UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
ADAM ELGINDY, et al.,
Plaintiffs, v. AGA SERVICE COMPANY, et al.,
Defendants.
Case No. 20-cv-06304-JST
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS Re: ECF No. 16
Before the Court is motion to dismiss. ECF No. 16. The Court will grant the motion in part and deny it in part. I. BACKGROUND
Plaintiffs Adam Elgindy and Julianne Chuanroong bring this putative class action on behalf of themselves and other consumers who purchased an event ticket insurance policy or a trip, travel, or flight insurance policy from Defendants during the class period. Complaint 5, 6, 80. Plaintiffs - optional assistance services fee with the sale of these insurance policies, and not fully disclosing the inclusion of that fee, constitutes unlawful, unfair, and deceptive conduct. Id. ¶ 1.
A. Factual Background Defendants are all involved in the sale of insurance for event tickets and travel arrangement purchases. Id. ¶ 2. Collectively, they are the dominant providers of event ticket insurance in California, and are the main provider of insurance on the website Ticketmaster.com. Id. ¶ 23. They are also the largest providers of trip and travel insurance in California and the United States. Id. ¶ 33. Defendants Jefferson Insurance Company and BCS Insurance Company underwrite the insurance policies at issue. Id. ¶¶ 8-9. Defendant AGA Services Co. d/b/a Allianz
Glo business transacted by Jefferson and BCS in California. Id. ¶ 7. AGA is responsible for obtaining regulatory approval of the insurance policy products, as well as
the marketing and sales of those products. Id. ¶ 22.
When a consumer purchases an event ticket on Ticketmaster.com, she is presented with an offer to purchase insurance. Id. ¶ 24. She is given only one vendor option to insure her purchase. Id. The same is true when a consumer purchases airfare and similar travel fares, including from websites for Hawaiian Airlines, American Airlines, and Jet Blue Airways. Id. ¶¶ 33-34.
On the Ticketmaster.com website, the offer to co Id. ¶ 25. The offer
page does not indicate that the price quoted reflects any costs beyond the cost of the insurance premium. Id. ¶¶ 25-26. Likew Id. ¶ 35. On these travel websites, the offers sometimes, but not always, reference assistance for travel or medical emergency as one of the benefits of the insurance. Id. ¶¶ 34, 36.
Within the offer is Id. ¶¶ 26, 37 - Id. Neither the link nor the surrounding text indicates that the plan details page will disclose a non-insurance service fee. Id. If on the event ticket insurance page, the landing page explains the benefits of the policy as including -existing Medical Condition Exclusio Id. ¶ 26. When a consumer clicks the same link on the
Id. ¶ 37. The plan details and disclosure webpage does not say that the consumer is charged a separate fee for the benefit. Id.
consumer will purchase the insurance without ever realizing that he or she paid AGA for access to a toll- Id. ¶ 25.
After a consumer purchases a ticket or travel insurance policy, she receives a confirmation email with the policy number and total cost of insurance. Id. ¶¶ 27, 38. The confirmation email Id. The cover letter identifies a Viewer Advantage Services. Id.
AGA posts pricing sheets on its website that disclose the non-insurance assistance fee. Id. ¶¶ 29, 41. These pricing sheets explain that the fee charged for assistance services is dependent on the cost of the ticket being purchased and the length of time between the purchase and event date Id. The pricing sheets are difficult to find, unlikely to be accessed by consumers, and inconsistent with the prices actually charged to consumers. Id. For example, although the pricing sheet for Domestic Trip Protector Plus states that the standard assistance fee is 1%, Plaintiff Chuanroong was charged assistance fees of 1.95%, 1.42%, and 3.64% for trips that she insured in 2019 and 2020. See id. ¶ 41.
The assistance service, for which the additional fee is charged, is a toll-free line to a customer service representative. Id. ¶ 25. For event insurance, the assistance services entitle the insured to call a toll-free number to speak to a service representative for information on directions, nearby restaurants, hotels, parking garages, weather forecasts, destination information, passport- replacement information, doctors and medical facilities. Id. ¶ 27. For travel insurance, the assistance services entitle the insured to call a toll-free number to speak to a service representative for information on where to refill prescriptions or find child care equipment, pet care services, destination information, business service information, gift delivery information, passport- replacement information, doctor or medical facility information, legal referrals and translation services. Id. ¶¶ 38, 39
Plaintiffs allege that there is no significant demand for the assistance benefits offered by AGA. Id. They information that consumers can readily access for free on the internet. Id. Consumers would not pay for the assistance service product if given a choice not to do so. Id. ¶ 28. Additionally, Plaintiffs contend that the fee charged by Defendants is not actually used to invest in or provide the informational assistance service for which it is supposedly charged. Id. ¶ 30. Case 4:20-cv-06304-JST Document 35 Filed 03/29/21 Page 3 of 29 Defendants make no mention of any separate charges for [assistance] services at the time they present their insurance offers to consumers, consumers have no reason to suspect they are being - Id. ¶ 39.
B. Statutory and Regulatory Background Plaintiffs ground their claims on several different California insurance statutes and rules. First, Insurance Code Section 1861.01 requires be approved by the co
insurance rates and provides 1861.05(a). Both of these provisions were added to the Insurance Code by Proposition 103, approved by California voters on November 8, 1988. See State Farm Mut. Auto. Ins. Co. v. Garamendi, 32 Cal. 4th 1029, 1035 (2004). Beyond the requirement of requirement for insurance rate pre-approval, Proposition 103 further Id. (quoting Walker v. Allstate Indemnity Co., 77 Cal. App. 4th 750, 753 (2000). the voters vested the power to enforce the Insurance Code in the public as well as the
Donabedian v. Mercury Ins. Co., 116 Cal. App. 4th 968, 982 (2004) (quoting an amicus brief filed by the California Department of Insurance).
