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LEGAL\39696566\1 1
COZEN O’CONNOR
Valerie D. Rojas, State Bar No. 180041
vrojas@cozen.com
Michael Ruocco, State Bar No. 297414
mruocco@cozen.com
601 South Figueroa Street, Suite 3700
Los Angeles, CA 90017-5556
Telephone: 213.892.7900
Facsimile: 213.892.7999
Attorneys for Defendant SCOTTSDALE
INSURANCE COMPANY
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
THE PRINT LAB, INC., a California
corporation, STACI STEWART,
TOMMY GELINAS and JUAN
FLORES,
Plaintiffs,
vs.
SCOTTSDALE INSURANCE
COMPANY, a corporation;
NATIONWIDE INSURANCE
COMPANY, TRUCK INSURANCE
EXCHANGE and DOES 1 through 25,
Inclusive,
Defendants.
Case No. 2:17-cv-05148 GW(Ex)
Assigned to: Honorable Judge
George Wu
[State Court Case No. BC658082]
DEFENDANT SCOTTSDALE
INSURANCE COMPANY’S
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
MOTION FOR SUMMARY
JUDGMENT, OR IN THE
ALTERNATIVE, PARTIAL
SUMMARY JUDGMENT
[Filed Concurrently with Notice of
Motion; Separate Statement of
Uncontroverted Facts and Conclusions
of Law; Declaration of Michael
Zartman; Declaration of Valerie D.
Rojas; [Proposed] Order and [Proposed]
Judgment]
Date: March 4, 2019
Time: 8:30 a.m.
Courtroom: 9D
Action Filed: April 17, 2017
Defendant Scottsdale Insurance Company (“Scottsdale”) hereby submits the
following Memorandum of Points and Authorities in support of its Motion for
Summary Judgment, or in the alternative, Partial Summary Judgment.
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TABLE OF CONTENTS
MEMORANDUM OF POINTS AND AUTHORITIES ............................................. 1
I. INTRODUCTION AND SUMMARY OF ARGUMENT ............................... 1
II. STATEMENT OF FACTS ................................................................................ 2
A. The Scottsdale Policy .............................................................................. 2
B. Scottsdale’s Payments Pursuant to the Policy ........................................ 3
C. Plaintiffs’ Alleged Damages ................................................................... 3
III. Legal Argument ................................................................................................. 4
A. Standard for Granting Summary Judgment ............................................ 4
B. Plaintiffs Cannot Meet Their Burden of Proving that Scottsdale’s
Alleged Breach was a Substantial Factor in Causing Their Contract
Damages .................................................................................................. 5
C. Plaintiffs Cannot Meet Their Burden of Proving that Scottsdale’s
Alleged Bad Faith was a Substantial Factor in Causing Their Bad Faith
Damages .................................................................................................. 7
IV. CONCLUSION ............................................................................................... 12
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TABLE OF AUTHORITIES
Page(s)
Federal Cases
Aguilera v. Pirelli Armstrong Tire Corp.,
223 F.3d 1010 (9th Cir.2000) ................................................................................. 6
Anderson v. Liberty Lobby, Inc.,
477 U.S. 742 (1986) ............................................................................................... 5
Anderson v. Liberty Lobby, Inc.,
supra, 477 U.S. ................................................................................................... 5, 6
Celotex Corp. v. Catrett,
477 U.S. 317 (1986) ............................................................................................... 6
Celotex Corp. v. Catrett,
477 US 317, 106 S.Ct. 2548 (1986) ....................................................................... 5
F.P.D., Inc. v. Hartford Casualty Insurance Co.,
2015 WL 12806477 (C.D. Cal. 2015) .................................................................. 11
Guzman v. Bridgepoint Educ., Inc.,
305 F.R.D. 594 (S.D. Cal. 2015) .......................................................................... 11
Matsushita Elec. Industrial Co. v. Zenith Radio Corp.,
475 U.S. 574, 106 S. Ct. 1348 (1986) .................................................................... 5
Reed v. Scottsdale Insurance Company,
1998 WL 34072536 (N.D.Cal. 1998) ..................................................................... 9
San Diego Unified Port Dist. v. Nat’l Union Fire Ins. Co. of Pittsburg,
PA,
2017 WL 2465026 (S.D. Cal. June 7, 2017) .......................................................... 8
Slottow v. Am Casualty Co.,
10 F.3d 1355 (9th Cir.1993) ................................................................................... 9
Unicon Financial Services, Inc. v. InterCept, Inc.,
256 Fed.Appx. 27 (9th Cir. 2007) .......................................................................... 6
Case 2:17-cv-05148-GW-E Document 71 Filed 02/04/19 Page 3 of 17 Page ID #:1717
