# Sodexo Management, Inc. v. Old Republic Insurance Company

> District Court, S.D. California · January 26, 2021

URL: https://www.frixlaw.com/law-library/cases/10082930

## Case

- **Court:** District Court, S.D. California
- **Decided:** January 26, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 SODEXO MANAGEMENT, INC., Case No.: 20-cv-1517-WQH-BGS

12 Plaintiff,
ORDER
13 v.
14 OLD REPUBLIC INSURANCE
COMPANY; and DOES 1-100, inclusive,
15
Defendants.
16
17 HAYES, Judge:
18 The matter before the Court is the Motion to Dismiss Complaint filed by Defendant
19 Old Republic Insurance Company. (ECF No. 6).
20 I. BACKGROUND
21 On July 2, 2020, Plaintiff Sodexo Management, Inc. (“Sodexo”) filed a Complaint
22 against Defendants Old Republic Insurance Company (“Old Republic”) and Does 1
23 through 100 in the Superior Court for the State of California, County of San Diego. (Ex. A
24 to Notice of Removal, ECF No. 1-2 at 4). In the Complaint, Sodexo alleges that it entered
25 into two contracts with Cargill Meat Solutions Corporation (“Cargill”), including a Master
26 Supply Agreement. Sodexo alleges that pursuant to the Master Supply Agreement, Cargill
27 was required to name Sodexo as an additional insured under its commercial general liability
28 insurance policies. Sodexo alleges that Cargill is insured by Old Republic. Sodexo alleges
1 that it is entitled to coverage as an additional insured under one or more of the insurance
2 policies issued to Cargill by Old Republic.
3 Sodexo alleges that Marines and Marine recruits filed ten actions against Sodexo in
4 San Diego state and federal court “in connection with an illness allegedly caused by the
5 ingestion of ground beef manufactured by Cargill and prepared by Sodexo in October
6 2017” (the “Underlying Actions”1). (Id. at 6 ¶ 10). Sodexo alleges that on December 12,
7 2019, it “tendered its request for a defense and indemnity of the Underlying Actions to Old
8 Republic under the terms and conditions of the policies . . . .” (Id. at 7 ¶ 13).
9 Sodexo alleges that no adjuster from Old Republic contacted Sodexo or responded
10 to its tender. Sodexo alleges that on January 29, 2020, Cargill’s defense attorneys in the
11 Underlying Actions informed Sodexo that Old Republic denied Sodexo’s request for
12 defense and indemnity. Sodexo alleges that it requested reconsideration, but “Old Republic
13 continued to fail and refuse to provide a defense or indemnify Sodexo in the Underlying
14 Actions.” (Id. ¶ 16). Sodexo alleges that Old Republic has refused to participate in
15 settlement negotiations in the Underlying Actions. Sodexo alleges that it has incurred
16 attorneys’ fees, costs, and expenses as a result of Old Republic’s failure to defend and
17 indemnify Sodexo in the Underlying Actions.
18 Sodexo brings claims against Defendants for 1) declaratory relief (duty to defend);
19 2) declaratory relief (duty to indemnify); 3) breach of contract (failure to defend); 4) breach
20 of contract (failure to indemnify); and 5) breach of the duty of good faith and fair dealing.
21
22
23 1 The ten Underlying Actions are: Grano v. Sodexo Inc., et al., Case No. 3:18-cv-1818-TWR-BLM (S.D.