In addition to the setting of rates, California insurance law also regulates the sale of insurance and the practices of agents and brokers. See generally Cal. Ins. Code Art. 5.3 (§§ 769- 769.56). California Insurance Regulation Section 2189.3 details broker fee requirements and allows a broker- , tit. 10, § 2189.3. This rule further requires that Id. § 2189.3(c).
Mercury Ins. Co. v. Lara, 35 Cal. App. 5th 82, 88 (2019). Finally, a fee-charging broker must also disclose,
Cal. Code Regs., tit. 10, § 2189.3(g).
C. Procedural Background Plaintiffs filed their complaint on September 4, 2020. ECF No. 1. The complaint brings three causes of action against Defendants. First, Plaintiffs allege unlawful, unfair, and fraudulent trade practices in violation of Code § 17200. Compl. ¶¶ 90-102. Second, Plaintiffs allege that Defendants made false,
deceptive, or misleading statements in connection with the sale of event and trip insurance policies 17500. Id. ¶¶ 103-15. Third, Plaintiffs bring a claim for common-law fraud, deceit, and/or misrepresentation. Id. ¶¶ 116-125.
On November 13, 2020, Defendants filed a motion to dismiss the complaint. ECF No. 16. Plaintiffs filed an opposition to the motion on December 16, 2020, ECF No. 21, and Defendants filed a reply on January 6, 2021, ECF No. 27. The Court held a hearing on the motion on January 27, 2021. II. SUBJECT MATTER JURISDICTION
The Court has jurisdiction over this putative class action pursuant to 28 U.S.C. § 1332(d)(2) because the amount in controversy exceeds $5 million and at least one member in the proposed class of over 100 members is a citizen of a state different from a Defendant. 1 III. LEGAL STANDARDS
A. Federal Rule of Civil Procedure 12(b)(1) -matter jurisdiction, the court must dismiss the a Fed. R. Civ. P. 12(h)(3). A defendant may raise the defense of lack of subject matter jurisdiction by motion pursuant to Federal Rule of Civil Procedure 12(b)(1). The party asserting subject matter jurisdiction bears the burden of establishing it. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).
B. Federal Rule of Civil Procedure 12(b)(6)
1 Elgindy is a resident and citizen of California, and AGA is a citizen of Virginia. Compl. ¶¶ 5, 7.
ismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008) (citation omitted). A complaint need not contain detailed factual allegations, but facts Bell Atl. Corp. v. Twombly iss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal quotation marks factual allegations in the complaint as true and construe the Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).
C. Federal Rule of Civil Procedure 9(b) Any claims must satisfy the traditional plausibility standards of Rules 8(a) and 12(b)(6), as well as the heightened pleading requirements of Rule Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 967 (9th Cir. 2018). The heightened
s notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong. Averments of fraud must be accompanied by the who, what, when, where, and how of the misconduct Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation marks, alteration, and citations omitted). IV. DISCUSSION
their first theory, Plaintiffs argue that Defendants have acted unlawfully and unfairly by bundling a non-optional assistance services fee with their offer of event and travel ticket insurance policies. Plaintiffs contend that this fee is premium that has not been approved and authorized by the California Insurance Commissioner. Plaintiffs
ground their claims on this theory. Plaintiffs Defendants have acted fraudulently by concealing the fact price that an individual is charged when purchasing a policy. Plaintiffs ground their claims alleging violation o prong, violation of the FAL, and common-law fraud on that theory.
A. Standing
1. Legal Standard To establish Article III standing, a plaintiff in federal court must meet three requirements. an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).
Whether a party has Article III standing to bring a cause of action in federal court is a different analysis than whether the plaintiff has adequately established statutory standing under No. 09-cv-2701-JLS, 2010 WL 1329077, at *3 (S.D. Cal. Apr. 1, 2010). UCL further requires a plaintiff to demonstrate that she lost money or property as a result of such Hall v. Time Inc., 158 Cal. App. 4th 847, 849 (2008); see also Rubio v. Capital One Bank, 613 F.3d 1195, 1203-04 (9th Cir. 2010). FAL claims have a substantially similar requirement. See Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310, 322 (2011) (a plaintiff must s injury-in- the UCL and FAL); Meyer v. Sprint Spectrum L.P., 45 Cal. 4th 634, 646 (2009) bring a CLRA action, not only must a consumer be exposed to an unlawful practice, but some kind
2. Injury-in-Fact Defendants argue that Plaintiffs complaint fails to establish either Article III standing or s 17. Plaintiffs disagree, arguing that their alleged injury is simple amounts of money that they would not have paid if Defendants had complied with the law, had not
27. They explain that having paid more than they would have but for satisfies the UCL and Article III requir Id. at 28.
-in-fact requirement because
Sierra Club v. Morton, 405 U.S. 727, 733-34 (1972); see also Comm. v. Reno, 98 F.3d 1121, 1130 (9th Cir. 1996) It also where a consumer alleges that
Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 330 (2011). A consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of section 17204 by alleging . . . that he or she would not have bought the product but for the Id.
Plaintiffs argue that such an overpayment is present here. As to their theory that the fees
Compl. ¶ 43. Likewise, as to their theory that
Id. On their face, these allegations appear to allege an economic injury.
