Pivonka v. Allstate Ins. Co.

KENT PIVONKA and JAMES SMITH, on behalf of themselvesand a class of similarly situated persons, Plaintiffs, v. ALLSTATE INSURANCE COMPANY, an Illinois Corporation, and ALLSTATE PROPERTYAND CASUALTY COMPANY, an Illinois Corporation, Defendants.

No. 2:11-cv-01759-TLN-CKD

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

March 30, 2021

ORDER

This matter is before the Court on Plaintiffs Kent Pivonka ("Pivonka") and James Smith's ("Smith") (collectively, "Plaintiffs") Motion for Leave to File a First Amended Complaint. (ECF No. 78.) Defendants Allstate Insurance Company and Allstate Property and Casualty Company (collectively, "Defendants") oppose Plaintiffs' motion (ECF No. 80), and Plaintiffs have filed a reply (ECF No. 82). For the reasons set forth below, the Court GRANTS Plaintiffs' motion.

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I. FACTUAL AND PROCEDURAL BACKGROUND

This matter involves California homeowners who carried insurance policies with Defendants and subsequently made claims for losses to personal property. (ECF No. 53 at ¶¶ 7-8, 12.) On May 27, 2011, Plaintiffs filed suit in Sacramento County Superior Court against Defendants seeking declaratory relief and alleging claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Unfair Competition Law ("UCL") under California Business and Professions Code § 17200. (ECF No. 1 at 11-30.) Defendants subsequently removed the action to this Court. (See id.)

The Court granted Defendants' 2011 motion to compel appraisal and stayed the case pending resolution of the appraisal process. (ECF No. 25.) Following the October 27, 2016 appraisal process hearing, the appraisal panel issued awards on November 18, 2016.¹ (ECF No. 59 at 13.) On March 22, 2017, the Court lifted the stay (ECF No. 47) and thereafter Defendants filed a motion to dismiss the complaint (ECF No. 48) based on the appraisal panel's finding that Defendants had overpaid Plaintiffs. (ECF No. 59 at 14.) Plaintiffs did not file an opposition, but instead filed a First Amended Complaint ("FAC") on May 8, 2017 (ECF No. 53). On May 9, 2017, the Court issued a minute order denying Defendants' motion to dismiss as moot pursuant to the filing of the FAC. (ECF No. 54.)

On June 21, 2017, Defendants filed a motion to strike, dismiss, or compel appraisal of the FAC (ECF No. 59) and a related request for judicial notice (ECF No. 60). On July 11, 2019, the Court granted in part Defendants' motion to strike, dismiss, or compel appraisal of the FAC, striking Plaintiffs' FAC for failure to adhere to the proper procedural guidelines, but denying Defendants' motion to dismiss or compel appraisal without prejudice. (See ECF No. 73.)

On September 30, 2019, Plaintiffs filed the instant Motion to File a FAC. (ECF No. 78.) On October 27, 2019, Defendants submitted an opposition (ECF No. 80) and a Request for Judicial Notice (ECF No. 81). On October 24, 2019, Plaintiffs filed a reply. (ECF No. 82.)

II. STANDARD OF LAW

Federal Rule of Civil Procedure ("Rule") 15 governs amended and supplemental pleadings. Fed. R. Civ. P. 15. Rule 15(d) provides: "On motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented."² Fed. R. Civ. P. 15(d); see also Eid v. Alaska Airlines, Inc., 621 F.3d 858, 874 (9th Cir. 2010) ("Rule 15(d) provides a mechanism for parties to file additional causes of action based on facts that didn't exist when the original complaint was filed") (citing Cabrera v. City of Huntington Park, 159 F.3d 374, 382 (9th Cir. 1998) (per curiam)).

"Rule 15(d) is intended to give district courts broad discretion in allowing supplemental pleadings." Keith v. Volpe, 858 F.2d 467, 473 (9th Cir. 1988). "In deciding whether to permit a supplemental pleading, a court's focus is on judicial efficiency." Yates v. Auto City 76, 299 F.R.D. 611, 613 (N.D. Cal. 2013) (citing Planned Parenthood of S. Az. v. Neely (Neely), 130 F.3d 400, 402 (9th Cir. 1997)). The use of supplemental pleadings is "favored" because it enables a court to award complete relief in one action "to avoid the cost, delay and waste of separate actions which must be separately tried and prosecuted." Keith, 858 F.2d at 473 (citing New Amsterdam Cas. Co. v. Waller, 323 F.2d 20, 28-29 (4th Cir. 1963), cert. denied, 367 U.S. 963 (1964); Yates, 299 F.R.D. at 613 (citation omitted)). The Supreme Court has stated that new claims, new parties, and events occurring after the original action are all properly permitted under Rule 15(d). Keith, 858 F.2d at 475 (citing Griffin v. County School Bd. of Prince Edward County, 377 U.S. 218, 226-27 (1964)). Moreover, even though supplemental proceedings are "favored," they "cannot be used to introduce a separate, distinct, and new cause of action." Neely, 130 F.3d at 402 (citations omitted). Rather, matters newly alleged in a supplemental complaint must have "some relation to the claims set forth in the original pleading." Keith, 858 F.2d at 474. "[T]hefact that a supplemental pleading technically states a new cause of action should not be a bar to its allowance, but only a factor to be considered by the court in the exercise of discretion . . ." Id.