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LEGAL\39696566\1 iii
State Cases
Burnaby v. Standard Fire Ins. Co.,
40 Cal.App.4th 787 (1995) ..................................................................................... 8
Gruenberg v. Aetna Ins. Co.,
9 Cal.3d 566 (1973) .............................................................................................. 11
Love v. Fire Ins. Exch.,
221 Cal.App.3d 1136 (Cal. Ct. App. 1990) ............................................................ 7
Maxwell v. Fire Ins. Exch.,
60 Cal.App.4th 1446 (1998) ................................................................................. 11
McKell v. Washington Mutual, Inc.,
142 Cal.App.4th 1457 (2006) ................................................................................. 6
Monster LLC v. Superior Court,
12 Cal.App.5th 1214, 1229 (2017) ..................................................................... 7, 8
Monster LLC v. Superior Court,
supra, 12 Cal.App.5th ............................................................................................. 8
Prentice v. N. Am. Title Guar. Corp., Alameda Div.,
59 Cal.2d 618 (1963) .............................................................................................. 8
Reichert v. General Ins. Co.,
68 Cal.2d 822 (1968) .............................................................................................. 6
Waters v. United Services Auto. Ass’n,
41 Cal.App.4th 1063 (1996) ................................................................................. 11
State Statutes
Cal. Civ. Code § 3301 .................................................................................................. 6
Rules
Fed. R. Civ. Proc. 56(e) ............................................................................................... 5
Fed. R. Civ. Proc. 26(a)(1)(A)(ii) .............................................................................. 10
Fed. R. Civ. Proc. 26(a)(1)(A)(iii) ............................................................................. 10
Fed. R. Civ. Proc. 37 .................................................................................................. 11
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Fed. R. Civ. Proc. 26(a) ............................................................................................. 10
Fed. R. Civ. Proc. 26(e) ....................................................................................... 10, 11
Fed. R. Civ. Proc. 37(c)(1) .................................................................................. 10, 11
Fed. R. Civ. Proc. 56(c)(1)(B) .................................................................................... 5
Fed. R. Civ. Proc. 56 ............................................................................................. 4, 11
Fed. R. Civ. Proc. 56(c) .............................................................................................. 6
Other Authorities
CACI 303 ..................................................................................................................... 6
CACI 2331 ................................................................................................................... 7
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MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION AND SUMMARY OF ARGUMENT
Scottsdale Insurance Company (“Scottsdale”) moves for summary judgment,
or in the alternative, partial summary judgment on Plaintiffs The Print Lab, Inc.
(“The Print Lab”), Juan Flores (“Flores”), Tommy Gelinas (“Gelinas”), and Staci
Stewart’s (“Stewart”) (collectively “Plaintiffs”) claims for breach of contract, and
breach of the implied covenant of good faith and fair dealing (“bad faith”) because
Scottsdale has paid all benefits allegedly owed under a Business and Management
Indemnity Policy issued to The Print Lab, Policy No. EKS3122422 (the “Policy”),
such that Plaintiffs cannot prove any damages in support of their breach of contract
claim, and Plaintiffs have not identified the amount of Brandt fees in support of
their bad faith claim - the only economic damages alleged in support of their bad
faith claim.
In their complaint, Plaintiffs allege that Scottsdale owes Plaintiffs a duty to
defend them in an underlying lawsuit filed by a former employee, Edgar Rodriguez
(“Rodriguez”) under the Policy. In particular, Rodriguez alleged sexual harassment,
intimidation, discrimination, wrongful termination and a multitude of other
employment claims in an action titled, Rodriguez v. The Print Lab, et. al., Los
Angeles Superior Court Case No. BC617786 (the “Underlying Action”). Scottsdale
denied coverage for the Underlying Action because it is related to and includes a
number of the same allegations made in a different lawsuit against Plaintiffs, which
was made before the Policy incepted and is specifically excluded from coverage.