Nonetheless, Defendants urge the Court to reject that overpayment injury argument because Plaintiffs got what they paid for. See ECF No 16 at 17. The fact that Plaintiffs do not find the assistance services valuable does not change the fact that they received the offered plan in exchange for the advertised price which they agreed to pay. ECF No. 27 at 9. This argument
makes a great deal of sense, and the Court might adopt it if there were no law to the contrary. But precedent is
Rather, the argument is foreclosed by Hinojos Corp., 718 F.3d 1098 (9th Cir. 2013). There a consumer alleged to have bought merchandise because it was sale, when really the merchandise was actually sold at its normal price. Id. at 1101. Following the standard set forth by the California Supreme Court in Kwikset, the court found satisfied because Hinojos allege[d] that the
advertised discounts conveyed false information about the goods he purchased Id. at 1105. The court explained
product he just purchased is precisely that it has a higher perceived value and therefore has a Id. at 1106 (emphasis in original).
Plaintiffs allege an analogous injury here. They contend that they were deceived to believe that they were paying a certain amount for insurance, when in reality the insurance was worth less than the total price paid it was worth the offer price minus the added service fee. See Compl. ¶¶ 51, 74, 105, 112, 117, 124. Just as in Hinojos, the fact that Plaintiffs were willing to pay the quoted price does not change the economic injury that occurs due to a misrepresentation about the value of the product. Defendants attempt to distinguish Hinojos by painting Plaintiff injury as consisting entirely of a subjective devaluation of the product that they received. ECF No. 27 at 9. But Hinojos
Hinojos, 718 F.3d at 1105 (internal quotation marks omitted). Misinformation price can be a source of economic injury. See id. at 1106.
economic injury is a question for another day. For purposes of this motion, the Court finds that Plaintiffs have satisfied the Article III and UCL/FAL injury-in-fact standing requirements by alleging that they paid more than they would have but
3. Standing to Seek Injunctive Relief Defendants further argue that Plaintiffs lack standing to seek injunctive relief because their allegations of future harm are not plausible. ECF No. 16 at 14. In short, Defendants say that now that Plaintiffs know that the event and ticket insurance policies include an assistance service fee, or trip protection from Defendants in the Id. at 15.
Peaco*ck v. 21st Amendment Brewery Cafe, LLC, No. 17- cv-01918- previously deceived consumer may have standing to seek an injunction against false advertising or
labeling, even though the consumer now knows or suspects that the advertising was false at the Davidson, 889 F.3d at 969 (quoting Summers
v. Earth Island Inst., 555 U.S. 488, 493 (2009)). This harm may be demonstrated in two ways: (1) based on s plausible allegations that she will b s advertising or labeling in the future, and so will not purchase the product although she would like based on plausible allegations that she might purchase the product in the future, despite the fact it was once marred by false advertising or labeling, as she may reasonably, but incorrectly, assume the pr Id. at 969-70.
In Davidson, the plaintiff alleged false advertising of flushable wipes that were not, in fact, Id. at 961. The Ninth Circuit held that she had adequately pleaded imminent or a
manufactured by [Kimberly- . . where [Kimberly-Clark inually presented with Kimberly- n Id. at 970-71.
This case fits squarely within the ambit of Davidson. Plaintiff Elgindy alleges will
purchase event tickets and airfare in the future and will be presented with the option to insure those purchases through Defendants desires to insure his event ticket purchases but, absent the injunctive relief sought, will not be able to determine whether he will be charged a Compl. ¶ . Id. ¶ 78. These allegations are sufficient to confer standing to seek injunctive relief. See, e.g., Schwartz v. Bai Brands, LLC, No. 19-cv-6249- Similar to the allegations in Davidson, Schwartz alleges that he was deceived by defendant and does intend to purchase the [Cocofusion beverages] in the future, but is concerned about the ions are sufficient to confer Davidson, 889 F.3d at 970-71)); Tucker v. Post Consumer Brands, LLC, No. 19-cv-03993-YGR, 2020 WL 1929368, at *6 (N.D. Cal. Apr. 21, 2020) Here, plaintiff has sufficiently alleged that he was deceived by the front of the Honey Bunches of Oats packaging and that he may purchase the cereal again in the future if the label is accurate. Absent injunctive relief, plaintiff would not know whether honey is in fact a significant sweetener in defendants product based on the front of the cereal box. Nor is the onus on plaintiff to consult the ingredient list to try to discern this fact. ; Schneider v. Chipotle Mexican Grill, Inc., 328 F.R.D. 520, 528 (N.D. Cal. 2018) (allegations that the plaintiffs would patronize Chipotle in the future if it had a non-GMO/GMO-free menu).
Injunctive relief is also available with regard to claims based on Plaintiffs argue that the nature of the harm they seek to prevent is the requirement that
they pay an unlawful and unfair fee in order to purchase insurance with their event and travel ticket purchases. ECF No. 21 at 26-27. They argue that their harm is certain to reoccur absent injunctive relief that prohibits Defendants from continuing to charge a non-optional fee for assistance services as part of their insurance offers. Id. Defendants have not raised any argument nor cited any authority that would suggest that Plaintiffs lack standing for injunctive relief under this theory. See ECF No. 16 at 14-16; ECF No. 27 at 7-8. The Court agrees that Plaintiffs have in a
See Davidson, 889 F.3d at 971.
The Court finds that Plaintiffs have standing to sue and have standing to seek injunctive air.
B. UCL Claim
In re Pomona Valley Med. Grp., 476 F.3d 665, 674 (9th Cir. 2007) (quoting Cal. Bus. & Prof. Code § 17200 et seq. In re First Alliance Mortg.
Co., 471 F.3d 977, 995 (9th Cir. 2006). A claim that sufficiently pleads any one of these prongs will survive a motion to dismiss. Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (2007).
as to each of the three prongs. As to the unlawful prong, Defendants contend that Plaintiffs fail to plausibly allege that their conduct has violated any statute. ECF No. 16 at 24. As to the unfair prong, Defendants argue that none of
conduct. Id. at 27. As to the fraudulent prong, Defendants argue that the complaint fails the heightened pleading requirements of whether a marketing practice is deceptive or misleading. Id. at 18, 20. The Court examines each prong in turn.