"The legal standard for granting or denying a motion to supplement under Rule 15(d) is the same as the standard for granting or denying a motion under Rule 15(a)." Yates, 299 F.R.D. at 614 (citing Athena Feminine Techs., Inc. v. Wilkes, No. C 10-4868 SBA, 2013 WL 450147, at *2 (N.D. Cal. Feb. 6, 2013)) (internal quotations omitted). Courts commonly apply the five Foman factors to Rule 15(d) motions: (1) undue delay; (2) bad faith or dilatory motive on the part of the movant; (3) repeated failure of previous amendments; (4) undue prejudice to the opposing party; and (5) futility of the amendment. Lyon v. U.S. Immigr. & Customs Enf't, 308 F.R.D. 203, 214 (N.D. Cal. 2015) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)); Natural Resources Defense Council v. Kempthorne, No. 1:05-cv-01207-LGO GSA, 2016 WL 8678051 (E.D. Cal. Apr. 22, 2016). Among these five factors, "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). "Absent prejudice or a 'strong showing' of any other Foman factor, there is a presumption in favor of granting leave to supplement." Lyon, 308 F.R.D. at 214 (citing Eminence Capital, LLC, 316 F.3d at 1052)). Supplementation should be permitted where doing so would serve Rule 15(d)'s goal of judicial efficiency, and a court should assess whether an entire controversy can be settled in one action. See Neely, 130 F.3d at 402.

III. ANALYSIS

Plaintiffs seek leave to file a FAC that "accounts for the significant factual developments that have occurred since the original complaint was filed" and "adds a new representative plaintiff." (ECF No. 78 at 2.) The Court will first address Defendants' Request for Judicial Notice (ECF No. 81) and then evaluate Plaintiff's motion.

A. Defendants' Request for Judicial Notice

Defendants request the Court take judicial notice of Exhibits A-1 through H. (ECF No. 81 at 2-3.) Plaintiffs do not object to this request in their reply. (See ECF No. 82.)

Federal Rule of Evidence 201(b) authorizes a court to take judicial notice of a fact that "is not subject to reasonable dispute because it: (1) is generally known within the trial court'sterritorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). A court may not take judicial notice of findings of fact from another case, nor may a court take judicial notice of any matter that is in dispute. See Wyatt v. Terhune, 315 F.3d 1108, 1114 n.5 (9th Cir. 2003) overruled on other grounds by Albino v. Baca, 747 F.3d 1162, 1166 (9th Cir. 2014); Lee v. City of L.A., 250 F.3d 668, 688-90 (9th Cir. 2001); M/V Am. Queen v. San Diego Marine Const. Corp., 708 F.2d 1483, 1491 (9th Cir. 1983). Moreover, as with evidence generally, the matter to be judicially noticed must be relevant to the issues in the case. Fed. R. Evid. 402; Vallot v. Central Gulf Lines, Inc., 641 F.2d 347, 350 (5th Cir. 1981) (per curiam). Courts "may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue." U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc. (Borneo), 971 F.2d 244, 248 (9th Cir. 1992) (emphasis added).

Relatedly, "[d]ocuments are subject to incorporation by reference if the plaintiff refers to them 'extensively' or they form the basis of the complaint." Evanston Police Pension Fund v. McKesson Corp., 411 F. Supp. 3d 580, 592 (N.D. Cal. 2019) (quoting Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 2018)). The Ninth Circuit has recognized the disjunction between incorporation by reference and judicial notice. See Khoja, 899 F.3d at 1003 ("[U]nlike judicial notice, a court 'may assume [an incorporated document's] contents are true for purposes of a motion to dismiss under Rule 12(b)(6).'") (quoting Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006)). Yet, "[i]t is improper to assume the truth of an incorporated document if such assumptions only serve to dispute facts stated in a well-pleaded complaint." Id.

Exhibits A-1 and A-2³ are insurance policy declarations ("Policy Declarations") relating to insurance coverage purchased by Smith and Pivonka. (ECF No. 81-1 at 1-23.) Both the Complaint and FAC refer to insurance contracts between Plaintiffs and Defendants "extensively."(See, e.g., ECF No. 72-8 at 3-25;) see also Evanston Police Pension Fund, 411 F. Supp. 3d at 592. Plaintiffs' claims for breach of contract and breach of the implied covenant of good faith and fair dealing necessarily rely on the...