However, this Court granted Plaintiffs’ motion for partial summary judgment on
Plaintiffs’ claim for declaratory relief and denied Scottsdale’s cross-motion for
summary judgment finding that there is at least a potential for coverage for the
Underlying Action, and therefore Scottsdale owed a duty to defend Plaintiffs in the
Underlying Action.
Thereafter, Scottsdale paid all defense fees and costs Plaintiffs incurred in
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defending the Underlying Action, and fully indemnified Plaintiffs for the settlement
of the Underlying Action. Therefore, Plaintiffs have no damages to support their
claim for breach of contract and Scottsdale is entitled to summary judgment on
Plaintiffs’ claim for breach of contract.
Similarly, Plaintiffs cannot establish their claim for bad faith because they
cannot prove damages to support such a claim. Economic damages are a required
element to prove a bad faith claim and the only economic damages alleged in
connection with Plaintiffs’ claim for bad faith is for attorneys’ fees (i.e., Brandt
fees), but Plaintiffs failed to identify the amount of Brandt fees they are claiming in
their initial disclosures and discovery. Absent economic damages, Plaintiffs cannot
recover damages for emotional distress in connection with it claim for bad faith.
Thus, Scottsdale is entitled to summary judgment on Plaintiffs’ claim for bad faith.
II. STATEMENT OF FACTS
A. The Scottsdale Policy
Scottsdale issued a Business and Management Indemnity Policy to The Print
Lab, Inc., Policy No. EKS3122422, effective 02/20/2014 to 02/20/2015 (the
“Policy”). UF 1. The Policy includes Employment Practices Coverage, which
provides coverage for “Loss of the Insureds which the Insureds have become
legally obligated to pay by reason of an Employment Practices Claim first made
against the Insureds during the Policy Period . . .” UF 2. “Claim” is defined by the
Policy to include “a written demand against an Insured for damages or other relief”
and “a civil proceeding against an Insured . . . “. UF 3.
Loss is defined in pertinent part to mean “the damages, judgments,
settlements, front pay and back pay, pre-judgment or post judgment interest awarded
by a court, and Costs, Charges and Expenses incurred by any of the Insureds.” UF
4.
Cost, Charges and Expenses is defined as follows:
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Costs, Charges and Expenses means reasonable and
necessary legal costs, charges, fees and expenses incurred by
any of the Insureds in defending Claims and the premium for
appeal, attachment or similar bonds arising out of covered
judgments, but with no obligation to furnish such bonds and
only for the amount of such judgment that is up to the
applicable Limit of Liability. Costs, Charges and Expenses
do not include salaries, wages, fees, overhead or benefit
expenses of or associated with officers or employees of the
Company. UF 5.
B. Scottsdale’s Payments Pursuant to the Policy
On March 26, 2018, prior to this court’s ruling that Scottsdale owed a duty to
defend Plaintiffs, Scottsdale offered to reimburse Plaintiffs for the defense fees and
costs they paid to defend the Underlying Action and to assume the defense (i.e., pay
the defense fees) going forward. UF 6. Plaintiffs did not respond to this March 26,
2018 offer. UF 7. Instead, Plaintiffs chose to continue litigating this matter, and to
defend the Underlying Action on its own.
Thereafter, Scottsdale reimbursed Plaintiffs for all Costs, Charges and
Expenses they paid to their defense counsel in the Underlying Action. UF 8.
Scottsdale also paid all outstanding Costs, Charges and Expenses owed to Plaintiffs’
defense counsel in the Underlying Action. UF 9. Additionally, Scottsdale paid the
entire settlement amount on behalf of Plaintiffs to settle the Underlying Action. UF
10. Therefore, Scottsdale paid all defense fees and costs for Plaintiffs’ defense in
the Underlying Action, and paid the full settlement amount in the Underlying
Action. UF 8-10. Accordingly, no additional amounts are owed under the Policy.
C. Plaintiffs’ Alleged Damages
In support of their claim for breach of contract, Plaintiffs claim damages for
the defense fees and costs they incurred to defend themselves in the Underlying
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Action – which Scottsdale has paid. UF 11.