Cal.); Anderson v. Sodexo Management, Inc., et al., Case No. 3:19-cv-1903-TWR-BLM (S.D. Cal.); Baker
24
v. Sodexo Management, Inc., et al., Case No. 3:19-cv-1904-TWR-BLM (S.D. Cal.); Browning v. Sodexo
25 Management, Inc., et al., Case No. 3:19-cv-1905-TWR-BLM (S.D. Cal.); Evers v. Sodexo Management,
Inc., et al., Case No. 3:19-cv-1907-TWR-BLM (S.D. Cal.); Lader v. Sodexo Management, Inc., et al.,
26 Case No. 3:19-cv-1908-TWR-BLM (S.D. Cal.); Miller v. Sodexo Management, Inc., et al., Case No. 3:19-
cv-1909-TWR-BLM (S.D. Cal.); Abbott v. Sodexo Management, Inc., et al., Case No. 3:19-cv-1917-
27 TWR-BLM (S.D. Cal.); Milholland, et al. v. Sodexo, Inc., et al., Case No. 37-2019-00049662-CU-PL-
CTL (Cal. Super. Ct.); and McNiven v. Sodexo, Inc., et al., Case No. 37-2019-00056337-CU-PL-CTL
28
1 Sodexo seeks a declaration “that Old Republic and DOES 1-100 are each contractually and
2 legally obligated to immediately, fully, and completely defend Sodexo under the terms of
3 their respective policies in the Underlying Actions;” a declaration that Old Republic and
4 DOES 1-100 are each contractually and legally obligated to indemnify Sodexo for any
5 amounts paid in the settlement or judgment in the Underlying Actions;” compensatory and
6 punitive damages in excess of $1,000,000; attorneys’ fees, costs, and interest; and “such
7 other and further relief as this Court deems just and proper.” (Id. at 13).
8 On August 6, 2020, Old Republic removed the action to this Court based on diversity
9 jurisdiction under 28 U.S.C. §§ 1332, 1441, and 1446. (ECF No. 1). On August 13, 2020,
10 Old Republic filed a Motion to Dismiss Complaint. (ECF No. 6). Old Republic moves to
11 dismiss the Complaint for lack of personal jurisdiction under Rule 12(b)(2) of the Federal
12 Rules of Civil Procedure and for failure to state a claim upon which relief can be granted
13 under Rule 12(b)(6) of the Federal Rules of Civil Procedure. On August 31, 2020, Sodexo
14 filed an Opposition to the Motion to Dismiss Complaint. (ECF No. 16). On September 4,
15 2020, Old Republic filed a Reply. (ECF No. 18).
16 II. PERSONAL JURISDICTION
17 Old Republic moves to dismiss the Complaint on the grounds that the Court lacks
18 personal jurisdiction. Old Republic asserts that it is not subject to general jurisdiction in
19 California because it is incorporated in Pennsylvania and has its principal place of business
20 in Illinois. Old Republic asserts that it is not subject to specific jurisdiction in California.
21 Old Republic contends that it lacks minimum contacts with California. Old Republic
22 contends that Sodexo’s claims do not arise out of contacts between Old Republic and
23 California because the insurance policy was issued to Cargill in Minnesota. Old Republic
24 contends that the Court’s exercise of jurisdiction would be unreasonable because none of
25 the parties are California residents, and Minnesota law applies to interpret the insurance
26 contract.
27 Sodexo asserts that the Court has specific jurisdiction. Sodexo contends that Old
28 Republic purposefully availed itself of the benefits of California by agreeing in the
1 insurance policy to defend and indemnify additional insureds who contract with Cargill,
2 broadly defining the policy coverage territory to include the entire United States, and
3 identifying additional insureds in the policy with California addresses. Sodexo contends
4 that this action arises out of Old Republic’s contacts with California because Old Republic
5 failed to defend Sodexo against lawsuits in California. Sodexo contends that Old
6 Republic’s attorneys are already participating in the Underlying Actions in California, and
7 California has an interest in regulating insurance coverage for California claims.
8 Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may move
9 to dismiss a complaint for “lack of personal jurisdiction.” Fed. R. Civ. P. 12(b)(2). In
10 opposing a defendant’s Rule 12(b)(2) motion, “the plaintiff bears the burden of establishing
11 that jurisdiction is proper.” Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008).