1. Unlawful Prong of the UCL other laws and treats them as Davis v. HSBC Bank Nev., N.A. state a claim under the unlawful prong of the UCL, a plaintiff must sufficiently plead a predicate MacDonald v. Ford Motor Co., 37 F. Supp. 3d. 1087, 1097 (N.D. Cal. 2014). An alleged violation of the California Insurance Code can serve as the predicate basis for a claim of an unlawful practice under the UCL. Friedman v. AARP, Inc., 855 F.3d 1047, 1052 (9th Cir. 2017) (citing Stevens v. Superior Court, 75 Cal. App. 4th 594, 606-07 (1999)).
Plaintiffs suggest two ways in which Defendant bundling of the assistance services fee into the event and travel ticket insurance policies . First, Plaintiffs contend that the assistance services fee is actually an illegal agent fee or agent commission in violation of California insurance regulations, Cal. Code Regs., tit. 10, §§ 2189.3 and 2189.5. ECF No. 21 at 11. Second, Plaintiffs argue that the assistance fee is just an additional charge for the insurance policy premium, which was not approved by the California Insurance Commissioner, in violation of California Insurance Code §§ 1861.01(c) and 1861.05. Id.
a. Agent Fee Defendants do not appear to dispute that they are prohibited from charging an agent fee with the sale of trip and event insurance policies. ECF No. 16 at 24. Rather, Defendants argue that the fee they charge is not an agent fee but a service fee. Id. -free number to speak
with customer service representatives to obtain various types of information, including directions, information concerning nearby restaurants, hotels, and parking garages, weather forecasts, destination information, information relating to passports, and information regarding doctors and 27)). Plaintiffs state that the characterization of the fee as a - no demand for the services offered and Plaintiffs did not request or agree to purchase the services in the first place. ECF No. 21 at 12.
The only case cited by either party Friedman v. AARP, 855 F.3d 1047 (9th Cir. 2017). In Friedman, the court held that the plaintiff had sufficiently alleged that AARP was receiving an agent fee in violation of California Insurance Code Section 1631 (prohibiting unlicensed persons from soliciting for the sale of insurance). Id. at 1055. The court considered two key factors in determining that the 4.95% fee on each sale of UnitedHealth Medigap coverage was an insurance commission. Id. at 1050. First, the complaint alleged that all purchases of Medigap coverage were required to be made through AARP, making AARP the only Id. at 1053. Second, the court observed that the fee received by
Id. (quoting Wayne v. Staples, Inc., 135 Cal. App. 4th 466, 478 (2006)). . Id.
Id. Taking these factors into account, the court concluded that the he pleading stage of alleging facts Id.
Friedman complaint alleges that to purchase ticket insurance for the event tickets bought on Ticketmaster.com or trip insurance for the airline tickets bought on travel websites like Hawaiianairlines.com or United.com, the only offer presented to consumers is the AGA policy. Compl. ¶¶ 24, 34, 45-47, 52-54, 56-58. In effect, AGA is the only See Friedman, 855 F.3d at 1053. Plaintiffs also allege that the fee received by AGA for assistance services is calculated based on the cost of the ticket purchased, Compl ¶¶ Friedman, 855 F.3d at 1053. As Plaintiffs allege, this calculation is consistent with the calculation for the cost of the insurance premium, but bears no reasonable relation to the cost of the service itself. Compl. ¶¶ 29, 41.
is that because they offer a service, and because Plaintiffs have not alleged that the service is unavailable, the [s] that fees allocated to Concierge Services are not (referring to Compl. ¶ 27). This mischaracterizes the allegations and asks the Court to make an unsupported assumption. First, the complaint alleges that, after a p . Compl. ¶ 27; see also id. ¶ 38. Plaintiffs do not allege to the provision of Concierge Services; they suggest the opposite. See id. ¶ purchase, uses a formula that increases the fee according to the purchase and risk at issue, and does not actually invest in providing a convenient informational assist Second, the name given to a fee does not determine the nature of the fee. See Dietrick v. Securitas Sec. Servs.
USA, Inc. Were it otherwise, any insurance agent could circumvent the agent fee prohibition by offering an illusory low- or no-cost service including one for which consumers have no use, as Plaintiffs allege here. See Lara, 35 Cal. App. 5th at 102 not part of the premium, finding this would lead to requirements by allowing insurance co The relationship between the fees in question and the services Defendants provided raises questions of fact that will be resolved later in the litigation.
The Court concludes that Plaintiffs have plausibly alleged that the fee charged by AGA in
in violation of California insurance regulations.
b. Unapproved premium Defendants rely on a similar challenge against allegation that the assistance services fee is part of the underlying premium, and that they acted unlawfully by treating it as a separate fee and failing to obtain approval by the California Insurance Commissioner. Defendants point to the complaint ECF No.
16 at 25 (citing Compl. ¶ 25). Therefore, D the portion of the cost . . . allocated to non-insurance services is not itself an insurance premium that warrants commissioner Id. Defendants also argue, more broadly, that courts have acknowledged and approved of the practice of bundled product or service offerings. Id. Defendants contend that it makes
Id. at 26. Defendants cite no authority to guide the Court in how to distinguish a fee that is part of the insurance premium from a fee that is not. See id. at 25-26; ECF No. 27 at 14-15.