In support of their claim for bad faith, Plaintiffs claim they are entitled to
attorney’s fees under Brandt v. Superior Court, 37 Cal. 3d at 817 (1985), and
damages for emotional distress. UFs 12-13. However, Plaintiffs failed to identify
their alleged Brandt fees in initial disclosures, and responses to discovery. UFs 12-
13. Plaintiff The Print Lab belatedly produced attorney invoices without
explanation presumably in support of its claim for Brandt fees, but The Print Lab
failed to identify which portion of those fees identified in the invoices relate to its
claim for Policy benefits (i.e., Brandt fees) versus its claim for bad faith against
Scottsdale, or its claims against defendants National Union Fire Insurance Company
of Pittsburgh PA and Nationwide Mutual Insurance Company, who have been
dismissed. UF 14. The individual Plaintiffs did not produce any evidence of Brandt
fees and in fact, the invoices produced by The Print Lab show that the invoices are
directed to The Print Lab, not the individuals. UFs 14 and 15.
Plaintiffs also claim damages for emotional distress. UF 13. To support a
claim for damages resulting from emotional distress, Plaintiffs must first establish
some economic loss in connection with the emotional distress and here, Plaintiffs’
only economic loss is their purported claim for Brandt fees. However, as noted
above, The Print Lab has not identified the amount of Brandt fees it is claiming, but
as an entity, it cannot suffer emotional distress in any event. The individual
Plaintiffs have not identified the amount of Brandt fees they have incurred, and have
not produced any evidence to support their claim for Brandt fees. UF 14.
Therefore, the individual Plaintiffs have no economic damages, which is required to
support a claim for emotional distress damages in a bad faith case. Thus, Plaintiffs
cannot meet their burden of proving their claim for bad faith.
III. LEGAL ARGUMENT
A. Standard for Granting Summary Judgment
Under Rule 56, the moving party has the initial burden to prove that no
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genuine issue of material fact exists. Matsushita Elec. Industrial Co. v. Zenith
Radio Corp., 475 U.S. 574, 580, 106 S. Ct. 1348 (1986). A party is entitled to
summary judgment when the documentary evidence provided by the parties permits
only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 742 (1986). The
moving party may meet its burden by showing “that there is an absence of evidence
to support the non-moving party’s case.” Id. Scottsdale can meet its burden on
summary judgment by showing that Plaintiffs lack sufficient evidence to carry their
ultimate burden of persuasion at trial; i.e., they do not have evidence from which a
jury could find an essential element of the Plaintiffs’ claim. FRCP 56(c)(1)(B);
Celotex Corp. v. Catrett, 477 US 317, 325, 106 S.Ct. 2548, 2554 (1986).
Once the moving party has carried its burden, “its opponent must do more
than simply show that there is some metaphysical doubt as to the material facts.”
Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 580, (1986).
The party opposing summary judgment must go beyond the pleadings to designate
specific facts establishing a genuine issue for trial. Id. If the adverse party does not
so respond, summary judgment shall be entered against the adverse party. Fed. R.
Civ. P. 56(e). Further, the mere existence of some alleged factual dispute between
the parties is not sufficient to overcome an otherwise properly supported motion for
summary judgment. Anderson v. Liberty Lobby, Inc., supra, 477 U.S. at 252. Thus,
to defeat Scottsdale’s motion, Plaintiffs must affirmatively set forth material facts
showing there is a genuine issue on which a reasonable jury could find in Plaintiffs’
favor. Id. at 252. Here, Plaintiffs cannot meet their burden of proving the element
of damages in support of their claims for breach of contract and bad faith.
B. Plaintiffs Cannot Meet Their Burden of Proving that Scottsdale’s
Alleged Breach was a Substantial Factor in Causing Their Contract
Damages
Plaintiffs cannot establish all elements necessary to prove their breach of
contract claim. Under California law, in order to succeed on their claim for breach
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of contract, Plaintiffs must prove 1) the existence of a valid contract, 2) Plaintiffs’
performance, 3) Defendant’s breach, and 4) that Defendant’s breach was a
substantial factor in causing Plaintiffs’ damages. CACI 303; Reichert v. General
Ins. Co., 68 Cal.2d 822, 830 (1968); McKell v. Washington Mutual, Inc., 142
Cal.App.4th 1457, 1489 (2006).