12 “Where, as here, the defendant’s motion is based on written materials rather than an
13 evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional
14 facts to withstand the motion to dismiss.” Mavrix Photo, Inc. v. Brand Techs., Inc., 647
15 F.3d 1218, 1223 (9th Cir. 2011) (citing Brayton Purcell LLP v. Recordon & Recordon, 606
16 F.3d 1124, 1127 (9th Cir. 2010), abrogated on other grounds as recognized by Axiom
17 Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1070 (9th Cir. 2017)). “The plaintiff
18 cannot ‘simply rest on the bare allegations of its complaint,’ but uncontroverted allegations
19 in the complaint must be taken as true.” Id. (quoting Schwarzenegger v. Fred Martin Motor
20 Co., 374 F.3d 797, 800 (9th Cir. 2004)); see Ballard v. Savage, 65 F.3d 1495, 1498 (9th
21 Cir. 1995) (“[T]he plaintiff need only demonstrate facts that if true would support
22 jurisdiction over the defendant.” (citing Data Disc., Inc. v. Sys. Tech. Assocs., 557 F.2d
23 1280, 1285 (9th Cir. 1977)). “[W]e may not assume the truth of allegations in a pleading
24 which are contradicted by affidavit . . . but we resolve factual disputes in the plaintiff’s
25 favor.” Mavrix Photo, 647 F.3d at 1223 (first alteration in original) (citations omitted); see
26 Boschetto, 539 F.3d at 1015 (“Absent an evidentiary hearing, this court ‘only inquire[s]
27 into whether [the plaintiff’s] pleadings and affidavits make a prima facie showing of
28
1 personal jurisdiction.’” (alterations in original) (quoting Caruth v. Int’l Psychoanalytical
2 Ass’n, 59 F.3d 126, 127-28 (9th Cir. 1995)).
3 “‘Federal courts apply state law to determine the bounds of their jurisdiction over a
4 party.’” Axiom Foods, 874 F.3d at 1067 (quoting Williams v. Yamaha Motor Co., 851 F.3d
5 1015, 1020 (9th Cir. 2017)). “California authorizes its courts to exercise jurisdiction ‘to the
6 full extent that such exercise comports with due process.’” Id. (quoting Williams, 851 F.3d
7 at 1020); see Cal. Civ. Proc. Code § 410.10 (“A court of this state may exercise jurisdiction
8 on any basis not inconsistent with the Constitution of this state or of the United States.”).
9 “Accordingly, ‘the jurisdictional analyses under [California] state law and federal due
10 process are the same.’” Axiom Foods, 874 F.3d at 1067 (alteration in original) (quoting
11 Mavrix Photo, 647 F.3d at 1223).
12 Absent one of the traditional bases for personal jurisdiction––domicile, presence, or
13 consent––due process requires that a defendant have “certain minimum contacts with [the
14 forum state] such that maintenance of the suit does not offend traditional notions of fair
15 play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The
16 extent to which a federal court can exercise personal jurisdiction absent presence, domicile,
17 or consent depends on the nature and quality of the defendant’s contacts with the state.
18 “There are two forms of personal jurisdiction that a forum state may exercise over a
19 nonresident defendant—general jurisdiction and specific jurisdiction.” Boschetto, 539 F.3d
20 at 1016.
21 “The inquiry whether a forum State may assert specific jurisdiction over a
22 nonresident defendant ‘focuses on the relationship among the defendant, the forum, and
23 the litigation.’” Axiom Foods, 874 F.3d at 1068 (quoting Walden v. Fiore, 571 U.S. 277,
24 283-84 (2014)). For a court to exercise specific jurisdiction over a nonresident defendant,
25 (1) the defendant must either “purposefully direct his activities” toward the
forum or “purposefully avail[ ] himself of the privileges of conducting
26
activities in the forum”; (2) “the claim must be one which arises out of or
27 relates to the defendant’s forum-related activities”; and (3) “the exercise of
jurisdiction must comport with fair play and substantial justice, i.e. it must be
28
1 reasonable.”

2
Id. (alteration in original) (quoting Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1111 (9th
3
Cir. 2002)). “The plaintiff bears the burden of satisfying the first two prongs of the test.”
4
Schwarzenegger, 374 F.3d at 802. “If the plaintiff meets that burden, ‘the burden then shifts
5
to the defendant to present a compelling case that the exercise of jurisdiction would not be
6
reasonable.’” Axiom Foods, 874 F.3d at 1068-69 (quoting Burger King Corp. v. Rudzewicz,
7
471 U.S. 462, 476-78 (1985)).
8
Suits sounding in contract are analyzed under the “purposeful availment” standard.
