Miller et al v. Metropolitan Life Insurance Company et al

MEMORANDUM OF LAW in Support re: 104 MOTION to Dismiss Pursuant to Federal Rule of Civil Procedure 12

S.D.N.Y.February 8, 2019

04706285.14 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------X DALE MILLER et al., Plaintiffs, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant. Case No. 17-cv-7284 (AT) (SN) MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(B) ---------------------------------------------------X MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(B) Lee E. Bains, Jr. Edward Morris Holt MAYNARD, COOPER & GALE, P.C. 1901 Sixth Avenue North 2400 Regions | Harbert Plaza Birmingham, AL 35203 Telephone: 205.254.1000 Facsimile: 205.254.1999 Email: lbains@maynardcooper.com Email: tholt@maynardcooper.com John M. Hintz MAYNARD, COOPER & GALE, P.C. The Fred F. French Building 551 Fifth Avenue - Suite 2000 New York, NY 10176 Telephone: 646.609.9284 Facsimile: 646.609.9281 Email: jhintz@maynardcooper.com Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 1 of 33 04706285.14 i TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................................. i TABLE OF AUTHORITIES .......................................................................................................... ii PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF FACTS ..............................................................................................................1 PROCEDURAL BACKGROUND ..................................................................................................4 STANDARD OF REVIEW .............................................................................................................5 ARGUMENT ...................................................................................................................................6 I. Plaintiffs’ claims are precluded by SLUSA. ........................................................................6 II. Plaintiffs’ claims are time-barred. ......................................................................................12 III. Even if timely, Plaintiffs’ breach of contract claim (Count I) does not cure its prior deficiencies and should be dismissed. ...............................................................................17 IV. Even if timely, Plaintiffs’ Implied Covenant claims (Count II) should be dismissed. ......18 V. Even if timely, Plaintiffs’ Bad Faith claims (Count III) should be dismissed. ..................21 VI. Even if timely, Plaintiffs’ negligence claims (Count IV) should be dismissed. ................23 VII. Plaintiffs’ Rule 23(b)(1) and Rule 23(b)(2) class action allegations should be dismissed based on Wal-Mart and Plaintiffs’ failure to satisfy the requisite Twombly/Iqbal pleading standards. ...........................................................................................................................24 CONCLUSION ..............................................................................................................................25 CERTIFICATE OF SERVICE ......................................................................................................26 Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 2 of 33 04706285.14 ii TABLE OF AUTHORITIES CASES ADT Security Servs., Inc. v. Premier Home Prot., Inc., 181 P.3d 288 (Colo. Ct. App. 2007) ................................................................................. 20 Araujo v. John Hancock Life Ins. Co., 206 F. Supp. 2d 377 (E.D.N.Y. 2002) ................................................................................ 8 Aryeh v. Canon Bus. Sols., Inc., 292 P.3d 871 (Cal. 2013) ............................................................................................ 15, 16 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................................................................ 5 Barrus v. Dick’s Sporting Goods, Inc., 732 F. Supp. 2d 243 (W.D.N.Y. 2010) ............................................................................. 25 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................................................ 5 Benavides v. State Farm Gen. Ins. Co., 136 Cal. App. 4th 1241 (Cal. Ct. App. 2006) ................................................................... 21 Bey v. I.B.E.W. Local Union No. 3, 2009 WL 73113 (S.D.N.Y. Jan. 7, 2009) ......................................................................... 19 Bosco Legal Servs, Inc. v. Hiscox, Inc., 2018 WL 3012936 (C.D. Cal. June 11, 2018) .................................................................. 23 Bosetti v. U.S. Life Ins. Co. in City of New York, 175 Cal. App. 4th 1208 (Cal. Ct. App. 2009) ................................................................... 21 Careau & Co. v. Security Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1373 (Cal. Ct. App. 1990) ........................................................ 19, 20, 21 Carter v. HealthPort Techs., LLC, 822 F.3d 47 (2d Cir. 2016).................................................................................................. 6 Comcast Corp. v. Behrend, 569 U.S. 27 (2013) ............................................................................................................ 25 Cortlandt St. Recovery Corp. v. Hellas Telecommunications, S.A.R.L., 790 F.3d 411 (2d Cir. 2015)................................................................................................ 3 Cunningham v. Ins. Co. of N. Am., 521 F. Supp. 2d 166 (E.D.N.Y. 2006) .............................................................................. 16 Cupersmith v. Piaker & Lyons, P.C., 2016 WL 5394712 (N.D.N.Y. Sept. 27, 2016) ................................................................. 16 Deen v. New School Univ., 2008 WL 331366 (S.D.N.Y. Feb. 4, 2008) ....................................................................... 25 Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 3 of 33 04706285.14 iii Dudek v. Prudential Sec., Inc., 295 F.3d 875 (8th Cir. 2002) .............................................................................................. 9 Dudra v. Fairfield Ins. Co., 2008 WL 683387 (C.D. Cal. March 11, 2008) ................................................................. 15 Felton v. Morgan Stanley Dean Witter & Co., 429 F. Supp. 2d 684 (S.D.N.Y. 2006)............................................................................. 8, 9 Flight Scis., Inc. v. Cathay Pac. Airways Ltd., 647 F. Supp. 2d 285 (S.D.N.Y. 2009)............................................................................... 14 Friedman v. JP Morgan Chase & Co., 2016 WL 2903273 (S.D.N.Y. May 18, 2016) .................................................................... 8 Gentry v. State Farm Mut. Auto. Ins. Co., 726 F. Supp. 2d 1160 (E.D. Cal. 2010)............................................................................. 21 Global Network Commc’ns, Inc. v. City of New York, 458 F.3d 150 (2d Cir. 2006)................................................................................................ 1 Goodson v. Am. Standard Ins. Co. of Wisc., 89 P.3d 409 (Colo. 2004) ............................................................................................ 21, 22 Gordon & Co. v. Ross, 63 F. Supp. 2d 405 (S.D.N.Y. 1999)................................................................................. 13 Hill v. HSBC Bank PLC, 207 F. Supp. 3d 333 (S.D.N.Y. 2016)................................................................................. 8 Holtz v. JP Morgan Chase Bank, 846 F.3d 928 (7th Cir. 2017) ............................................................................................ 10 Howard v. Am. Nat’l Fire Ins. Co., 187 Cal. App. 4th 498 (Cal. Ct. App. 2010) ..................................................................... 22 HP Capital, LLC v. Vill. of Sleepy Hollow, 891 N.Y.S.2d 443 (N.Y. App. Div. 2009) ........................................................................ 13 Hudson Envelope Corp. v. Klausner, 249 A.D.2d 31 (N.Y. App. Div. 1998) ............................................................................. 16 In re Herald, 730 F.3d 112 (2d Cir. 2013)........................................................................................ 7, 8, 9 In re Kingate Management Limited Litigation, 784 F.3d 128 (2d Cir. 2015)........................................................................................ 7, 8, 9 Integrated Storage Consulting Servs., Inc. v. NetApp, Inc., 2013 WL 3974537 (N.D. Cal. July 31, 2013) ............................................................. 19, 20 Jordan v. City of Aurora, 876 P.2d 38 (Colo. Ct. App. 1993) ................................................................................... 23 Kisselman v. Am. Fam. Mut. Ins. Co., 292 P. 3d 964 (Colo. Ct. App. 2011) ................................................................................ 22 Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 4 of 33 04706285.14 iv Lincoln Gen. Ins. Co. v. Access Claims Adm’rs, Inc., 2007 WL 2492436 (E.D. Cal. Aug. 30, 2007) .................................................................. 24 Luv N’ Care, LTD v. Goldberg Cohen, LLP, 703 F. App’x 26 (2d Cir. 2017) .................................................................................. 13, 16 Makarova v. United States, 201 F.3d 110 (2d Cir. 2000)............................................................................................ 3, 6 Mangiafico v. Blumenthal, 471 F.3d 391 (2d Cir. 2006)................................................................................................ 1 McKight v. Torres, 563 F.3d 890 (9th Cir. 2009) ............................................................................................ 20 Mori v. El Asset Mgmt., Inc., 2016 WL 859336 (S.D.N.Y. Jan. 28, 2016) ....................................................................... 6 Moss v. Infinity Ins. Co., 197 F. Supp. 3d 1191 (N.D. Cal. 2016) ............................................................................ 23 Nasseri v. Wells Fargo Bank, N.A., 147 F. Supp. 3d 937 (N.D. Cal. 2015) .............................................................................. 20 NBCUniversal Media, LLC v. Sup. Ct., 171 Cal. Rptr. 3d 1 (Cal. Ct. App. 2014) .......................................................................... 