Plaintiffs have the burden of producing evidence supporting its claim that it
sustained damages as a result of Scottsdale’s alleged breach of contract. See Cal.
Civ. Code § 3301 (“No damages can be recovered for breach of a contract which are
not clearly ascertainable in both their nature and origin.”); Aguilera v. Pirelli
Armstrong Tire Corp., 223 F.3d 1010, 1015 (9th Cir.2000) (“[A] breach of contract
claim requires a showing of appreciable and actual damage.”) (citing Patent
Scaffolding Co. v. William Simpson Const. Co., 256 Cal.App.2d 506, 511, (1967)
(“A breach of contract without damage is not actionable.”). Scottsdale may meet its
burden on summary judgment by showing “that there is an absence of evidence to
support the non-moving party’s case.” Celotex Corp. v. Catrett, supra, 477 U.S. at
325.
Summary judgment is warranted when, as here, a plaintiff cannot provide
evidence of damages. Unicon Financial Services, Inc. v. InterCept, Inc., 256
Fed.Appx. 27, 28 (9th Cir. 2007) (Summary judgment granted because “Despite six
months of discovery, Unicon did not produce any direct evidence that InterCept
actually owed any royalties.”). The Supreme Court in Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986) held that “. . . the plain language of Rule 56(c) mandates the
entry of summary judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to establish the existence of
an element essential to that party's case, and on which that party will bear the burden
of proof at trial. In such a situation, there can be ‘no genuine issue as to any material
fact,’ since a complete failure of proof concerning an essential element of the
nonmoving party's case necessarily renders all other facts immaterial.”
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Plaintiffs cannot establish that Scottsdale’s alleged breach was a substantial
factor in causing their contract damages because Scottsdale paid what it supposedly
owed under the Policy such that Plaintiffs have no damages. Because Scottsdale
paid all Costs, Charges and Expenses as well as the settlement in the Underlying
Action, Scottsdale does not owe any additional amounts under the contract, and
Plaintiffs cannot establish all elements required to prove their breach of contract
claim. Therefore, Plaintiffs claim for breach of contract fails as a matter of law and
Scottsdale is entitled to summary judgment.
C. Plaintiffs Cannot Meet Their Burden of Proving that Scottsdale’s
Alleged Bad Faith was a Substantial Factor in Causing Their Bad
Faith Damages
In support of their claim for bad faith, Plaintiffs claim damages for attorney’s
fees incurred in this action under Brandt v. Superior Court, supra, 37 Cal.3d at 817
and damages for emotional distress. The essential elements of a cause of action for
breach of the implied covenant of good faith and fair dealing are: (1) the
withholding of benefits which are due under the policy; (2) the withholding of such
benefits unreasonably or without proper cause; and (3) that the withholding of
benefits was a substantial factor in causing Plaintiffs’ alleged damages. CACI 2331;
Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1, 35-36 (Cal. 1995); Love v. Fire
Ins. Exch., 221 Cal.App.3d 1136, 1151 (Cal. Ct. App. 1990).
As noted above, Plaintiffs failed to identify the amount of their Brandt fees in
initial disclosures and responses to discovery. Although The Print Lab belatedly
produced invoices for attorneys’ fees presumably in support of its claim for Brandt
fees, The Print Lab failed to identify which portion of those fees in the invoices
relate to its claim for benefits under the Scottsdale Policy (i.e., Brandt fees) versus
its claims for bad faith against Scottsdale and its claims against former defendants
National Union Fire Insurance Company of Pittsburgh PA and Nationwide Mutual
Insurance Company. The individual Plaintiffs did not produce any invoices,
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timesheets or other documents showing any amount of attorney fees owed or paid
by the individual Plaintiffs. Because Plaintiffs have not identified their damages
during discovery, they cannot do so now.
Courts have consistently held that “[a]lthough fee issues are usually addressed
to the trial court in the form of posttrial motion, fees as damages are pleaded and
proved by the party claiming them and are decided by the jury. . .[citations
omitted]” Monster LLC v. Superior Court, 12 Cal.App.5th 1214, 1229 (2017).