9
Schwarzenegger, 374 F.3d at 802. The purposeful availment analysis “is the test for the
10
fundamental determination of whether ‘the defendant’s conduct and connection with the
11
forum State are such that he should reasonably anticipate being haled into court there.’”
12
Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987) (quoting World-Wide Volkswagen Corp.
13
v. Woodson, 444 U.S. 286, 297 (1980)). “Purposeful availment analysis examines whether
14
the defendant’s contacts with the forum are attributable to his own actions or are solely the
15
actions of the plaintiff.” Sinatra v. Nat’l Enquirer, Inc., 854 F.2d 1191, 1195 (9th Cir.
16
1988) (citations omitted). “The purposeful availment prong is satisfied when a defendant
17
takes deliberate actions within the forum state or creates continuing obligations to forum
18
residents.” Hirsch v. Blue Cross, Blue Shield of Kan. City, 800 F.2d 1474, 1478 (9th Cir.
19
1986) (citing Burger King, 471 U.S. at 476-77). In other words, “[t]o have purposefully
20
availed itself of the privilege of doing business in the forum, a defendant must have
21
performed some type of affirmative conduct which allows or promotes the transaction of
22
business within the forum state.” Boschetto, 539 F.3d at 1016 (citation omitted).
23
In applying the purposeful availment standard, “we are guided by the Supreme
24
Court’s admonition that the formation of a contract with a nonresident defendant is not,
25
standing alone, sufficient to create jurisdiction.” Id. at 1017 (citing Burger King, 471 U.S.
26
at 478 (“If the question is whether an individual’s contract with an out-of-state party alone
27
can automatically establish sufficient minimum contacts in the other party’s home forum,
28
1 we believe the answer clearly is that it cannot.”)); see also Walden, 571 U.S. at 284 (in a
2 tort case, explaining that the Supreme Court has “consistently rejected attempts to satisfy
3 the defendant-focused ‘minimum contacts injury by demonstrating contacts between
4 plaintiffs (or third parties) and the forum state.”). In addition, “ordinarily use of the mails,
5 telephone, or other [ ] communications simply do not qualify as purposeful activity
6 invoking the benefits and protection of the [forum] state.” Roth v. Garcia Marquez, 942
7 F.2d 617, 622 (9th Cir. 1991) (second alteration in original) (quoting Peterson v. Kennedy,
8 771 F.2d 1244, 1262 (9th Cir. 1985)). “‘Prior negotiations and contemplated future
9 consequences, along with the terms of the contract and the parties’ actual course of dealing’
10 are the factors to be considered.” Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760
11 (9th Cir. 1990) (quoting Burger King, 471 U.S. at 479).
12 In Farmers Insurance Exchange v. Portage La Prairie Mutual Insurance Company,
13 907 F.2d 911 (9th Cir. 1990) (“Portage”), Lisa Lorango injured Claudia Kraemer in a
14 single-vehicle car accident in Montana. Lorango was driving a car owned by Canadian
15 resident John Kraemer. The car was insured under a policy issued by Canadian insurance
16 company Portage La Prairie Mutual Insurance Company (“Portage”) to John Kraemer. The
17 policy covered any person driving with the consent of the insured. Claudia Kraemer sued
18 Lorango in Montana state court, and Portage refused to defend Lorango. Lorango’s insurer,
19 Farmers Insurance Exchange (“Farmers”), settled the case by paying the policy limits and
20 sued Portage in federal district court for bad faith insurance and breach of contract. The
21 district court dismissed the case for lack of personal jurisdiction. 907 F.2d at 912.
22 The Court of Appeals for the Ninth Circuit reversed the decision of the district court.
23 The court of appeals determined that Portage purposefully availed itself of the benefits of
24 the Montana forum because “[i]ts policy coverage extends into Montana and an insured
25 event resulted in litigation there.” Id. at 913. The court stated:
26 [A]utomobile liability insurers contract to indemnify and defend the insured
for claims that will foreseeably result in litigation in foreign states. See
27
Rossman [v. State Farm Mut. Auto. Ins. Co.], 832 F.2d [282,] 286 [(4th Cir.