16 Northstar Financial Advisors, Inc. v. Schwab Investments, 904 F.3d 821 (9th Cir. 2018) ...................................................................................... 10, 12 Overheiser v. Safeway Stores, Inc., 814 P.2d 12 (Colo. App. 1991) ......................................................................................... 15 Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67 (2d Cir. 1998).................................................................................................. 1 Paterra v. Nationwide Mut. Fire Ins. Co., 831 N.Y.S.2d 468 (N.Y. App. Div. 2007) ........................................................................ 14 Pichardo v. Carmine’s Broadway Feast Inc., 2016 WL 4379421 (S.D.N.Y. June 13, 2016) .................................................................. 25 Pike v. New York Life Ins. Co., 72 A.D.3d 1043 (N.Y. App. Div. 2010) ........................................................................... 17 Polidoro v. Chubb Corp., 354 F. Supp. 2d 349 (S.D.N.Y. 2005)............................................................................... 15 Polk v. Hergert Land & Cattle Co., 5 P.3d 402 (Colo. App. 2000) ........................................................................................... 16 R&W Grand Lodge of Free & Accepted Masons of Pennsylvania v. Meridian Capital Partners, Inc., 634 F. App’x 4 (2d Cir. 2015) ............................................................................................ 8 Rayner v. E*Trade Fin. Corp., 248 F. Supp. 3d 497 (S.D.N.Y. 2017)................................................................................. 6 Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 5 of 33 04706285.14 v Rayner v. E*Trade Fin. Corp., 899 F.3d 117 (2d Cir. 2018)........................................................................ 6, 7, 8, 9, 10, 11 Resnick v. Resnick, 722 F. Supp. 27 (S.D.N.Y. 1989) ..................................................................................... 14 Romano v. Kazacos, 609 F.3d 512 (2d Cir. 2010)............................................................................................ 8, 9 Sanchez v. Lindsey Morden Claims Servs, Inc., 72 Cal. App. 4th 249 (Cal. Ct. App. 1999) ....................................................................... 23 Segal v. Fifth Third Bank, N.A., 581 F.3d 305 (6th Cir. 2009) .............................................................................................. 9 Shariff v. Goord, 235 F.R.D. 563 (W.D.N.Y. 2006) ..................................................................................... 25 Silcox v. State Farm Mut. Auto. Ins. Co., 2014 WL 7335741 (S.D. Cal. Dec. 22, 2014)................................................................... 23 Singh v. Amguard Ins. Co., 2016 WL 7469641 (C.D. Cal. Apr. 1, 2016) .................................................................... 23 Smith v. Campbell, 782 F. 3d 93 (2d Cir. 2015)............................................................................................... 18 Smith v. Soros, 2003 WL 22097990 (S.D.N.Y. Sept. 5, 2003) .................................................................. 15 Soderlun v. Pub. Serv. Co. of Colo., 944 P.2d 616 (Colo. Ct. App. 1997) ................................................................................. 20 Soward v. Deutsche Bank AG, 814 F. Supp. 2d 272 (S.D.N.Y. 2011)................................................................... 13, 15, 16 Spinnato v. Unity of Omaha Life Ins. Co., 322 F. Supp. 3d 377 (E.D.N.Y. 2018) .............................................................................. 16 Staehr v. Hartford Financial Services Group, Inc., 547 F.3d 406 (2d Cir. 2008)................................................................................................ 1 Tandon v. Captain’s Cove Marina of Bridgeport, Inc., 752 F.3d 239 (2d Cir. 2014)................................................................................................ 6 Tara Woods Ltd. P’ship v. Fannie Mae, 731 F. Supp. 2d 1103 (D. Colo. 2010) .............................................................................. 16 Tento Int’l, Inc. v. State Farm Fire & Cas. Co., 222 F.3d 660 (9th Cir. 2000) ............................................................................................ 23 Thea v. Kleinhandler, 807 F.3d 492 (2d Cir. 2015).............................................................................................. 16 Travelers Ins. Co. v. Savio, 706 P.2d 1258 (Colo. 1985) .............................................................................................. 22 Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 6 of 33 04706285.14 vi Trinity Hotel Inv’rs, LLC v. Sunstone OP Props., LLC, 2009 WL 303330 (C.D. Cal. Feb. 6, 2009)....................................................................... 20 UMG Recordings, Inc. v. Eagle Entm’t, Inc., 117 F. Supp. 3d 1092 (C.D. Cal. 2015) ............................................................................ 23 Vanbrocklen v. Gov’t Emps. Ins. Co., 2010 WL 3338931 (N.D.N.Y. Aug. 24, 2010) ................................................................. 14 Voiceone Commc’ns, LLC v. Google Inc., 2014 WL 10936546 (S.D.N.Y. Mar. 31, 2014) ................................................................ 16 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) ................................................................................................ 1, 24, 25 Warrick v. Travelers Commercial Ins. Co., 2015 WL 11921403 (S.D. Cal. Oct. 29, 2015) ................................................................. 23 Wilson v. 21st Century Ins. Co., 42 Cal. 4th 713 (Cal. 2007) ............................................................................................... 21 Wultz v. Bank of China Ltd., 306 F.R.D. 112 (S.D.N.Y. 2013) ...................................................................................... 14 Zweiman v. AXA Equitable Life Insurance Company, 146 F. Supp. 3d 536 (S.D.N.Y. 2015)................................................................................. 8 STATUTES 15 U.S.C. § 78bb(f) ......................................................................................................................... 1 Cal. Civ. Proc. Code § 335.1 ........................................................................................................ 15 Cal. Civ. Proc. Code § 337 ........................................................................................................... 15 Colo. Rev. Stat. § 13-80-101(1)(a) ............................................................................................... 15 Colo. Rev. Stat. § 13-80-102(1)(a) ............................................................................................... 15 RULES Fed. R. Civ. P. 10(c) ....................................................................................................................... 1 Fed. R. Civ. P. 12(b) ....................................................................................................................... 1 Fed. R. Civ. P. 12(b)(1)........................................................................................................... 3, 5, 6 Fed. R. Civ. P. 12(b)(6)........................................................................................................... 3, 5, 6 N.Y. C.P.L.R. § 202 ................................................................................................................ 13, 16 N.Y. C.P.L.R. § 213(1) ................................................................................................................. 15 N.Y. C.P.L.R. § 213[2] ................................................................................................................. 13 N.Y. C.P.L.R. § 214 ...................................................................................................................... 15 N.Y. C.P.L.R. § 214(4) ................................................................................................................. 15 N.Y. C.P.L.R. § 215(3) ................................................................................................................. 15 Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 7 of 33 04706285.14 1 PRELIMINARY STATEMENT This case evolves from one, discrete act of Metropolitan Life Insurance Company (“MetLife”) occurring in the year 2000. At that time, MetLife allegedly set Plaintiffs’ life insurance premium rates at the smoker “default rate” when Plaintiffs failed to respond to MetLife’s request for their smoking status. Plaintiffs’ smoking status was a fact uniquely within their own knowledge. Yet in this lawsuit, Plaintiffs make numerous claims grounded in the theory that if an insured never tells MetLife their smoking status, then MetLife must set the “default rate” to nonsmoker. Plaintiffs’ claims are deficient for the following seven reasons: (1) Plaintiffs’ claims are precluded by the Securities Litigation Uniform Standards Act, 15 U.S.C. § 78bb(f), et seq. (“SLUSA”); (2) Plaintiffs’ claims are time-barred; (3) even if timely, Plaintiffs’ breach of contract claims should be dismissed; (4) even if timely, Plaintiffs’ contractual breach of the implied covenant of good faith and fair dealing (“Implied Covenant”) claims should be dismissed; (5) even if timely, Plaintiffs’ tortious breach of the duty of good faith and fair dealing (“Bad Faith”) claims should be dismissed; (6) even if timely, Plaintiffs’ negligence claims should be dismissed; and (7) Plaintiffs’ Rule 23(b)(1) and Rule 23(b)(2) class action allegations should be dismissed based on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 359-63 (2011) (“Wal- Mart”) and Plaintiffs’ failure to satisfy the requisite Twombly/Iqbal pleading standards. STATEMENT OF FACTS1 In the 1990s, Plaintiffs enrolled in either an Optional Term Life (“OTL”) insurance 1 This Statement of Facts is derived from Plaintiffs’ Second Amended Complaint (D.E. 97) (“SAC”), including its attached exhibits. See Fed. R. Civ. P. 10(c). It is also based in part on the four prior complaints Plaintiffs have filed in this litigation, including those attached exhibits, see pp. 4-5, 9, infra, of which this Court may take judicial notice. Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006) (judicial notice is proper for public records such as documents filed in other courts) (citing Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d Cir. 1998)); Staehr v. Hartford Financial Services Group, Inc., 547 F.3d 406, 425 (2d Cir. 2008) (“[I]t is proper to take judicial notice of the fact that . . . prior lawsuits . . . contained certain information.”); Global Network Commc’ns, Inc. v. City of New York, 458 F.3d 150, 157 (2d Cir. 2006). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 8 of 33 04706285.14 2 program or a Group Universal Life (“GUL”) insurance program issued by MetLife to their employer, United Airlines. (See D.E. 97 ¶¶ 10-12; D.E. 73 ¶ 36). Plaintiffs never allege that they told MetLife in response to MetLife’s request that they were nonsmokers to receive a nonsmoker premium rate for the OTL/GUL policies. Instead, Miller only alleges, in connection with that OTL/GUL policy, that he “never indicated to MetLife in any form that he was a smoker.” (D.E. 97 ¶12). Barton made a similar allegation. (Id. ¶ 31). In or about March 2000, MetLife notified policyholders that their OTL and/or GUL policies would be converted to a Group Variable Universal (“GVUL”) policy. (D.E. 97 ¶ 13). At least some pilots, including Miller, filled out GVUL Special Enrollment Change Forms. (D.E. 97-1). The GVUL Special Enrollment Change Forms allowed the pilots to “accurately indicate [their] [smoking] status.” (Id.). Plaintiffs now allege that they left blank the change in smoker status section of the GVUL Special Enrollment Change Form. (D.E. 97 ¶¶ 15, 32, 35, 52, 59). MetLife issued Plaintiffs’ GVUL policies effective June 1, 2000. (D.E. 97 ¶¶ 17, 28; D.E. 97-2). MetLife issued a policyholder’s GVUL policy in June 2000 “with smoker rates set as the default” if the policyholder had not informed MetLife of his or her nonsmoking status as requested by MetLife. (D.E. 97-3). Plaintiffs never allege that they told MetLife they were nonsmokers; Miller and Barton each simply allege that he “never indicated to METLIFE in any form that he was a smoker.” (D.E. 97 ¶¶ 12, 31). The GVUL Policy states that the “entire contract” includes the “policy” and “its Exhibits.” (D.E. 97-2 at p. 10 of 15 (B-10)). Exhibit 1 to the GVUL Policy is a “Schedule of Premium Rates,” which includes a table showing that smokers and nonsmokers are charged different rates. (D.E. 97-2 at p. 14 of 15 (B-13)). The chart lists the smoker and nonsmoker rates per $1,000 of insurance based on age. (Id.). Plaintiffs possessed the GVUL Policy and attached it Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 9 of 33 04706285.14 3 to their SAC. (Id.). The Schedule of Premium Rates clearly disclosed the smoker and nonsmoker rates, allowing the Plaintiffs and any insured to calculate his own premium rate. (Id.). Miller in fact did so. Miller’s hand-written rate calculations on his March 15, 2000 GVUL Special Enrollment Change Form ($1.76 in Section 6 for his child’s coverage and $1.72 in Section 4 for his wife’s $20,000 coverage) correspond exactly to the figures in the Schedule of Premium Rates in the GVUL Policy. Compare D.E. 97-1 (p. 2 of 3 (A-1)) with D.E. 97-2 (p. 14 of 15 (B-13)). Thus, in March of 2000, Miller reviewed a table showing the smoker and non-smoker rates, including the rate applicable to his own insurance coverage, in filling out his GVUL Special Enrollment Change Form. Plaintiff Barton ultimately sent MetLife a letter protesting his smoker rate by default (D.E. 76-14) (“Barton Letter”).2 Barton admits that he was able to determine that MetLife was not charging him a nonsmoker rate by cross-checking his insurance deduction amount on his paystub with the rates on the United Airlines benefit site. (Id., at p. 2 of 3). He states that the “problem” of MetLife charging him as a smoker “seems to be a problem that arose from the year 2000, when members were required to sign up again for GVUL, and make any changes to their status.” (Id.). Barton describes MetLife’s actions as “fraudulent.” (Id.).3 When MetLife converted Plaintiffs’ prior OTL/GUL coverages to a GVUL policy, MetLife continued charging Plaintiffs the smoker premium they had previously been charged 2While the Report and Recommendation concluded that the Barton Letter would not be considered in connection with MetLife’s Rule 12(b)(6) motion to dismiss, (D.E. 86, at 3-4), MetLife is submitting the Barton Letter for consideration in connection with its Rule 12(b)(1) motion to dismiss based on SLUSA grounds. “In deciding a Rule 12(b)(1) motion, the court may . . . rely on evidence outside the complaint.” Cortlandt St. Recovery Corp. v. Hellas Telecommunications, S.A.R.L., 790 F.3d 411, 417 (2d Cir. 2015) (citing Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)); see D.E. 94, at 3-4. Plaintiffs have admitted to the authenticity of the Barton Letter. (D.E. 80, p. 5 (describing the exhibit as “a letter Barton sent MetLife in which he enquires into MetLife’s concealment and/or suppression of the fact it charged him smoker rate premiums for his GVUL coverage by default.”)). 3 While the SAC seems to suggest that MetLife charged every nonsmoking pilot with smoker rates, Barton’s Letter states that “an independent audit by our union . . . indicates” that MetLife “may” be incorrectly charging 5% of the United pilots smoker rates when they are nonsmokers. (D.E. 76-14, p. 2 of 3). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 10 of 33 04706285.14 4 with the OTL/GUL policy if the insured did not indicate his or her “smoker status during the initial enrollment” (D.E. 97-3), or indicate a change in smoker or non-smoker status on the GVUL Special Enrollment Change Form (e.g., D.E. 97-1), or subsequently submit a Smoking Status Change (e.g., D.E. 97-3). PROCEDURAL BACKGROUND Plaintiffs have now filed their fifth complaint in this case. Plaintiffs filed their first complaint against MetLife in California alleging fraud and breach of contract arising from MetLife allegedly charging them smoker rates on their GVUL policies despite their non-smoker status.4 After MetLife’s counsel informed Plaintiffs’ counsel of seven bases for dismissing that first complaint,5 Plaintiffs filed an amended complaint (i.e., Plaintiffs’ second complaint) that asserted substantially similar claims as those in the first complaint.6 MetLife filed a motion to dismiss Plaintiffs’ second complaint arguing, inter alia, that Plaintiffs’ claims were barred by SLUSA and the statute of limitations.7 Without responding to MetLife’s motion to dismiss, Plaintiffs voluntarily dismissed the California Miller I lawsuit and filed the original complaint (“Complaint”) in this civil action in New York on the same day. (D.E. 50-1 ¶¶ 28, 31-32). Plaintiffs’ Complaint in this civil action (i.e., Plaintiffs’ third complaint) was nearly identical to the California amended complaint. (D.E. 50-1 ¶ 32; Connally Decl., Ex. A). MetLife filed a motion to dismiss the Complaint in this civil action. (D.E. 67; D.E. 68; D.E. 69). Plaintiffs then filed a First Amended Complaint (D.E. 73) (“FAC”)-Plaintiffs’ fourth complaint against MetLife-alleging the same causes of action (breach of contract and fraud) based on the same 4 See Miller et al. v. Metropolitan Life Ins. Co., et al., No. 2:17-cv-2668-PSG-FFM (C.D. Cal.) (“Miller I”), D.E. 1, attached as Exhibit B to Declaration of Robert Scott Connally (“Connally Decl.”). 5 D.E. 50-1 ¶ 18 & Ex. 1 pp. 1-1 - 1-6 (pp. 13 of 68 - 18 of 68). 6 Miller I, D.E. 25, attached as Ex. C to Connally Decl.; D.E. 50-1 ¶ 20. 7 Miller I, D.E. 28. Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 11 of 33 04706285.14 5 factual allegations with minimal revisions to the Complaint.8 MetLife then filed a motion to dismiss the FAC. (D.E. 74; D.E. 75; D.E. 76). The Report & Recommendation (D.E. 86) (“R&R”) recommended dismissal of certain claims and gave Plaintiffs leave to file an amended complaint within very narrowly defined parameters. The R&R recommended dismissal of Plaintiffs’ fraud claims without prejudice and with leave to refile those claims as an individual action. The R&R also recommended dismissal of Plaintiffs’ breach of contract claims without prejudice to allow Plaintiffs to attempt to identify a contractual provision allegedly breached and to attempt to state the breach such that the “continuing wrong doctrine” would apply to toll the statute of limitations. The R&R also granted Plaintiffs leave to amend their complaint to attempt to state a Bad Faith claim. (Id. at 17-18). Judge Torres adopted the R&R “in its entirety”. (D.E. 94, at 13-14). Plaintiffs have now filed the SAC (D.E. 97), or fifth complaint overall. Plaintiffs now allege claims for breach of contract, contractual breach of the Implied Covenant of good faith and fair dealing, tortious Bad Faith, and negligence. Plaintiffs’ claims should be dismissed. STANDARD OF REVIEW To survive a motion to dismiss under FED. R. CIV. P. 12(b)(6), a complaint must plead sufficient facts to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice,” so a court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555-56).9 8 Connally Decl., Ex. A, comparing Complaint (D.E. 1) to FAC (D.E. 73). 9 Iqbal, 556 U.S. at 678 (“[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.”); Twombly, 550 U.S. at 555 (Plaintiff’s pleading obligation “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 12 of 33 04706285.14 6 A Rule 12(b)(1) motion seeks dismissal for lack of subject matter jurisdiction. “A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). The party asserting subject matter jurisdiction “has the burden of proving by a preponderance of the evidence that it exists.” Id. In this civil action, Judge Torres explained that, “[a] Rule 12(b)(1) motion . . . is fact-based and a court can properly consider evidence beyond the pleadings.”10 When the jurisdictional facts are at issue, “the court has the power and obligation to decide issues of fact by reference to evidence outside the pleadings, such as affidavits.” Mori v. El Asset Mgmt., Inc., No. 15 CIV. 1991 (AT), 2016 WL 859336, at *2 (S.D.N.Y. Jan. 28, 2016) (Torres, A.) (quoting Tandon v. Captain’s Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014)). The R&R recognized that courts in this Circuit have considered motions to dismiss based on SLUSA preclusion under Rule 12(b)(1) and 12(b)(6).11 The Second Circuit recently affirmed a Rule 12(b)(6) dismissal with prejudice of a purported class action alleging state law claims as being precluded by SLUSA. Rayner v. E*Trade Fin. Corp., 899 F.3d 117, 118 (2d Cir. 2018).12 ARGUMENT I. Plaintiffs’ claims are precluded by SLUSA. Congress enacted SLUSA to preclude certain state law claims in connection with securities transactions when brought on a class basis.13 More specifically, SLUSA bars any “(1) 10 Order, D.E. 94 at 3 (citing Carter v. HealthPort Techs., LLC, 822 F.3d 47, 57 (2d Cir. 2016)). 