Brandt fees are unique, in that they are viewed as “an economic loss—damages—
proximately caused by the tort.” Brandt v. Superior Court, 37 Cal. 3d at 817 (1985).
Because they are an element of bad faith, they must be proven at trial rather than in
a post-trial motion. Monster LLC v. Superior Court, supra, 12 Cal.App.5th at 1229;
Brandt v. Superior Court, supra, 37 Cal.3d at 815; see also Prentice v. N. Am. Title
Guar. Corp., Alameda Div., 59 Cal.2d 618, 621 (1963) (plaintiff can recover
reasonable attorneys’ fees incurred by them in litigation with third parties where
those fees are damages proximately flowing from wrongful conduct).
Further, while bad faith is a prerequisite for Brandt fees, it is well understood
that fees are not available for “bringing ... the bad faith action itself.” Brandt, supra,
37 Cal.3d at 798; see also Burnaby v. Standard Fire Ins. Co., 40 Cal.App.4th 787,
792 (1995) (noting that Brandt didn’t authorize “fees incurred in prosecuting the
tortious breach of covenant claim”). Only actions to recover policy benefits-not to
prove the insurer’s bad faith in denying them-qualify for fees. Id.; See also, San
Diego Unified Port Dist. v. Nat'l Union Fire Ins. Co. of Pittsburg, PA, 2017 WL
2465026, at *1 (S.D. Cal. June 7, 2017) (finding “attorneys' fees expended to
recover other types of damages are not recoverable as Brandt fees, so the attorneys'
fees incurred by a plaintiff in a bad faith action must be allocated between
recoverable fees incurred to obtain contract damages and non-recoverable fees
incurred to obtain tort damages.”). Also, attorneys’ fees and costs must be
reasonable and necessary to be recovered. Prentice v. N. Am. Title Guar. Corp.,
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Alameda Div., 59 Cal. 2d 618, 621 (1963) (plaintiff can recover reasonable
attorneys’ fees incurred by them in litigation where those fees are damages
proximately flowing from wrongful conduct.). This requires an analysis of the fees
and tasks associated with such fees to ensure they are Brandt fees. Brandt fees are
thus governed by their own standard, and cannot be estimated. See, Slottow v. Am
Casualty Co., 10 F.3d 1355, 1362 (9th Cir.1993).
In Slottow, the insured failed to segregate its attorney’s fees during discovery
and the Ninth Circuit denied it the opportunity to do so explaining that:
Because the bank made no effort to segregate its litigation
expenses as required by Brandt, we affirm the district court's
decision not to award fees.
Finally, the bank asks us to remand (rather than affirm) on the
issue of fees so it may prove up its damages, i.e., do the
necessary segregation of fees which Brandt requires. But
Brandt's rule is not new; the bank has no excuse for failing to
comply with it the first time around. We therefore decline the
bank's invitation to remand, and affirm the denial of fees. Id.
In Reed v. Scottsdale Insurance Company, 1998 WL 34072536, at *1
(N.D.Cal. 1998) the court dismissed a claim for Brandt fees where the attorney
attempted to proximate the amount of hours worked on recovery of benefits owed
under the policy, even when the attorney submitted time sheets because the time
sheets did not differentiate between time spent on recoverable and non–recoverable
claims. The failure to segregate Brandt fees warrants granting summary judgment
on a claim for Brandt fees. Celerity Educational Group v. Scottsdale Insurance
Company, No. 17-03239-RSWL-JC, at * 31 (C.D. Cal. February 4, 2019). (partial
summary judgment granted on Brandt fee claim “Because Plaintiff fails to establish
that it provided Defendant with evidence of its Brandt fees, segregated as required
by Brandt, Plaintiff has not satisfied its burden of establishing the existence of a
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triable issue of fact.”).
Here, The Print Lab refused to provide evidence of Brandt fees during
discovery and even with its belated production of invoices after the discovery
deadline and expert witness disclosures, The Print Lab failed to identify the amount
of Brandt fees it is claiming. Moreover, the invoices produced are directed to
Plaintiff The Print Lab, not the individual Plaintiffs. Indeed, the individual
Plaintiffs failed to produce any evidence of Brandt fees or identify the amounts that
they owe. Allowing them to do so now would severely prejudice Scottsdale as
discovery would need to be reopened so Scottsdale can depose witnesses, retain an
expert to evaluate the invoices, and disclose an expert. Plaintiffs should not be
permitted to reopen discovery and prejudice Scottsdale because it chose to withhold
evidence of Brandt fees during the course of this litigation.