28
1 1987)][ ]. Thus litigation requiring the presence of the insurer is not only
foreseeable, but it was purposefully contracted for by the insurer. Moreover,
2
unlike a product seller or distributor, an insurer has the contractual ability to
3 control the territory into which its “product”—the indemnification and
defense of claims—will travel.
4

5 We agree with the Fourth Circuit in Rossman. Portage’s territorial policy limit
included Montana within its scope. Portage controlled its own amenability to
6
suit. We therefore hold that Portage purposefully availed itself of the Montana
7 forum when it contracted to indemnify and defend claims arising there.

8
Id. at 914.
9
In this case, Sodexo has provided evidence that Old Republic is licensed to conduct
10
business in California and maintains offices in California.3 (See Exs. 7, 8 to Long Decl.,
11
ECF No. 16-2 at 55, 57). The Old Republic policy at issue in this case was issued to Cargill
12
in Minnesota from Old Republic in Wisconsin. (See Policy, Ex. K to Fitzgerald Decl., ECF
13
No. 6-2 at 139-140). The policy includes as an insured “[a]ny person or organization with
14
whom [Cargill] ha[s] agreed to include as an additional insured under a written contract,
15

16
17 2 In Rossman, the driver of a car covered by Illinois liability insurance was involved in an accident in
Virginia that resulted in the death of the driver of a second car. The surviving driver’s policy with
18 Consolidated Insurance Company (“Consolidated”) provided coverage in “The United States of America,
its territories or possessions[.]” 832 F.2d at 285. The family of the deceased driver filed suit in the federal
19 district court in Virginia against various insurers for a determination of insurance coverage. Consolidated
denied personal jurisdiction because it did no business in Virginia and had no agents there, the policy was
20
sold in Illinois, and the insured car was principally garaged in Illinois. The Court of Appeals for the Fourth
21 Circuit held that Consolidated had sufficient contacts with Virginia “such that [it] should reasonably
anticipate being haled into court there.” Id. at 286 (quoting World-Wide Volkswagen, 444 U.S. at 297).
22 The court stated that “an automobile liability policy is typically sued upon where an accident takes place
. . . . As an automobile liability insurer, Consolidated could anticipate the risk that its clients would travel
23 in their automobiles to different states and become involved in accidents and litigation there.” Id. (citation
omitted). The court stated that had Consolidated wished to avoid suit in Virginia, “it could have excluded
24
that state from the ‘policy territory’ defined in the policy.” Id. at 287.
25
3 In King v. Am. Family Mut. Ins. Co., 632 F.3d 570 (9th Cir. 2011), the Court of Appeals for the Ninth
26 Circuit concluded that although a car accident took place in Montana under a policy that provided
nationwide coverage, Montana’s long arm statute did not permit exercise of personal jurisdiction over an
27 insurer in a breach of contract dispute that “has no offices or agents in Montana, does not advertise [t]here,
and is not authorized to conduct business in Montana as a foreign insurer.” 632 F.3d at 580 (citation
28
1 provided such contract was executed prior to the date of loss,” for liability for bodily injury
2 “caused, in whole or in part, by [Cargill’s] acts or omissions or the acts or omissions of
3 those acting on [Cargill’s] behalf in the performance of [Cargill’s] ongoing operations . . .
4 .” (Id. at 157). The policy provides that Old Republic will “pay those sums that the insured
5 becomes legally obligated to pay as damages because of ‘bodily injury’ . . . to which this
6 insurance applies” and will “defend the insured against any ‘suit’ seeking those damages”
7 where the injury occurred “in the ‘coverage territory.’” (Id. at 141). The policy defines the
8 “Coverage territory” as “The United States of America (including its territories and
9 possessions), Puerto Rico and Canada.” (Id. at 153).
