp. 3d 987, 999 (W.D. Wash. 2020) (Martinez, J.). The...