11 R&R, D.E. 86, at 9. 12 In that case, defendant filed a motion to dismiss with prejudice under Rule 12(b)(6). Rayner v. E*Trade Fin. Corp., No. 16 Civ. 7129 (JGK), D.E. 36. A court in this District granted defendant’s dispositive motion. Rayner v. E*Trade Fin. Corp., 248 F. Supp. 3d 497, 506 (S.D.N.Y. 2017). The Second Circuit affirmed the Rule 12(b)(6) dismissal with prejudice of the purported class action. 899 F.3d 117, 123. 13 This Court has demonstrated its familiarity with the history, intent, and scope of SLUSA. MetLife does not repeat its background discussion of the statute here, but instead MetLife refers to and adopts its discussion of that background found in its motion to dismiss the FAC. (D.E. 73, at 5-9). Similarly, MetLife refers to and adopts its Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 13 of 33 04706285.14 7 covered class action (2) based on state law claims, (3) alleging that defendants made a ‘misrepresentation or omission of a material fact’ or ‘used or employed any manipulative or deceptive device or contrivance’ (4) ‘in connection with’ the purchase or sale of (5) covered securities.”14 This Court previously: (1) concluded that all five elements were met when evaluating the FAC; (2) dismissed the FAC’s class fraud claims based on SLUSA; and (3) allowed Plaintiffs leave to amend the FAC to assert certain non-fraud based claims, deferring the SLUSA analysis on those claims until Plaintiffs filed their SAC.15 The SAC does not alter this Court’s prior conclusions that elements 1, 2, 4, and 5 are met. The only issue for this Court’s consideration is the third element: does the SAC in substance allege misrepresentation, omission, or use of a manipulative or deceptive device? The answer is a resounding “yes.” All of Plaintiffs’ claims asserted in the SAC are based upon the same “underlying ‘realities’” as the claims in the FAC (and indeed, all four versions of the complaint that preceded the SAC) and must be dismissed. In re Herald, 730 F.3d 112, 119, n. 6 (2d Cir. 2013). Plaintiffs’ artful pleading cannot escape SLUSA: the “substance of [the SAC] plainly alleges fraudulent conduct.” Rayner, 899 F.3d at 120 (“Rayner describes his ‘breach of duty claim [as] based on E*TRADE's breach of a non-fraud based duty.’ But ‘plaintiffs should not be permitted to escape SLUSA by artfully characterizing a claim as dependent on a theory other than falsity when falsity nonetheless is essential to the claim….’”) (internal citations omitted) (quoting In re Kingate Management Limited Litigation, 784 F.3d 128, 140 (2d Cir. 2015)). The Second Circuit has repeatedly ruled that a plaintiff may not plead around SLUSA preclusion explanation that this civil action fails within the ambit of SLUSA (D.E. 73, at 4-9; D.E. 82, at 1-4) and adopts and incorporates the prospectuses relating to the GVUL Policy (Skaggs Decl. (D.E. 76) ¶ 13, Exs. 5-9) that are submitted in support of MetLife’s motion to dismiss and were discussed in the R&R and Order. D.E. 86, at 5-6, 8- 15; D.E. 94, at 3-7. 14 D.E. 86, at 8-9 (quoting Rayner, 899 F.3d at 119-20). 15 D.E. 86, at 10-15; D.E. 94, at 6-7. Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 14 of 33 04706285.14 8 through artful pleading. Rayner, 899 F.3d at 120; Kingate, 784 F.3d at 140, 149 (“‘SLUSA stands as an express exception to the well-pleaded complaint rule, and its preemptive force cannot be circumvented by artful drafting’ . . . [P]laintiffs do not evade SLUSA by camouflaging allegations that satisfy this standard in the guise of allegations that do not.”) (citation omitted).16 District courts within the Second Circuit have routinely applied the artful pleading analysis in dismissing plaintiff’s class actions alleging various state law claims as being precluded by SLUSA.17 The R&R acknowledged the Second Circuit’s “recognition that enterprising plaintiffs could engage in artful pleading to avoid SLUSA preclusion” and explained that if “the complaint fails to plead all the relevant facts under SLUSA,” then the district court “should ‘ascertain those facts independently of the plaintiffs’ allegations and apply SLUSA when those facts are present.’”18 In applying the artful pleading analysis, courts have looked to earlier versions of a plaintiff’s complaint.19 Despite Plaintiffs’ artful pleading, it is clear from reviewing Plaintiffs’ 16 See also Herald, 730 F.3d at 119 (“[E]ven though the complaints do not style their claims against [defendants] as securities fraud claims, the complaints’ allegations nonetheless are precluded by SLUSA. Since ‘SLUSA requires our attention to both the pleadings and the realities underlying the claims,’ plaintiffs cannot avoid SLUSA ‘merely by consciously omitting references to securities or to the federal securities law.’”) (citations omitted); Romano v. Kazacos, 609 F.3d 512, 519-20, 523 (2d Cir. 2010) (“SLUSA is a statute of preclusion,” and the court is “free to look beyond the face of the amended complaints to determine whether they allege securities fraud in connection with the purchase or sale of covered securities . . . SLUSA requires our attention to both the pleadings and the realities underlying the claims.”). 17 See, e.g., Zweiman v. AXA Equitable Life Insurance Company, 146 F. Supp. 3d 536, 546-547 & n.21 (S.D.N.Y. 2015) (breach of contract); Hill v. HSBC Bank PLC, 207 F. Supp. 3d 333, 342 & n.9 (S.D.N.Y. 2016) (unjust enrichment); Friedman v. JP Morgan Chase & Co., 2016 WL 2903273, at *1, 15 (S.D.N.Y. May 18, 2016) (several state law claims including breach of fiduciary duty, commercial bad faith, and gross negligence); Felton v. Morgan Stanley Dean Witter & Co., 429 F. Supp. 2d 684, 692-95 (S.D.N.Y. 2006) (breach of contract); Araujo v. John Hancock Life Ins. Co., 206 F. Supp. 2d 377, 384-85 (E.D.N.Y. 2002) (breach of contract and unjust enrichment); see also R&W Grand Lodge of Free & Accepted Masons of Pennsylvania v. Meridian Capital Partners, Inc., 634 Fed. Appx. 4, 8-9 & n.2 (2d Cir. 2015) (unpublished) (several state law claims including negligence and breach of fiduciary duty). 18 R&R, D.E. 86, at 10 (citation omitted). 19 Herald, 730 F.3d at 119 & n.6 (finding evidence of artful pleading where plaintiffs’ amended complaint omitted references to certain claims in earlier complaint, but was “based on the same underlying ‘realities’ of the case”); Zweiman, 146 F. Supp. 2d at 546-547 & nn.20-21 (“a plaintiff cannot avoid the application of SLUSA by removing covered words from its complaint but leaving in the covered concepts. In this regard, courts have utilized prior iterations of a plaintiff’s complaint to serve as an interpretive tool. My analysis therefore encompasses a careful review of the allegations in the instant Complaint, the Zweiman I complaint, and the underlying Contract at issue in this case.”) (citations omitted); Araujo, 206 F. Supp. at 384-85 (rejecting plaintiff’s argument that “he may avoid SLUSA by omitting the allegations of fraud in the amended complaint” and explaining that the “‘crux of the Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 15 of 33 04706285.14 9 prior complaints and the SAC that the gravamen of the SAC is that Plaintiffs were induced to pay higher premiums than appropriate based upon affirmative fraud, omission, or use of a manipulative or deceptive device. Plaintiffs’ class claims are thus precluded by SLUSA. A side-by-side comparison of the allegations in Plaintiffs’ four earlier complaints with allegations in the SAC establish that the SAC is an attempt to evade SLUSA preclusion through artful pleading that has been repeatedly rejected by the Second Circuit and district courts within this Circuit.20 Plaintiffs’ earlier complaints specifically alleged fraud claims and included allegations of misrepresentations or omissions of material fact and manipulative or deceptive devices or contrivances.21 The factual allegations in the SAC closely track the factual allegations in Plaintiffs’ four earlier complaints that specifically alleged fraud, misrepresentation, and omission and are based on the same “underlying ‘realities’” as those earlier complaints.22 Plaintiffs’ fraud claims in the four earlier complaints incorporated by reference all of those same factual allegations that are incorporated in the claims alleged in the SAC.23 Plaintiffs cannot engage in artful pleading to avoid SLUSA preclusion by camouflaging their allegations or omitting certain allegations.24 The Second Circuit’s Rayner decision demonstrates that the SAC’s factual allegations amended complaint’ . . . is an action involving a variable life insurance policy, which is a ‘covered security’ under SLUSA.”); Felton, 429 F. Supp. 2d at 693 (dismissing amended complaint that pled “a securities fraud wolf dressed up in a breach of contract sheep’s clothing”); Dudek v. Prudential Sec., Inc., 295 F.3d 875, 879-80 (8th Cir. 2002) (although plaintiffs’ second complaint “deleted the allegations of fraud, misrepresentation, and non-disclosure that permeated their [first] complaint, the fact allegations in the two complaints are essentially the same.”); cf., Segal v. Fifth Third Bank, N.A., 581 F.3d 305, 310-11 (6th Cir. 2009) (plaintiff “can no more elude SLUSA’s prohibitions by editing out covered words from the complaint than by disclaiming their presence.”). 20 Connally Decl. ¶¶ 34-5, Ex. A (chart comparing allegations in Plaintiffs’ four earlier complaints with the allegations in the SAC); supra, at 7-9 & nn. 16-19. 21 Connally Decl., Exs. A, B, C, D & E. 22 Connally Decl., Ex. A; see Herald, 730 F.3d at 119 & n.6; Rayner, 899 F.3d at 120; Romano, 609 F.3d at 523. 23 Compare Miller I, D.E. 1 ¶ 57 (Ex. B to Connally Decl.), Miller I, D.E. 25 ¶ 56 (Ex. C. to Connally Decl.), D.E. 1 ¶ 57 (Ex. D to Connally Decl.), FAC, D.E. 73 ¶ 58 (Ex. E to Connally Decl.) with SAC, D.E. 97 ¶¶ 47, 55, 62, 70 (Ex. F to Connally Decl.). 24 See Rayner, 899 F.3d at 120; Kingate, 784 F.3d at 149; Herald, 730 F.3d at 119; R&R, D.E. 86, at 10; supra, at 7 - 9 & nn. 16-19. Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 16 of 33 04706285.14 10 and claims are based on MetLife’s alleged falsity or omission, or use of a manipulative or deceptive device. In Rayner, the plaintiff, like here, attempted to plead around SLUSA and the court ruled that SLUSA preclusion nevertheless applied. There, plaintiff brought class claims for breach of fiduciary duty, unjust enrichment, and declaratory relief against E*TRADE Financial Corporation (“E*TRADE”) for allegedly violating its duty of best execution on non-directed, standing limit orders to purchase and sell securities. Rayner, 899 F.3d at 118. Plaintiff alleged that despite its duty of best execution, E*TRADE prioritized using trading venues that paid “the largest ‘kickbacks’ to it in exchange for order flow.” Id. E*TRADE moved to dismiss the complaint under SLUSA because the claims in reality were for material misrepresentations and omissions, i.e., the allegedly undisclosed conflict of interest on trading venues, even though the complaint did not assert such a claim. The district court found that the gravamen of the complaint was that “E*TRADE made ‘material misrepresentations and omissions that were designed to induce clients to execute non-directed standing limit orders with E*TRADE even though E*TRADE had no intention of fulfilling its purported fiduciary obligations.’” Id. at 120. The Second Circuit agreed. Id. In its framework for assessing the plaintiff’s claims, the Second Circuit explained: “‘Allowing plaintiffs to avoid [SLUSA] by contending they have ‘contract’ claims … would render [SLUSA] ineffectual, because almost all federal securities suits could be recharacterized as contract suits about the securities involved.’” Id. (quoting Holtz v. JP Morgan Chase Bank, 846 F.3d 928, 930-31 (7th Cir. 2017), cert. denied, 138 S.Ct. 170 (2017)).25 This case is no different. Here, as in Rayner, Plaintiffs try to allege state law non-fraud claims, but alleged fraud is the basis for all of those claims. In Rayner, the Second Circuit 25 Cf. Northstar Financial Advisors, Inc. v. Schwab Investments, 904 F.3d 821, 832-33 (9th Cir. 2018) (“Northstar”) (In putative class action against investment advisor for breach of investment policy guidelines, the court considered both pre-breach claims and post-breach claims, finding that misrepresentation or omission was essential to those claims, even though fraud was not pled in complaint; in particular, for post-breach claims, class members would have waived any breaches of duties if they had knowledge of a breach when they purchased their securities). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 17 of 33 04706285.14 11 concluded that the complaint was really alleging defendant’s omission of a material fact, in alleging that certain facts were “not known” to plaintiff. Id. at 121. Here, the SAC essentially alleges that Plaintiffs did not know MetLife was charging them smoker rates, and they were shocked to discover it. See D.E. 97 ¶¶ 19-23, 29. In Rayner, the Second Circuit held that alleging that defendant was “routing clients’ trades to the trading venues that paid the highest kickbacks” was really an allegation of the “use of a manipulative or fraudulent device.” 899 F.3d at 120-21. Here, the SAC essentially alleges that MetLife used a misleading GVUL enrollment form - “a manipulative or fraudulent device” - that only provided “From Smoker to Non-Smoker” and “From Non-Smoker to Smoker” options to set the Plaintiffs to a smoker “default” rate. See D.E. 97 ¶¶ 15, 32, 35, 49, 52, 53, 59, 66, 71. Indeed, the FAC pled that MetLife’s use of the misleading GVUL enrollment form was the source of the “scheme to defraud.” See D.E. 73 ¶ 59 (“METLIFE accomplished its scheme [to defraud] by establishing an internal policy of designating as smokers those individuals who left blank the smoker status change section of the GVUL enrollment form”). The SAC still bases all claims on that same GVUL enrollment form. Further, the SAC fails to plead the breach of any express term of the policy contract, i.e., it does not identify any contractual provision requiring MetLife “not to ‘default[] [Plaintiffs] to smoker status.’”26 Plaintiffs’ breach of contract claims remain the same as under the FAC (and the earlier complaints): Plaintiffs paid their premiums believing that they received nonsmoker rates when in fact they were charged a default rate as if they were smokers because they left the GVUL enrollment form blank. The SAC’s breach of contract claims continue to rely on the alleged fraud specified in the FAC. Fraud has always been the heart of Plaintiffs’ claims, now and then. See Barton Letter, D.E. 76-14, at 2-3 (requesting refund of alleged overpayments and communicating that he considered MetLife’s conduct or omissions to be “fraudulent” and that 26 R&R, D.E. 86, at 15-16. Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 18 of 33 04706285.14 12 “nowhere on any documents; Monthly Statements/Benefits Pages at United Airlines; can one see that they are a ‘smoker’ vs. ‘nonsmoker’”). The SAC also continues to base Plaintiffs’ damages on the alleged undisclosed overcharges of premium rates. See D.E. 97 ¶¶ 53, 60, 67, 72. The same damages analysis would apply as under the FAC, because Plaintiffs presumably would have mitigated their damages by informing MetLife of their nonsmoker status if at any point the smoker rate had been disclosed to them. See D.E. 73 ¶¶ 58-60 (reciting alleged nondisclosures and alleging that Plaintiffs and class members “would not have acted as they did had they known the truth regarding their premium payments”). If the pricing at a smoker rate had been disclosed, then: (1) the alleged breach of a duty under the contract would have been waived if the Plaintiffs nevertheless chose to pay the higher premiums, Northstar, 904 F.3d at 832, or (2) the damages of overpayment of premiums might not have occurred at all, because class members would have done what Miller did before filing his suit, which was to finally submit information to MetLife disclosing his non-smoker status. See D.E. 97 ¶¶ 19-24; D.E. 97-3. At a minimum, the alleged nondisclosure of the smoker pricing is part and parcel of the proof that Plaintiffs would have to establish to show damages in this case, and therefore their claims are precluded by SLUSA. The gravamen of Plaintiffs' claims remains fraud, misrepresentation, omission, or use of a manipulative or deceptive device as in their four earlier complaints. As this Court previously found when evaluating the FAC, Plaintiffs’ claims in substance allege misrepresentation, omission, or use of a manipulative or deceptive device brought by a covered class in connection with the purchase or sale of covered securities, and are therefore precluded by SLUSA. II. Plaintiffs’ claims are time-barred. All of the Plaintiffs’ claims are barred by the statute of limitations when applying New Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 19 of 33 04706285.14 13 York’s borrowing statute, N.Y. C.P.L.R. § 202.27 Under that statute, Plaintiffs’ claims must be timely under the law, including tolling principles, of both New York and Plaintiffs’ state of residence.28 Plaintiffs’ breach of contract claims are time-barred. - New York’s statute of limitations for breach of contract claims is six years, N.Y. C.P.L.R. § 213[2], accruing at the time of breach. HP Capital, LLC v. Vill. of Sleepy Hollow, 891 N.Y.S.2d 443, 445 (N.Y. App. Div. 2009). New York does not apply a discovery rule to the statute of limitations for breach of contract claims. Plaintiffs allege that MetLife breached their life insurance contracts when it “assum[ed] insureds’ smoker status by default at time of enrollment” in the GVUL policies in 2000. (D.E. 97 ¶ 35). Plaintiffs allege that MetLife charged them the smoker rate from the inception of their GVUL insurance policies in 2000. (Id. ¶¶ 17, 18, 22, 24, 28, 29, 35). Because Plaintiffs allege the breach occurred in 2000, when MetLife allegedly set Plaintiffs’ rates at the “default” smoker rate, their breach of contract actions are time-barred. The R&R, adopted by Judge Torres, agreed and concluded that: (1) “New York law does not provide the pilots the benefit of the discovery rule”; (2) “the New York statute of limitations expired six years after the breach, or around March 2006”; (3) “[b]arring any form of equitable relief or other legal doctrine that would toll their claims, the pilots’ claim for breach of contract is untimely”; and (4) equitable tolling and/or equitable estoppel do not apply. (D.E. 86, at 20-21). 27 Plaintiffs and MetLife agree that New York’s borrowing statute governs the statute of limitations issue. (D.E. 75, at 9; D.E. 80, at 11; D.E. 82, at 4). 28Luv N’ Care, LTD v. Goldberg Cohen, LLP, 703 F. App’x 26, 28 (2d Cir. 2017) (“[W]hen a nonresident sues on a cause of action accruing outside New York, C.P.L.R. 202 requires the cause of action to be timely under the limitations period of both New York and the jurisdiction where the cause of action accrued.” (emphasis added) (citation omitted)); see also Soward v. Deutsche Bank AG, 814 F. Supp. 2d 272, 278 (S.D.N.Y. 2011) (requiring that tolling provisions be considered); Gordon & Co. v. Ross, 63 F. Supp. 2d 405, 407-09 (S.D.N.Y. 1999) (cause of action accrues where the economic impact of the injury is felt, usually the plaintiff’s place of residence) (citing N.Y. C.P.L.R. § 202). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 20 of 33 04706285.14 14 Plaintiffs’ breach of contract claims are time-barred.29 Plaintiffs’ Implied Covenant claims are time-barred. - Under New York law, a breach of the implied covenant of good faith and fair dealing claim is grounded in contract and has the same statute of limitations as a breach of contract claim-six years from the alleged breach. Vanbrocklen v. Gov’t Emps. Ins. Co., No. 1:08-cv-254, 2010 WL 3338931, at * 1 (N.D.N.Y. Aug. 24, 2010).30 As with Plaintiffs’ breach of contract claim, Plaintiffs’ Implied Covenant claim accrued when MetLife allegedly “assum[ed] insureds’ smoker status by default at time of enrollment” in the GVUL policies in 2000. (D.E. 97 ¶ 35). Plaintiffs specifically plead that MetLife breached this contractual covenant when it began charging Plaintiffs smoker rates when the insureds “left Section 1 of the GVUL enrollment form blank.” (Id. ¶ 59; D.E. 97-1). That occurred in 2000, when Plaintiffs first entered the GVUL life insurance contract. As with Plaintiffs’ breach of contract claim, Plaintiffs’ Implied Covenant claim is time-barred. Plaintiffs’ Bad Faith claims are time-barred. - New York law does not recognize a tortious good faith and fair dealing claim; a claim for a breach of good faith and fair dealing is purely contractual under New York law.31 In determining the applicable New York statute of limitations when applying New York’s borrowing statute, “[w]here the substance of a non-New York claim does not clearly correspond to the substance of any claim under New York law, the Court must apply the statute of limitations that applies to the most . . . analogous cause of action.” Wultz v. Bank of China Ltd., 306 F.R.D. 112, 115 (S.D.N.Y. 2013) (citations omitted) (internal quotations omitted). Here, Plaintiffs have pled their Bad Faith claims as an intentional 29 Plaintiffs’ efforts to save their claims with a continuing violation theory should be rejected for the reasons set forth below, pp. 15-17, infra. 