Federal Rule of Civil Procedure 26(a) states “a party must, without awaiting a
discovery request, provide to the other parties” a copy of all documents that the
“disclosing party has. . . and may use to support its claims.” Fed. R. Civ. Proc.
26(a)(1)(A)(ii). Additionally, a party must provide “a computation of each category
of damages claimed” and provide all documents that support such computation.
Fed. R. Civ. Proc. 26(a)(1)(A)(iii). The duty to provide this information is ongoing,
as Federal Rule of Civil Procedure 26(e) requires that "[a] party who has made a
disclosure under Rule 26(a) – or who has responded to an interrogatory, request for
production or request for admission – must supplement or correct its disclosure or
response…" Fed. R. Civ. Proc. 26(e).
When a party fails to abide by the mandatory disclosure and supplementation
requirements, Federal Rule of Civil Procedure 37(c)(1) states that “the party is not
allowed to use that information or witness to supply evidence on a motion, at a
hearing, or at a trial, unless the failure was substantially justified or is harmless.”
Indeed, the Advisory Committee Notes describe these sanctions as “self-executing”
and “automatic,” in order to "provide[] a strong inducement for disclosure of
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material…" Fed. R. Civ. Proc. 37 Advisory Committee's Note (1993) (“This
automatic sanction provides a strong inducement for disclosure of material that the
disclosing party would expect to use as evidence, whether at a trial, at a hearing, or
on a motion, such as one under Rule 56.”) (quoted in Yeti by Molly, Ltd. v. Deckers
Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir.2001)). It would be patently unfair
and contrary to federal rules concerning disclosures to allow Plaintiffs to proceed to
trial seeking damages that they never identified in disclosures or discovery
responses. Guzman v. Bridgepoint Educ., Inc., 305 F.R.D. 594, 604 (S.D. Cal.
2015) (“This is because “[p]arties, aware of the ‘self-executing’ and ‘automatic’
nature of Rule 37(c)(1) sanctions, have a right to expect that only disclosed
witnesses will be used to support the disclosing party's claims and defenses.”). The
federal rules require Plaintiffs to not only identify categories of damages, but the
amount and calculation of such damages as well as documents supporting such
damages. Fed. R. Civ. Proc. 26(e).
Further, Plaintiffs claim for emotional distress does not save its claim for bad
faith and should also be dismissed. It is well settled that in order to recover
damages for emotional distress caused by an insurers’ alleged bad faith, an insured
must first prove some economic damage caused by the alleged bad faith. Gruenberg
v. Aetna Ins. Co., 9 Cal.3d 566, 580 (1973); Waters v. United Services Auto. Ass'n,
41 Cal.App.4th 1063, 1079 (1996). The individual Plaintiffs cannot prove any
economic loss caused by Scottsdale’s alleged bad faith, and an entity such as The
Print Lab, cannot recover for emotional distress. F.P.D., Inc. v. Hartford Casualty
Insurance Co., 2015 WL 12806477, * 3, (C.D. Cal. 2015).
Additionally, “a delay in paying policy benefits, even if in an unreasonable
manner, does not in itself establish economic loss to the plaintiff” so as to justify
emotional distress damages.” Maxwell v. Fire Ins. Exch., 60 Cal.App.4th 1446,
1450-1451 (1998). Plaintiffs have not identified the amount of economic damages
they are claiming and without economic damages, they cannot recover damages for
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alleged emotional distress. Accordingly, Scottsdale is entitled to summary judgment
on Plaintiffs’ claim for bad faith, or at least, partial summary judgment on Plaintiffs’
claims for Brandt fees and emotional distress.
IV. CONCLUSION
For the foregoing reasons, Scottsdale prays this Court to grant its motion for
summary judgment, or in the alternative, partial summary judgment.
Respectfully submitted,
DATED: February 4, 2019 COZEN O’CONNOR
By: /s/Valerie D. Rojas
Valerie D. Rojas
Michael Ruocco
Attorneys for Defendant SCOTTSDALE
INSURANCE COMPANY
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