Plaintiffs [t]he charges at issue are mandatory, bundled with the calculated premium into a single price, and are based on underwriting risks, not the costs of the supposed assistance service. ECF No. 21 at 13. They direct the Court to two
cases for their proposition that the fee in question can be deemed part of the insurance premium. Id. at 12 (citing Mercury Ins. Co. v. Lara, 35 Cal. App. 5th 82 (2019) and Troyk v. Farmers Grp., Inc., 171 Cal. App. 4th 1305 (2009)).
In Troyk, the California Court of Appeal upheld that a service charge, imposed for the payment in full of the stated premium for an automobile insurance -the California insurance statute mandating the required contents of an insurance policy. 171 Cal. App. 4th at 1315. The court started by
Id. at 1322-23. Therefore, as a matter of first impression, the court recognized the common unde Id. at 1324 (quoting Interinsurance Exchange of the Automobile Club v. Superior Court, 148 Cal. App. 4th 1218, 1230 (2007)). Moreover, as a consumer
Id. required to pay a service charge in addition to the stated premium [in ord s per Id.
The court in Lara relied heavily on Troyk, including for the well-established principle that ith 35 Cal. App. 5th at 97 (quoting Troyk, 171 Cal. App. 4th at 1325). could not be premium because they were paid for separate comparative rate shopping services, the court c finding that the fees were actually agent fees, Id. at 99; see also id. at 94 (explaining the the rate statutes and regulations, the purpose of Proposition 103, and Bulletin 80- The court further distinguished the Installment Payment cases, In re Insurance Installment Fee Cases, 211 Cal. App. 4th 1395 (2012) and Interinsurance Exchange, 148 Cal. App. 4th 1218 (2007),
explaining that the fees in those cases were not premium because they were optional depending on the payment plan chosen by the consumer and were paid only by consumers who received the benefit. Lara, 35 Cal. App. 5th at 103.
Once again, the Court finds that Plaintiffs have plausibly alleged that the fee in question is part of the insurance premium, required to be approved by the California Insurance Commissioner under Sections 1861.01(c) and 1861.05 of the Insurance Code. First, if it is ultimately determined, as Plaintiffs have plausibly alleged, that the fee charged by AG actually an agent fee, then, under Lara, it is part of premium and must be included in a rate application for prior See Lara, 35 Cal. App. 5th at 99. Moreover, even if not an agent fee, it is plausible that a factfinder could find the fee part of the overall premium, particularly in that the offer was presented to consumers as a single total cost for the insurance policy. See, e.g., Compl. ¶
consumers understand the insurance
In sum, the Court finds that Plaintiffs have plausibly alleged that the assistance services fee is an agent fee charged in violation of Cal. Code Regs., tit. 10, §§ 2189.3 and 2189.5, and/or an additional cost of the premium charged without approval by the Insurance Commissioner in violation of Cal. Ins. Code, §§ 1861.01(c) and 1861.05. Having plausibly alleged predicate g.
2. Unfair Prong of the UCL of the UCL. See Graham v. Bank of Am., N.A., 226 Cal. App. 4th 594, 612 (2014); MacDonald, 37 F. Supp. 3d at 1098- the victim, balanced against the reasons, justifications and motives of the alleged wrongdoer . . .
victim Graham, 226 Cal. App. 4th at 612 (quoting Smith v. State Farm Mutual Auto. Ins. Co., 93 Cal. App. 4th 700, 718-19 (2001)). Under a second or
regulatory provision Id. (quoting Wilson v. Hynek, 207 Cal. App. 4th 999, 1008 (2012)) (internal quotations and alterations omitted). a business practice may be . . . in violation of the UCL even if the practice does not violate any Rovai v. Select Portfolio Servicing, Inc., No. 14-cv-1738-BAS-WVG, 2018 WL 3140543, at *16 (S.D. Cal. June 27, 2018) (quoting Olszewski v. Scripps Health, 30 Cal. 4th 798, 827 (2003)). In that case, the test is satisfied if the practice Id. (quoting Smith, 93 Cal. App. 4th at 719). 2
Defendants argue that Plaintiffs fail to state a claim for unfair conduct under any test, but their argument is largely premised on the contention that Plaintiffs fail to plausibly allege any unlawful conduct. ECF No. 16 at 26-27. The Court has now rejected that argument and separately finds that Plaintiffs have plausibly alleged that Defendants conduct was unfair.
Under the balancing test, Plaintiffs have alleged that is See Fraley v.
Facebook, Inc., 830 F. Supp. 2d 785, 813 (2011) (quoting S. Bay Chevrolet v. Gen. Motors Acceptance Corp., 72 Cal. App. 4th 861, 886-87 (1999)). Defendants argue that there are and that there is -26. Plaintiffs allege, however, that multiple products in a single package is not what is being offered at the point of sale, and that Compl. ¶¶ 2, 31, 43, 48, 72; see also id. ¶ whether to do so.). Furth practice. See, e.g., id. ¶
Jefferson had complied with California law and charged her only an approved premium, rather
2 There is a third test under which [is] substantial; (2) the injury [is not] outweighed by any countervailing benefits to consumers or competition; and (3) it [is] an injury that consumers themselves could not reasonably have Graham, 226 Cal. App. 4th at 613, (quoting Camacho v. Auto. Club of S. Cal., 142 Cal. App. 4th 1394, 1403 (2006)). The Ninth Circuit has rejected the Camacho test except as to claims of unfair competition between direct competitors. See Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 736 (9th Cir. 2007).
than unfairly, unlawfully, and deceptively including an undisclosed, additional fee in the cost of The financial injury to consumers of being charged an additional fee, on top of the insurance premium, for a service they do not want or need outweighs any potential benefit of a bundled product in these circ*mstances particularly when Defendants could easily make their -
Under Plaintiffs have alleged a UCL claim that conduct violates California long-standing public policy to ensure that the costs of insurance are fair, transparent and affordable. See Lara see also Donabedian, 116 Cal. App. 4th at 981 (quoting Proposition 103, which added premium rate-review requirements under California law, . . . and to ensure that insurance is fair, available, and affordable for all Calif ; Garamendi, 32 Cal. 4th at 1042 affect rates charged by insurers and lead to insurance that is unfair, unavailable, and Plaintiffs allege that Defendant practice of bundling a mandatory but unwanted assistance services product with the sale of insurance policies r 31; see also id. ¶
a formula that increases the fee according the purchase and risk at issue, and does not actually . As such, an additional, non- established policy seeking to ensure fair and affordable insurance products.