10 Sodexo alleges in the Complaint that under its contract with Cargill, Cargill agreed
11 to include Sodexo as an additional insured under the policy. The plaintiffs in the
12 Underlying Actions sued Sodexo and Cargill in California federal and state court for
13 personal injuries arising from the ingestion of ground beef manufactured by Cargill and
14 prepared by Sodexo in California. The Old Republic policy contemplates that claims
15 against Cargill or against additional insureds who contract with Cargill may accrue in
16 California. Old Republic had the contractual ability to control the territory for which it
17 would indemnify or defend claims and explicitly chose to include California within its
18 scope. See Portage, 907 F.2d at 914. Based on the allegations in the Complaint and the
19 jurisdictional evidence presented by the parties, the Court concludes that Sodexo has made
20 a prima facie showing that Old Republic purposefully availed itself of the forum state.
21 “Under the second prong of our personal jurisdiction analysis, the plaintiff’s claim
22 must be one which arises out of or relates to the defendant’s forum-related activities.”
23 Menken v. Emm, 503 F.3d 1050, 1058 (9th Cir. 2007), as amended (Sept. 20, 2007);
24 Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1780 (2017). “In determining
25 whether [the plaintiff]’s claims arise out of [the defendant]’s forum related conduct, ‘the
26 Ninth Circuit follows a but for test.’” Id. (quoting Myers v. Bennett Law Offices, 238 F.3d
27 1068, 1075 (9th Cir. 2001)). “[The plaintiff] must show that he would not have suffered an
28 injury ‘but for’ [the defendant]’s forum-related conduct.” Id.; see Ballard, 65 F.3d at 1500
1 (“[B]ut for Royal’s contacts with the United States and California, would Ballard’s claims
2 against the Bank have arisen?”); Portage, 907 F.2d at 914-15 (“But for Portage’s alleged
3 breach of promise to defend its insured for injuries caused in Montana, this suit would not
4 have arisen. The second prong is satisfied.”). In this case, but for Old Republic’s alleged
5 breach of its promise to defend and indemnify its insureds and additional insureds who
6 contract with its insureds for bodily injury occurring in California, this suit would not have
7 arisen. The Court concludes that Sodexo has made a prima facie showing that this suit
8 arises out of Old Republic’s contacts with the forum state.
9 “The final requirement for specific jurisdiction . . . is reasonableness. For jurisdiction
10 to be reasonable, it must comport with fair play and substantial justice.” Bancroft &
11 Masters, 223 F.3d at 1088. The defendant bears the burden to demonstrate
12 unreasonableness and must “present a compelling case that the presence of some other
13 considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477. In
14 determining whether the exercise of jurisdiction would be reasonable, the court balances:
15 1) the extent of the defendant’s purposeful interjection into the forum state’s
affairs; 2) the burden on the defendant; 3) conflicts of law between the forum
16
and defendant’s home jurisdiction; 4) the forum’s interest in adjudicating the
17 dispute; 5) the most efficient judicial resolution of the dispute; 6) the
plaintiff’s interest in convenient and effective relief; and 7) the existence of
18
an alternative forum.
19
Roth, 942 F.2d at 623 (citations omitted).
20
In this case, Old Republic voluntarily provided insurance coverage for personal
21
injury occurring throughout the United States. Old Republic should have reasonably
22
anticipated being haled into court in any forum within the coverage territory, including
23
California. The burden on Old Republic is low, because its attorneys are already litigating
24
the Underlying Actions in California. Although Old Republic asserts that Minnesota law,
25
rather than California law applies to this action, it acknowledges that “there is no real
26
discernable conflict between the law of California and Minnesota . . . .” (ECF No. 18 at 5).
27
The Court concludes that Old Republic has not presented a compelling case that the Court’s
28
1 exercise of jurisdiction would be unreasonable or unfair. See Ballard, 65 F.3d at 1502
2 (describing the “heavy burden of presenting a ‘compelling case’ against jurisdiction”). The
3 Court concludes that Sodexo has made a prima facie showing that the Court has personal
4 jurisdiction over Old Republic. The Motion to Dismiss Complaint for lack of personal
5 jurisdiction is denied.