30 See also Resnick v. Resnick, 722 F. Supp. 27, 38 n.6 (S.D.N.Y. 1989); Flight Scis., Inc. v. Cathay Pac. Airways Ltd., 647 F. Supp. 2d 285, 288 (S.D.N.Y. 2009)). 31 Paterra v. Nationwide Mut. Fire Ins. Co., 831 N.Y.S.2d 468 (N.Y. App. Div. 2007); see also Resnick, 722 F. Supp. at 38 n.6 (“[A] claim for breach of the covenant of good faith and fair dealing is grounded in contract.”). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 21 of 33 04706285.14 15 tort, (D.E. 97 ¶ 69), and thus New York’s one-year statute of limitations for intentional torts applies, N.Y. C.P.L.R. § 215(3).32 Under New York law, a tort claim for the purposes of the borrowing statute generally accrues when the plaintiff is injured. Smith v. Soros, No. 02-civ- 4229, 2003 WL 22097990, at * 4 (S.D.N.Y. Sept. 5, 2003). Under any of the options, Plaintiffs’ tortious Bad Faith claims are time-barred because the claims accrued in 2000 when MetLife allegedly set the “default rate” as a smoker rate and Plaintiffs began paying smoker rates. Plaintiffs’ negligence claims are time-barred. - Under New York law, the statute of limitations for a negligence claim is three years, running from the time of the commission of the alleged tortious act. N.Y. C.P.L.R. § 214; Polidoro v. Chubb Corp., 354 F. Supp. 2d 349, 356 (S.D.N.Y. 2005). MetLife’s alleged tortious act occurred in 2000, when Plaintiffs allege that MetLife “assum[ed] insureds’ smoker status by default at time of enrollment” in the GVUL policies in 2000. (D.E. 97 ¶ 35). Plaintiffs’ negligence claims are thus time-barred.33 No claims are saved by a continuing violation theory. - Plaintiffs bear the burden of proving the applicability of equitable exceptions, such as a continuing violation theory, to the statute of limitations.34 Plaintiffs also bear a Twombly/Iqbal pleading burden to “specifically 32 As an alternative, this Court could apply New York’s three year residual statute of limitations for general tort actions, N.Y. C.P.L.R. § 214(4). As a further alternative, tortious Bad Faith claims correspond to contractual Implied Covenant claims and are consequently barred by the same six-year statute of limitations. There is also a “catchall” statute of limitations of six years for “an action for which no limitation is specifically prescribed by law.” N.Y. C.P.L.R. § 213(1). 33 Plaintiffs’ claims are also time-barred under California and Colorado law. See CAL. CIV. PROC. CODE § 337 (four years for breach of contract and contractual breach of good faith and fair dealing); COLO. REV. STAT. § 13-80- 101(1)(a) (three years for same); COLO. REV. STAT. § 13-80-102(1)(a) (two years after plaintiff knew or should have known with reasonable diligence for bad faith and negligence); Dudra v. Fairfield Ins. Co., No. CV 07-05500, 2008 WL 683387, at * 4 (C.D. Cal. March 11, 2008) (bad faith is two years after an unequivocal denial of insured’s claim); CAL. CIV. PROC. CODE § 335.1 (two years for negligence). To the extent a discovery rule applies to any of these claims, Plaintiffs received a Schedule of Premium rates, giving the smoker and nonsmoker rates, with their Policies issued in 2000. (D.E. 97-2 at p. 14 of 15 (B-13)). With reasonable diligence, Plaintiffs could have easily calculated that MetLife was charging them smoker rates in 2000, just as Barton later did. (D.E. 97 ¶ 29). Thus, the discovery rule does not save Plaintiffs’ claims and they are time-barred. 34 Soward, 814 F. Supp. 2d at 278; Aryeh v. Canon Bus. Sols., Inc., 292 P.3d 871, 879 (Cal. 2013); Overheiser v. Safeway Stores, Inc., 814 P.2d 12, 13 (Colo. App. 1991). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 22 of 33 04706285.14 16 plead facts that make entitlement to [these equitable exceptions] plausible.”35 If the continuing violation theory does not apply to Plaintiffs’ claims under either New York law or the law of their residence, then those claims are time barred.36 Plaintiffs here do not meet their burden. Continuing violation does not save Barton’s time-barred claims because Colorado has limited the continuing violation doctrine to discrimination cases.37 Thus, all of Barton’s claims are time-barred and must be dismissed. The continuing violation theory does not apply to Miller’s claims (under New York or California law) or to Barton’s claims (under New York law) where the claim accrues as a result of a discrete act occurring outside the limitations period, even if there are subsequent injuries during the limitations period from the act.38 Under New York law, the subsequent renewal of an insurance policy or payment of premiums do not constitute “continuing wrongs” for statute of limitations purposes where they originate from a discrete wrongful act occurring outside the limitations period, and do not involve “independent” acts of wrongdoing.39 35 Thea v. Kleinhandler, 807 F.3d 492, 501 (2d Cir. 2015) (citations omitted). See also, e.g., Voiceone Commc’ns, LLC v. Google Inc., 12-cv-9433, 2014 WL 10936546, at *7 (S.D.N.Y. Mar. 31, 2014) (“[W]here a plaintiff’s claims are time-barred on the face of its own complaint, [plaintiff] has the burden of pleading facts sufficient to establish that the statute of limitations should be tolled.” (alteration in Voiceone) (internal quotation marks and citation omitted)). 36 Luv N’ Care, LTD, 703 F. App’x at 28 (“[W]hen a nonresident sues on a cause of action accruing outside New York, C.P.L.R. 202 requires the cause of action to be timely under the limitations period of both New York and the jurisdiction where the cause of action accrued.” (emphasis added) (citation omitted)); see also Soward, 814 F. Supp. 2d at 278 (requiring that tolling provisions be considered). 37 See, e.g., Polk v. Hergert Land & Cattle Co., 5 P.3d 402, 405 (Colo. App. 2000); Tara Woods Ltd. P’ship v. Fannie Mae, 731 F. Supp. 2d 1103, 1120 (D. Colo. 2010). 38 E.g., Cupersmith v. Piaker & Lyons, P.C., No. 3:14-cv-01303, 2016 WL 5394712, at *11 (N.D.N.Y. Sept. 27, 2016), aff’d, Ayers v. Piaker & Lyons, P.C., No. 17-3513, 2018 WL 4224330, *3 (2d Cir. Sept. 6, 2018); Aryeh, 292 P.3d at 879-80; NBCUniversal Media, LLC v. Sup. Ct., 171 Cal. Rptr. 3d 1, 13 n.10 (Cal. Ct. App. 2014) (continuing violation doctrine did not apply to claims arising from infringement of television show idea which accrued when the show initially broadcast, despite additional later broadcasts). 39 See e.g., Spinnato v. Unity of Omaha Life Ins. Co., 322 F. Supp. 3d 377, 394-95 (E.D.N.Y. 2018) (rejecting continuing violation theory based on a wrong occurring each time plaintiff paid her policy premiums, because “premium payments of life insurance policies that were in effect do not constitute independent acts,” but rather were additional occasions of damage resulting from the original wrongful act); Cunningham v. Ins. Co. of N. Am., 521 F. Supp. 2d 166, 171 (E.D.N.Y. 2006) (rejecting plaintiff’s argument that continuing violation applied because the insurance policy was renewed annually and holding that “annual renewals, effected with no further discussions between plaintiff and the broker . . . constitute only new instances of damage, and are therefore, irrelevant to Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 23 of 33 04706285.14 17 Here, Plaintiffs’ claims arise from a discrete act occurring in 2000-MetLife allegedly “assum[ed] insureds’ smoker status by default at time of enrollment” in the GVUL policies in 2000. (D.E. 97 ¶ 35). The alleged calculation of premiums “every year” or charging of premiums every month were not new, independent acts of wrongdoing; they merely applied the “default” smoker rate that MetLife allegedly set in 2000. (D.E. 97 ¶ 36 (alleging that MetLife “continues to breach its contracts with members of the putative class, breach the implied covenant of good faith and fair dealing, and breach the duty of good faith and fair dealing, by continuing to enforce, bill, and demand on a recurring monthly basis from its United pilot GVUL insureds a high smoker rate premium for GVUL coverage, . . . even though the insureds . . . left Section 1 of the GVUL enrollment form blank.”)) (emphasis added). Plaintiffs thus allege that ensuing premium payments are only the monthly enforcement of MetLife’s act in 2000 of setting the “default rate” as the smoker rate, not a monthly independent wrong. The continuing violation doctrine does not apply. All of Plaintiffs’ claims are time-barred and should be dismissed. III. Even if timely, Plaintiffs’ breach of contract claim (Count I) does not cure its prior deficiencies and should be dismissed. Plaintiffs’ FAC alleged that MetLife breached its contract with Plaintiffs “when it charged Plaintiffs . . . smoker rates when they should have been charged nonsmoker rates.” (D.E. 73 ¶ 54). The R&R, adopted by Judge Torres, concluded that Plaintiffs’ breach of contract claim failed because Plaintiffs failed to identify a specific contractual provision requiring MetLife “not to ‘default[] them to smoker status,’” as required under California and Colorado law. (D.E. 86, at 15-16). Plaintiffs’ SAC fares no better. Plaintiffs now allege that MetLife, in defaulting Plaintiffs limitations analysis”); Hudson Envelope Corp. v. Klausner, 249 A.D.2d 31 (N.Y. App. Div. 1998) (affirming lower court’s granting of motion to dismiss claims for recovery of insurance premiums based on the statute of limitations, and rejecting the continuing violation doctrine based on annual renewals of the policy, as such annual renewals did not involve “independent acts” of wrongdoing); Pike v. New York Life Ins. Co., 72 A.D.3d 1043, 1046-48 (N.Y. App. Div. 2010) (refusing to apply the continuing violation doctrine to claims stemming from the purchase of life insurance policies, holding that “any wrong accrued at the time of the purchase of the policies, not at the time of payment of each premium”). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 24 of 33 04706285.14 18 to smoker rates, violated the contractual provision providing that “MetLife may use any reasonable method to compute Premiums” and Exhibit 1 to the Policy, a chart simply giving smoker and nonsmoker rates. The R&R, however, already stated that “as MetLife points out, its alleged decision to designate [Plaintiffs] as smokers in the absence of any indication otherwise may be rational,” (D.E. 86, at 16), and thus quite reasonable and not a breach at all. Plaintiffs have failed to identify a contractual provision requiring MetLife “not to ‘default[] them to smoker status” because there is none. Instead, Plaintiffs plead that MetLife is in breach because they “never agreed to any contractual term designating them as smokers,” (D.E. 97 ¶ 52) which is a breach of contract claim premised on an alleged lack of a contractual provision. Because Plaintiffs have still not identified a specific contractual provision that MetLife has breached, their breach of contract claims must be dismissed. IV. Even if timely, Plaintiffs’ Implied Covenant claims (Count II) should be dismissed. Plaintiffs’ Implied Covenant claims fail for six independent reasons. First, Plaintiffs have waived any right to assert an Implied Covenant claim. In response to MetLife’s motion to dismiss the FAC, Plaintiffs claimed that they pled an Implied Covenant claim, and if not, sought leave to amend their complaint to add that claim. (D.E. 80, at 20). The R&R concluded: [U]nder both Colorado and California law, this implied duty [of good faith and fair dealing] gives rise to a cause of action sounding in tort, not contract, when dealing with an insurance contract. . . . Thus, because their claim arises from an insurance contract, the pilots’ breach of contract claim does not encompass a breach of the implied covenant of good faith and fair dealing under either California or Colorado law. (D.E. 86, at 17). Plaintiffs did not object to those R&R conclusions. (D.E. 91).40 “[F]ailure to timely object to a magistrate’s report and recommendation operates as a waiver of further judicial review of the magistrate’s decision.” Smith v. Campbell, 782 F. 3d 93, 102 (2d Cir. 40 The R&R gave each party fourteen days to file objections to it, and stated that the “failure to file these timely objections will result in waiver of those objections . . .” (D.E. 86, at 23). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 25 of 33 04706285.14 19 2015). By failing to object to the R&R’s conclusions that California and Colorado do not recognize a contractual Implied Covenant claim in the insurance context, Plaintiffs waived that claim and the Implied Covenant claim in the SAC should be dismissed.41 Second, this Court has already rejected a contractual breach of the Implied Covenant claim in this case. (D.E. 86, at 17; D.E. 94, at 13-14). That holding is now law of the case.42 Third, the R&R, and the Order, allowed Plaintiffs the opportunity to file a SAC under certain parameters. (D.E. 86, at 23; D.E. 94, at 14; supra, at 5) Plaintiffs were not granted leave to file a SAC alleging an Implied Covenant claim, so that claim should be dismissed as beyond the scope of the permitted amendment. Fourth, Miller’s Implied Covenant claim is duplicative of his breach of contract claim and should be dismissed as superfluous. “A plaintiff may claim breach of contract and the implied covenant of good faith and fair dealing, but when both causes of action cite the same breach,” the second claim is superfluous. Integrated Storage Consulting Servs., Inc. v. NetApp, Inc., No. 5:12-cv-06209-EJD, 2013 WL 3974537, at *7 (N.D. Cal. July 31, 2013) (dismissing contractual Implied Covenant claim as superfluous).43 Miller’s breach of contract claim and Implied Covenant claim allege the same breach of the same contractual provision.44 Plaintiffs’ two claims also seek identical damages, with both claiming overpayment of premiums. (D.E. 97 41 The R&R recognized that the Plaintiffs might be able to state a tortious breach of good faith and fair dealing claim, and ruled that allowing Plaintiffs to file an amended complaint stating such a claim would not be futile. (D.E. 86, at 17-18). 42 See Bey v. I.B.E.W. Local Union No. 3, No. 05 CIV 7910, 2009 WL 73113, at * 1 (S.D.N.Y. Jan. 7, 2009) (rejecting plaintiff’s complaints about an earlier court order and the magistrate report and recommendation that it adopted, on the basis that “that set of rulings constitutes law of the case”). 43 See also Careau & Co. v. Security Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1373, 1395 (Cal. Ct. App. 1990) (noting additional contract-based claim may be disregarded as superfluous if the allegations rely on the same alleged acts and seek the same damages as the other contract claim). 44 Miller alleges MetLife breached the contractual provision providing that “MetLife may use any reasonable method to compute Premiums due” by charging him smoker rates. (D.E. 97 ¶ 52). Miller’s Implied Covenant claim alleges that MetLife “misus[ed] its discretionary power” by charging him a smoker rate. (Id. ¶ 59). This Court already concluded that the contractual provision (“MetLife may use any reasonable method to compute Premiums due”) is the source of MetLife’s alleged discretionary power to charge smoker rates. (Order, D.E. 94, at 12). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 26 of 33 04706285.14 20 ¶¶ 53, 60). Miller’s Implied Covenant claim is superfluous and should be dismissed. Fifth, Miller’s Implied Covenant claim should be dismissed because Miller has not alleged a “conscious and deliberate act” as required under California law.45 Negligence alone will not suffice; a plaintiff must plead facts establishing bad faith.46 Miller accuses MetLife of only “misusing its discretionary power” when it charged Miller a smoker premium rate. (D.E. 97 ¶¶ 52, 59). Miller does not allege that MetLife knew Miller was a non-smoker and charged him a smoker rate anyway, or any other conscious or deliberate act of bad faith. (D.E. 97 ¶¶ 55-61). Miller thus fails to state an Implied Covenant claim. Sixth, Plaintiffs’ Implied Covenant claims should be dismissed because they are not rooted in any contractual obligation. “The implied covenant of good faith and fair dealing’s application is ‘limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract.’” Integrated Storage, 2013 WL 3974537, at *7 (quoting McKight v. Torres, 563 F.3d 890, 893 (9th Cir. 2009)). In other words, the implied covenant does not “permit a party to inject substantive terms into the contract.” ADT Security Servs., Inc. v. Premier Home Prot., Inc., 181 P.3d 288, 293 (Colo. Ct. App. 2007) (citation omitted).47 Plaintiffs’ Implied Covenant claim is premised on MetLife’s failure to default them to nonsmoker status, even if they failed to tell MetLife that they were nonsmokers. Plaintiffs point to no contractual language that imposes such a requirement. The R&R correctly concluded: “Simply because the pilots did not have an option in the enrollment form that described their 45 “In order to make a claim for breach of the implied covenant, the plaintiff must show that defendant ‘fail[ed] or refuse[d] to discharge contractual responsibilities . . . by a conscious and deliberate act . . . .’” Nasseri v. Wells Fargo Bank, N.A., 147 F. Supp. 3d 937, 942 (N.D. Cal. 2015) (quoting Careau, 222 Cal. App. 3d at 1395) (alterations in Nasseri). 46 Trinity Hotel Inv’rs, LLC v. Sunstone OP Props., LLC, No. SA CV 07-1356 AHS(MLGx), 2009 WL 303330, at *3-4 (C.D. Cal. Feb. 6, 2009). 47 See also Soderlun v. Pub. Serv. Co. of Colo., 944 P. 2d 616, 623 (Colo. Ct. App. 1997) (same). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 27 of 33 04706285.14 21 smoking status does not mean that MetLife had an explicit contractual duty not to ‘default [] them to smoker status.’” (D.E. 86, at 16). The R&R rejected Plaintiffs’ efforts to “request the Court to read an implicit term into the contract, and then construe that term in their favor” which “would extend beyond contract interpretation to contract formation.” (Id.). The R&R’s statement is still true. The GVUL policy does not impose any requirement that MetLife apply non-smoker premiums to an insured who has not informed MetLife of his non-smoker status, and the Implied Covenant may not be used to create such a requirement. Because Plaintiffs’ Implied Covenant claim is not rooted in any contractual obligation, Plaintiffs have failed to state a claim. V. Even if timely, Plaintiffs’ Bad Faith claims (Count III) should be dismissed. Plaintiffs cannot state a Bad Faith claim48 for three reasons. First, MetLife has not denied payment of a covered loss or benefit due under the policy. Under California and Colorado law, to state a Bad Faith claim, a plaintiff must allege the insurer unreasonably refused to pay “benefits due under the policy.” Gentry v. State Farm Mut. Auto. Ins. Co., 726 F. Supp. 2d 1160, 1166 (E.D. Cal. 2010) (citing Wilson v. 21st Century Ins. Co., 42 Cal. 4th 713, 720 (Cal. 2007))49; Goodson v. Am. Standard Ins. Co. of Wisc., 89 P.3d 409, 414 (Colo. 2004). Plaintiffs do not allege that MetLife denied payment of a benefit due under the GVUL policy, nor could they, as they are not deceased. (See generally D.E. 97). Because Plaintiffs have not alleged benefits due under the GVUL policy, they cannot state a Bad Faith claim. Second, MetLife did not act unreasonably. “[I]t is essential to a recovery in tort that the insurer, in breaching the implied covenant, have acted unreasonably or without proper cause.” Careau, 222 Cal. App. 3d at 1395 (citations omitted) (emphasis added); see Goodson, 89 P.3d at 48 Under California law, a “bad faith” claim is the same as a claim for tortious breach of the duty of good faith and fair dealing. Bosetti v. U.S. Life Ins. Co. in City of New York, 175 Cal. App. 4th 1208, 1235 (Cal. Ct. App. 2009). 49 See also Benavides v. State Farm Gen. Ins. Co., 136 Cal. App. 4th 1241, 1250 (Cal. Ct. App. 2006) (“[A]n insured cannot maintain a claim for tortious breach of the implied covenant of good faith and fair dealing absent a covered loss” (collecting cases)). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 28 of 33 04706285.14 22 415 (stating that the insured must prove that the “insurer acted unreasonably under the circumstances”).50 Plaintiffs do not allege that: (1) MetLife knew they were non-smokers and charged them a smoker rate anyway; (2) they ever informed MetLife that they were non- smokers; or (3) MetLife contracted to charge them a non-smoker rate and instead charged them a smoker rate anyway. (D.E. 97). Plaintiffs allege that MetLife’s practice of defaulting them to smoker status is unreasonable. The R&R, however, concluded that, “as MetLife points out, its alleged decision to designate them as smokers in the absence of any indication otherwise may be rational.” (D.E. 86, at 16). Plaintiffs have failed to allege facts supporting their conclusory allegation that MetLife acted unreasonably. Third, Barton’s Bad Faith claim should be dismissed because MetLife did not charge Barton a smoker rate with knowledge or reckless disregard of the fact that he was a nonsmoker. The Colorado Supreme Court has “concluded that, in the first-party context, an insured must prove that (1) the insurer’s conduct was unreasonable, and (2) the insurer either had knowledge of or reckless disregard for the fact that its conduct was unreasonable.” Kisselman, 292 P. 3d at 970 (citing Savio, 706 P.2d at 1275).51 The sole action by MetLife which Barton alleges breached the implied covenant is charging Barton a smoker premium rate when he never agreed to any contractual term designating him as a smoker. (D.E. 97 ¶¶ 52, 59). Barton does not allege that MetLife knew Barton was a non-smoker and charged him a smoker rate anyway. (D.E. 97). As a result, Barton fails to allege that MetLife acted with the requisite knowledge or reckless disregard of the fact that he was a nonsmoker and fails to state a Bad Faith claim. 50 See also Howard v. Am. Nat’l Fire Ins. Co., 187 Cal. App. 4th 498, 529 (Cal. Ct. App. 2010) (“In simple terms, an insurer’s tortious bad faith conduct is conduct that is unreasonable.”); Kisselman v. Am. Fam. Mut. Ins. Co., 292 P. 3d 964, 970 (Colo. Ct. App. 2011) (“an insured must prove that . . . the insurer’s conduct was unreasonable”) (citing Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1275 (Colo. 1985) (“Savio”)). 51 See also Goodson, 89 P.3d at 415 (“In addition to proving that the insurer acted unreasonably under the circumstances, a first-party claimant must prove that the insurer either knowingly or recklessly disregarded the validity of the insured’s claim.”). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 29 of 33 04706285.14 23 VI. Even if timely, Plaintiffs’ negligence claims (Count IV) should be dismissed. Plaintiffs’ negligence claims should be dismissed. The R&R, and the Order, did not grant leave for Plaintiffs to file a SAC alleging a brand new negligence claim, so that claim should be dismissed as beyond the scope of the permitted amendment. (D.E. 86, at 23; D.E. 94, at 14; supra, at 5). Even if timely and permitted, Plaintiffs’ negligence claims against their insurance company, MetLife, should be dismissed under Colorado and California law. Jordan v. City of Aurora, 876 P.2d 38, 43 (Colo. Ct. App. 1993) (“[A] claim for simple negligence against an insurer or its agent is not recognized in Colorado.”); Moss v. Infinity Ins. Co., 197 F. Supp. 3d 1191, 1202 (N.D. Cal. 2016) (“[N]egligent conduct is insufficient to bring a claim against an insurer.”) (citing Sanchez v. Lindsey Morden Claims Servs, Inc., 72 Cal. App. 4th 249, 254 (Cal. Ct. App. 1999) (“[N]egligence is not among the theories of recovery generally available against insurers.”)).52 Miller’s negligence claim is also barred by California’s economic loss rule. Under California law, generally, “purely economic losses are not recoverable in tort.” Singh v. Amguard Ins. Co., No. 16-cv-00618, 2016 WL 7469641, at *2 (C.D. Cal. Apr. 1, 2016) (quoting UMG Recordings, Inc. v. Eagle Entm’t, Inc., 117 F. Supp. 3d 1092, 1103 (C.D. Cal. 2015)). Where tort and breach of contract claims make virtually the same factual and damage allegations, California courts have held that the tort claims are barred by the economic loss rule, including tort claims in the insurance context.53 Miller’s breach of contract and negligence claims are based on the same 52 See also Tento Int’l, Inc. v. State Farm Fire & Cas. Co., 222 F.3d 660, 664 (9th Cir. 2000) (noting the unlikely viability of plaintiff’s claim for negligent handling of its insurance claim because, in California, negligence is not among the theories of recovery generally available against insurers)); Bosco Legal Servs, Inc. v. Hiscox, Inc., No. EDCV 18-48-GW, 2018 WL 3012936, at * 8 (C.D. Cal. June 11, 2018) (dismissing negligence claim against insurer on the basis that no such claim exists under California law). 53 See Warrick v. Travelers Commercial Ins. Co., No. 3:15-cv-1467, 2015 WL 11921403, at *2-3 (S.D. Cal. Oct. 29, 2015) (insured’s fraud claim was barred by economic loss rule when her breach of contract and fraud claims sought the same damages); Silcox v. State Farm Mut. Auto. Ins. Co., No. 14-cv-2345, 2014 WL 7335741, at *7 (S.D. Cal. Dec. 22, 2014) (granting motion to dismiss insured’s fraud claim based on the economic loss rule when the insured Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 30 of 33 04706285.14 24 allegation: MetLife charged them smoker rates when they should have been charged non-smoker rates. (D.E. 97 ¶¶ 52, 71). Miller claims the same damages for both claims: overpaid premiums. (Id. ¶¶ 52-54, 72). Miller alleges purely economic losses compensable, if at all, by his breach of contract claims so his negligence claim is barred by California’s economic loss rule. VII. Plaintiffs’ Rule 23(b)(1) and Rule 23(b)(2) class action allegations should be dismissed based on Wal-Mart and Plaintiffs’ failure to satisfy the requisite Twombly/Iqbal pleading standards. Plaintiffs’ allegations are insufficient to support a class under Rule 23(b)(1) or 23(b)(2). Rule 23(b)(1) and 23(b)(2) classes are not appropriate in this case because Plaintiffs seek individualized monetary damages. The Supreme Court has explained that it is “clear that individualized monetary claims belong in Rule 23(b)(3).” Wal-Mart, 567 U.S. at 362.54 The R&R explained that, “[c]laims for individualized monetary relief may only be collectivized under Rule 23(b)(3).” (D.E. 86, at 22 (citing Wal-Mart, 564 U.S. at 362)). Plaintiffs seek repayment of the allegedly overcharged premiums and also seek punitive damages. (D.E. 97 ¶¶ 52-54, 59-61, 67-69, 72-74, Prayer for Relief (No. 5)). If Plaintiffs are successful, then they would be entitled to an individualized award of monetary damages based on the amount of overcharges applicable to them. In accordance with the holding in Wal-Mart, Plaintiffs’ claims are not suitable for class certification under Rule 23(b)(1) or 23(b)(2). did “not allege any specific injury distinct from the breach of contract claim”); Lincoln Gen. Ins. Co. v. Access Claims Adm’rs, Inc., No. CIV S-07-1015 LKK/EFB, 2007 WL 2492436, at *8 (E.D. Cal. Aug. 30, 2007) (dismissing negligence and negligent misrepresentation claims which closely paralleled the breach of contract claim). 54 Wal-Mart, 564 U.S. at 360-61 (“The key to the (b)(2) class is ‘the indivisible nature of the injunctive or declaratory remedy warranted-the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them. In other words, Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant. Similarly, it does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.”) (internal citation omitted). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 31 of 33 04706285.14 25 Plaintiffs’ Rule 23(b)(1) and 23(b)(2) allegations also fail to satisfy the Twombly and Iqbal pleading requirements.55 A class action plaintiff “must plead more than a simple reiteration of [the Rule 23] requirements in conclusory allegations” and “should allege facts demonstrating that all of the requirements for bringing a class action are fulfilled.” Barrus v. Dick’s Sporting Goods, Inc., 732 F. Supp. 2d 243, 248-49 (W.D.N.Y. 2010) (citation omitted).56 Plaintiffs’ Rule 23(b)(1) and 23(b)(2) class action allegations consist only of legal conclusions with no supporting facts. (D.E. 97 ¶¶ 44-46). CONCLUSION For all of the reasons stated above, this Court should grant MetLife’s Motion to Dismiss and dismiss Plaintiffs’ claims. Respectfully submitted, /s/ Edward M. Holt Lee E. Bains, Jr. Edward Morris Holt MAYNARD, COOPER & GALE, P.C. 1901 Sixth Avenue North 2400 Regions | Harbert Plaza Birmingham, AL 35203 Telephone: 205.254.1000 Facsimile: 205.254.1999 Email: lbains@maynardcooper.com Email: tholt@maynardcooper.com John M. Hintz MAYNARD, COOPER & GALE, P.C. The Fred F. French Building 551 Fifth Avenue - Suite 2000 New York, NY 10176 Telephone: 646.609.9284 Facsimile: 646.609.9281 Email: jhintz@maynardcooper.com 55 “The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Wal-Mart, 564 U.S. at 348 (internal quotation marks and citation omitted). “To come within the exception, a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23.” Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (internal quotation marks and citation omitted). 56 See also Shariff v. Goord, 235 F.R.D. 563, 568 (W.D.N.Y. 2006) (same); Deen v. New School Univ., No. 05-cv- 7174, 2008 WL 331366, at *3 (S.D.N.Y. Feb. 4, 2008) (same); Pichardo v. Carmine’s Broadway Feast Inc., No. 15- cv-03312, 2016 WL 4379421, at *3 (S.D.N.Y. June 13, 2016) (“Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule-that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” (quoting Wal-Mart, 564 U.S. at 352)). Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 32 of 33 04706285.14 26 CERTIFICATE OF SERVICE I hereby certify that on this 8th day of February 2019, I caused a true and correct copy of the foregoing to be served by email on the following counsel for Plaintiffs: Michael Louis Kelly, Esq. Behram V. Parakh Joshua A. Fields KIRTLAND & PACKARD LLP 2041 Roscrans Avenue - 3rd Floor El Segundo, CA 90245 Phone: (310)-536-1002 Fax: (310)-536-1001 Email: mlk@kirtlandpackard.com Email: bvp@kirtlandpackard.com Email: jf@kirtlandpackard.com Hunter Shkolnik, Esq. Salvatore Charles Badala NAPOLI SHKOLNIK PLLC 360 Lexington Avenue - 11th Floor New York, NY 10017 Phone: (212) 397-1000 Fax: (646) 843-7603 Email: hunter@napolilaw.com Email: sbadala@napolilaw.com /s/ Edward M. Holt Edward M. Holt Case 1:17-cv-07284-AT-SN Document 105 Filed 02/08/19 Page 33 of 33