In sum, at the pleading stage, Plaintiffs have plausibly alleged a practice injurious to They have stated a claim for a violation of
3. Fraudulent Prong of the UCL Plaintiffs under the fraudulent prong, is rooted in their second theory that Defendants acted deceptively by misrepresenting their offers of insurance, using language suggesting that the price advertised was solely for the insurance premium, when it also
included a hidden fee for a non-insurance service. Compl. ¶ 93. This same theory also supports FAL cause of action. Id. ¶ 105. The California Supreme Court has recognized that any violation of the FAL necessarily violates the UCL. Kasky v. Nike, Inc., 27 Cal. 4th 939, 950 (2002). Accordingly, courts often analyze the two claims together. See Hadley v. Kellogg Sales Co., 273 F. Supp. 3d 1052, 1063-64 (N.D. Cal. 2017) (analyzing FAL and UCL claims together); In re Tobacco II Cases, 46 Cal. 4th 298, 312 n.8 (2009) (same); Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351, 1360 (2003) (same). Both parties have chosen to address these claims together, and so, the Court will address the fraudulent prong of [Plaintiffs UCL claim with its FAL claim below. Schrenk v. Carvana, LLC, No. 2:19-cv-01302 TLN CKD, 2020 WL 4339969, at *5 (E.D. Cal. July 28, 2020).
C. FAL Claim Cal. Bus. & Prof. Code § 17500. Defe FAL and other fraud-based claims should be dismissed for (1) failure to satisfy the heightened pleading standard of Rule 9, and (2) failure to allege a misrepresentation that satisfies ECF No. 16 at 18, 20.
a. Rule 9 Sufficiency of pleadings If a complaint alleges fraud, Rule state with particularity the Fed. R. Civ. P. 9(b). identify the who, what, when, where, and how of the misconduct charged, as well as what is false United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quotation marks and citations omitted). Likewise, when UCL and FAL claims are premised on misleading advertising or labeling, Rule 9(b)
In re Arris Cable Modem Consumer Litig., No. 17-cv-01834-LHK, 2018 WL 288085, at *8 (N.D. Cal. Jan. 4, 2018) (citing Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009)); see also Von Koenig v. Snapple Beverage Corp., 713 F. Supp. 2d 1066 (2010). These circ*mstances include what the alleged misrepresen when [the
plaintiff] was exposed to them . . . Kearns, 567 F.3d at 1126. forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth Vess, 317 F.3d at 1106 (quoting Decker v. GlenFed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).
In Von Koenig, the plaintiffs satisfied the Rule 9(b) pleading standard by identifying that defendant Snapple Beverage Corporation
ples of the labels from several this labeling Id.
This, the court held, satisfied the Rule 9(b) standard. Id. at 1078. and what in their allegations that Defendant AGA, as the agent of Defendants Jefferson and BCS, presented Plaintiffs with offers for insurance without properly disclosing that the quoted price of insurance included a fee for assistance services. Compl. ¶¶ 10, 22, 25, 35-36, 46, 57, 61, by the specific dates of purchase alleged by each Plaintiff. Id. ¶¶ 45, 52, 56, 60, 64, 68. And as in Von Koenig screenshots of the allegedly deceptive offers, and their description of how those offers were misleading. Id. ¶¶ 24, 34, 47, 54, 58, 62, 66, 70; Von Koenig, 713 F. Supp. 2d at 1077; see also Peviani v. Nat. Balance, Inc. list of challenged statements and their deceptive
Defendants argue that these allegations fall short for two reasons. First, Defendants argue that Plaintiffs have not alleged that any statements The Court disagrees. Plaintiffs have alleged that the offers presented by Defendants on event and travel websites and omit the fact that the price includes a services fee and that the actual cost of the insurance is lower than the price being quoted to the
consumer. Compl. ¶¶ 24-25, 34-35, 47, 73. They argue that these offers are deceptive and inaccurate because they do not tell consumers that they are being charged for non-insurance services on top of the insurance product premium. Id. ¶¶ 25, 35-36; see also id. ¶ Plaintiff Elgindy was not aware of the existence of any fee in addition to the insurance premium . . . at the time he purchased the ticket insurance. As Elgindy agreed to pay AGA and Jefferson to insure his event tickets and believed that the amount Under Hinojos, and construing false statements. Hinojos, 718 F.3d at 1107 false price information This also distinguishes Chuang, where plaintiffs
where other evidence before the court indicated that the labeling was entirely accurate. See Jonathan Chuang v. Dr. Pepper Snapple Grp., Inc., No. CV 17-01875- MWF (MRWx), 2017 WL 4286577, at *4 (C.D. Cal. Sept. 20, 2017).