6 III. FAILURE TO STATE A CLAIM
7 Old Republic moves to dismiss the Complaint on the grounds that Sodexo fails to
8 state a claim upon which relief can be granted.
9 Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal for “failure
10 to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In order to state
11 a claim for relief, a pleading “must contain . . . a short and plain statement of the claim
12 showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Dismissal under Rule
13 12(b)(6) “is proper only where there is no cognizable legal theory or an absence of
14 sufficient facts alleged to support a cognizable legal theory.” Shroyer v. New Cingular
15 Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citation omitted).
16 “To survive a motion to dismiss, a complaint must contain sufficient factual matter,
17 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
18 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
19 “A claim has facial plausibility when the plaintiff pleads factual content that allows the
20 court to draw the reasonable inference that the defendant is liable for the misconduct
21 alleged.” Id. (citation omitted). However, “a plaintiff’s obligation to provide the ‘grounds’
22 of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic
23 recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555
24 (alteration in original) (quoting Fed. R. Civ. P. 8(a)). A court is not “required to accept as
25 true allegations that are merely conclusory, unwarranted deductions of fact, or
26 unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.
27 2001). “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual
28 content, and reasonable inferences from that content, must be plausibly suggestive of a
1 claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.
2 2009) (citation omitted).
3 a. Judicial Notice
4 Old Republic and Sodexo request that the Court take judicial notice of certain filings
5 in the Underlying Actions. (Requests for Judicial Notice, ECF No. 6-4, 16-3). It is
6 appropriate for a court to take judicial notice of court filings and other matters of public
7 record, such as pleadings in related litigation. See Reyn’s Pasta Bella, LLC v. Visa USA,
8 Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006). The Court takes judicial notice of all of the
9 filings in the ten Underlying Actions.
10 b. Choice of Law
11 Old Republic asserts that the Court should apply Minnesota law to interpret the
12 insurance policy. Old Republic contends that because the policy contains no choice of law
13 provision and does not indicate a place of performance, the Court should apply the law of
14 the place where the contract was made.
15 Sodexo asserts that the Court should apply California law. Sodexo contends that the
16 place of performance is the place of the insured risk: in this case, California. Sodexo
17 contends that Old Republic fails to meet its burden to identify a material conflict between
18 California and Minnesota law.
19 “Federal courts sitting in diversity must apply ‘the forum state’s choice of law rules
20 to determine the controlling substantive law.’” Fields v. Legacy Health Sys., 413 F.3d 943,
21 950 (9th Cir. 2005) (quoting Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002)). The foreign
22 law proponent has the burden to show that foreign law, rather than California law, should
23 apply to the plaintiff’s claims. See Espinoza v. Ahearn (In re Hyundai v. Kia Fuel Econ.
24 Litig.), 926 F.3d 539, 561 (9th Cir. 2019) (en banc), as amended (June 12, 2019). To meet
25 their burden, the foreign law proponent must satisfy California’s three-step “governmental
26 interest” test. Id. (citing Wash. Mut. Bank v. Superior Court, 24 Cal. 4th 906, 919-20 (Cal.
27 2001).
28
1 Under the first step of the governmental interest approach, the foreign law
proponent must identify the applicable rule of law in each potentially
2
concerned state and must show it materially differs from the law of California
3 . . . . If . . . the trial court finds the laws are materially different, it must proceed
to the second step and determine what interest, if any, each state has in having
4
its own law applied to the case . . . . Only if the trial court determines that the
5 laws are materially different and that each state has an interest in having its
own law applied, thus reflecting an actual conflict, must the court take the
6
final step and select the law of the state whose interests would be “more
7 impaired” if its law were not applied.

8
Wash. Mut. Bank, 24 Cal. 4th at 919-20 (citations omitted). The preference is to apply
9
California law, rather than choose the foreign law. See Strassberg v. New England Mut.
10
Life Ins. Co., 575 F.2d 1262, 1264 (9th Cir. 1978).
11
In this case, Old Republic acknowledges that “there is no real discernable conflict
12
between the law of California and Minnesota with regard to the insurance issues presented
13
in the Motion [to Dismiss].” (ECF No. 18 at 6). Old Republic fails to show that the law of
14
Minnesota “materially differs from the law of California . . . .” Wash. Mut. Bank, 24 Cal.