Second, Defendants argue that the example screenshots are not enough because Plaintiffs have not alleged which of the sample offers they saw. ECF No. 16 at 19. The Court agrees with Plaintiffs that they are not required to submit screenshots of the actual offers that were presented to them on the day of their purchases, ECF No. 21 at 21, just as the Von Koenig plaintiffs were not required to include photographs of the specific Snapple beverage that they had previously purchased (and presumably consumed). See Von Koenig, 13 F. Supp. 2d at 1077. Plaintiffs identify each date of purchase and specifically allege that the offers that they were presented with 46, 53, 57, 61, 65, 69. This satisfies the standard. 3
The Court finds that Plaintiffs have satisfied the Rule 9(b) pleading requirements for their fraud-based claims.
b. Reasonable Consumer Test Claims alleging fraudulent conduct under the UCL or false advertising under the FAL are
3 Moreover, if any party is likely to have access to the precise offer that was presented to Plaintiffs, it is Defendants.
Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995) and Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 506-07 (2003). show that members Peaco*ck v. Pabst Brewing Co., LLC, No. 2:18-cv-00568 TLN CKD, 2020 WL 5847244, at *3 (E.D. Cal. Oct. 1, 2020). Because the UCL and FAL prohibit though true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or Leoni v. State Bar, 39 Cal. 3d 609, 626 (1985) Williams, 522 F.3d at 938.
situations in which the fact Inc., 284 F. Supp. 3d 1005, 1014 (N.D. Cal. 2018) (quoting Chapman v. Skype Inc., 220 Cal. App.
4th 217, 226-27 (2013).
for event and travel insurance misleading. Plaintiffs Elgindy and Chuanroong each allege that in
each instance they were presented with an offer to purchase insurance, a single price was stated as
fee for non-insurance services. Compl. ¶¶ 45-47, 49, 52-54, 56-58, 60-62, 64-66, 68-70, 73. In addition, the complaint alleges that consumers who purchase event and travel tickets online and
the internet and online search tools to accomplish the exact services for which Defendants charge the assistance fee. Id. ¶¶ 28, 39 of any separate charges for such services at the time they present their insurance offers to consumers, consumers have n -insurance assistance service at the time they insure their event ticket purchases Id.
Despite this, Defendants ask the Court to find that consumers are not likely to be deceived by the insurance offers as a matter of law. ECF No. 16 at 20. They argue that Plaintiffs were
- purchase cancellation period. Id. at 21. First, Defendants point to the feature and you need it. Compl. ¶ 34. Notably, Plaintiffs allege that Defendants made this disclosure in their offers for travel insurance but not those for event tickets. See id. ¶ 24. Moreover, the reference to
insurance coverage, given that the offers did not mention any separate fee for such assistance. Id. ¶¶ 36, 72-73, 105, 117. Second, Defendants highlight that each offer includes a hyperlink to the
again disclosed in the cover letter and policy documents emailed to [the] consumer immediately ECF No. 16 at 23 (citing Compl. ¶¶ 34, 50, 63). disclosure somewhere other than the offer. See Williams, 552 F.3d at district court that reasonable consumers should be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print
D. Common-Law Fraud Claim he elements of a cause of action for fraud in California are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or ; (3) intent to defraud, i.e. to induce reliance; (4) justifiable reliance; and (5) resulting damage. Kearns, 567 F.3d at 1126 (citing Engalla v. Permanente Med. Grp., Inc., 15 Cal. 4th 951, 974 (1997)). Beyond their Rule 9(b) and reasonable consumer arguments, Defendants also move to dismiss -law fraud claim for failure to plead a misrepresentation, intent, or reliance. ECF No. 16 at 29-30.
The Court rejects t Plaintiffs have failed to allege a misrepresentation for the reasons set forth above. Plaintiffs have plausibly alleged that conceal or fail to sufficiently disclose that the quoted price for the product includes a fee for non-insurance services. Compl. ¶¶ 24-25, 34-36, 47, 73.
The Court agrees, however, that the complaint falls short of alleging intent. While the heightened pleading requirements of Rule 9(b) do not apply to allegations of knowledge or intent, Plaintiffs DeLeon v. Wells Fargo Bank, N.A., No. 10-cv-01390-LHK, 2011 WL 311376, at *8 (N.D. Cal. Jan. 28, 2011) (internal citation omitted). The complaint contains only conclusory allegations that Defendants knew or should have known that consumers did not understand they were being charged for an assistance services fee Defendants continued to advertise their insurance policies as part of a scheme with the intent not to sell the insurance as advertised and to mislead consumers regarding the nature and extent of the services . . . [and] the prices of 119.
plaintiffs . . . Pemberton v. Nationstar Mortg. LLC, 331 F. Supp. 3d 1018, 1047 (S.D. Cal. 2018) (quoting Linear Tech. Corp. v. Applied Materials, Inc., 152 Cal. App. 4th 115 (2007)) (ellipsis in original). Because Plaintiffs do not allege any facts as to knowledge that consumers were being misled, these allegations do not support an inference of intent. Cf. Ahn v. Scarlett, No. 5:16-cv-05437-EJD, 2017 WL 1196828, at *3 (N.D. Cal. Mar. 31, 2017) (finding knowledge of falsi escribed the circ*mstances surrounding statements is not merely the difference between two permissible judgments, but rather the result of
-law fraud claim must be dismissed.
E. Remedies The final arguments remedies. First, Defendants argue that Plaintiffs have failed to state a claim entitling them to equitable relief because they have an adequate remedy at law. ECF No. 16 at 31. Second, Defendants argue that Plaintiffs have failed to state a claim entitling them to punitive damages because they have not alleged oppression, fraud or malice by Defendant entities. Id. at 33.
1. Adequacy of Remedies at Law rding restitution Sonner v. Premier Nutrition Corp., 971 F.3d 834, 841 (9th Cir. 2020). This includes the equitable principle that in order to obtain an equitable remedy, a plaintiff Mort v. U.S., 86 F.3d 890, 892 (9th Cir. 1996); see also Anderson v. Apple Inc., No. 3:20-cv-02328-WHO, 2020 WL 6710101, at *7 (N.D. Cal. Nov. 16, 2020) ( [The adequate remedy at law] principle applies squarely to an award of restitution an equitable remedy ).
not pleaded in the alternative. ECF
No. 16 at 32. Accordingly, Defendants argue, Plaintiffs are Id. (quoting Duttweiler v. Triumph Motorcycles (Am.) Ltd., 2015 WL 4941780, *8 (N.D. Cal. Aug. 19, 2015)). A unlawful and unfair prongs -law fraud, FAL, and UCL fraudulent prong claims. Only equitable claims are available on theory that services fee violates California insurance statutes and regulations. Therefore, Plaintiffs are entitled to pursue equitable relief under this theory. See In re JUUL Labs, Inc., Mktg., Sales Practices, & Prod. Liab. Litig., No. 19-MD-02913-WHO, 2020 WL 6271173, at *55 (N.D. Cal. Oct. 23, 2020) (suggesting that a UCL claim can survive the adequate remedy at law challenge
-based claims, however, are all rooted in the same theory and factual allegations and therefore are not pleaded in the alternative. See In re Ford Tailgate Litig., No. 11- cv-2953-RS, 2014 WL 1007066, at *5 (N.D. Cal. Mar. 12, 2014) here the unjust enrichment claim relies upon the same factual predicates as a plaintiffs legal causes of action, it is not a true (citation omitted)). To show they are entitled to equitable relief, Plaintiffs must demonstrate that they lack
an adequate remedy at law.
As to their request for forward-looking injunctive relief, Plaintiffs contend that a legal continuation of their allegedly deceptive conduct in the future. ECF No. 21 at 24; see also Compl. ¶¶ 102, 115. Plaintiffs suggest, therefore, that damages are inadequate to remedy their potential future harms. Id. The Court has already held, however, that Plaintiffs lack standing under their fraud-based theory to seek injunctive relief.
As to their request for restitution to remedy their past harms, Plaintiffs argue that the significant differences in proof and certainty establish that their common-law fraud claim cannot serve as an adequate remedy at law displacing their fraud-based UCL and FAL claims. ECF No. 21 at 24-25; see also Compl. ¶¶ 100, 113. Defendants do not engage in this argument, and instead merely restate the inadequate remedy rule with a conclusory assertion that Plaintiffs have failed to satisfy it. ECF No. 27 at 20. Since Defendants do not cite any authority holding that a fraud claim for damages by definition defeats a fraudulent UCL/ FAL claim for restitution, the Court proceeds to evaluate the sufficiency of Plaintiffs inadequate remedy argument.
The Court finds that Plaintiffs have shown that they lack an alternative remedy at law to their claims seeking restitution under the fraudulent prong of the UCL and the FAL. Although rooted in the same theory, the elements of a common-law fraud claim require proof of conduct beyond that which must be shown to establish liability under the UCL and FAL. See Naeyaert v. Kimberly-Clark Corp., No. ED CV17-00950 JAK (JPRx), 2018 WL 6380749, at *6 (C.D. Cal.
the statement was false, that the party who made it knew that it was false or that the plaintiff In re Tobacco II Cases, 46 Cal. 4th 298, 312 (2009) (the s damages, in service of the see also Hadley, 273 F. Supp. 3d at 1063 (the same standard for fraudulent activity governs the
UCL and FAL). These differences are highlighted by the fact that the Court has held that Plaintiffs have stated a claim for fraudulent conduct under the UCL and false advertising under the
FAL, but failed to state a claim for common-law fraud. Thus, Plaintiffs have shown that they lack See Am. Life Ins. Co. v. Stewart, 300 U.S. 203, 214 (1937). Sonner does not bar these claims.
2. Punitive Damages Finally, Defendants argue that Plaintiffs fraud required to support an award of punitive damages. ECF No. 16 at 33; Cal. Civ. Code § 3294(a).
for punitive damages. There must be circ*mstances of aggravation or outrage, such as spite or malice, or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful Taylor v. Superior Court, 24 Cal. 3d 890, 894-895 (1979) (internal quotation marks, alterations, and citation omitted).
Defendants reason that, because a corporate entity cannot commit willful and malicious conduct, Plainti director, or managing agent of Defendants acted with fraud, oppression, or malice. Id. (citing In re Yahoo! Inc. Customer Data Sec. Breach Litig., 313 F. Supp. 3d 1113, 1147 48 (N.D. Cal.
corporate employers by showing that the harm alleged could not have occurred in the absence of Anaya v. Machines de Triage et Broyage, No. 18-cv-01731-DMR, 2019 WL 359421, at *5 (N.D. Cal. Jan. 29, 2019). In Shaterian, that standard was met because, even though plaintiff did not plead authorization or ratification, the court found that allegedly fraudulent loan would not have been made if it was not authorized or ratified by corporate employer. Shaterian v. Wells Fargo Bank, N.A., 829 F. Supp. 2d 873, 888 (N.D. Cal. 2011). The same is true here.
Although the Court rejects Defendants
claim, which is the only claim that would support an award of punitive damages.
CONCLUSION For the foregoing reas
claim of common- and FAL. Plaintiffs are granted leave to amend. An amended complaint is due 21 days from the date of this order. Failure to timely file an amended complaint will result in dismissal of the common-law fraud claim with prejudice.
IT IS SO ORDERED. Dated: March 29, 2021
______________________________________
JON S. TIGAR United States District Judge