15
4th at 919. Old Republic has not met its burden to show that the Court should apply
16
Minnesota law. The Court applies California law to interpret the insurance policy.
17
c. Duty to Defend
18
Sodexo brings claims against Old Republic for breach of contract (failure to defend)
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and for declaratory relief (duty to defend). Old Republic contends that it has no duty to
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defend Sodexo in the Underlying Actions in state or federal court. Old Republic contends
21
that the plaintiffs in the Underlying Actions in California state court do not allege that any
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act or omission by Cargill caused their injuries, so Sodexo does not qualify as an additional
23
insured under the policy. Old Republic contends that it has no duty to defend Sodexo in
24
the Underlying Actions in federal court because there is a conflict of interest between
25
Cargill and Sodexo as an indemnitee of Cargill, eliminating Old Republic’s obligation to
26
defend Sodexo under the Supplementary Payments Provision of the policy.
27
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1 Sodexo contends that the Motion to Dismiss is an improper motion for summary
2 judgment. Sodexo contends that it is an additional insured under the terms of the policy.
3 Sodexo contends that the Supplementary Payments Provision does not discharge Old
4 Republic’s duty to defend Sodexo as an additional insured under the terms of the policy.
5 Sodexo contends that there is a possibility of a potential for coverage of the Underlying
6 Actions, so Old Republic has a duty to defend.
7 Under California law, the elements of a cause of action for breach of contract are:
8 “(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s
9 breach, and (4) damage to plaintiff therefrom.” Wall St. Network, Ltd. v. N.Y. Times Co.,
10 164 Cal. App. 4th 1171, 1178 (2008) (citation omitted). Federal courts apply state law to
11 interpret an insurance policy. See Travelers Prop. Cas. Co. of Am. v. ConocoPhillips Co.,
12 546 F.3d 1142, 1145 (9th Cir. 2008) (citing Manzarek v. St. Paul Fire & Marine Ins. Co.,
13 519 F.3d 1025, 1031 (9th Cir. 2008)). “The ordinary rules of contract interpretation apply
14 equally to contracts of insurance.” Am. Alternative Ins. Corp. v. Superior Court, 135 Cal.
15 App. 4th 1239, 1245 (2006) (citing Palmer v. Truck Ins. Exch., 21 Cal. 4th 1109, 1115
16 (1999)). Courts “read a contract as a whole in order to ‘give effect to every part, if
17 reasonably practicable, each clause helping to interpret the other.’” Van Ness v. Blue Cross
18 of Cal., 87 Cal. App. 4th 364, 372 (quoting Cal. Civ. Code § 1641). “Where contract
19 language is clear and explicit and does not lead to an absurd result, [the court] ascertain[s]
20 [the parties’] intent from the written provisions and go[es] no further.” Id. (citing Cal. Civ.
21 Code §§ 1638, 1639; AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807, 822 (1990)); see Bank
22 of the W. v. Superior Court, 2 Cal. 4th 1254, 1264 (1992) (if a policy’s language is “clear
23 and explicit, it governs”). “[I]nsurance coverage is interpreted broadly so as to afford the
24 greatest possible protection to the insured . . . .” MacKinnon v. Truck Ins. Exch., 31 Cal.
25 4th 635, 648 (2003) (citation omitted), as modified on denial of reh’g (Sept. 17, 2003).
26 Where an insurance contract imposes a duty to defend on an insurer, the insurer
27 “owes a broad duty to defend its insured against claims that create a potential for
28 indemnity.” Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 295 (1993) (citations
1 omitted). “[T]he duty to defend is so broad that it only requires ‘a bare potential or
2 possibility of coverage as the trigger of a defense duty.’” Nat’l Union Fire Ins. Co. v.
3 Seagate Techs., Inc., 466 F. App’x 653, 655 (9th Cir. 2012) (quoting Montrose, 6 Cal. 4th
4 at 300). However, the duty to defend does not arise “if the third party complaint can by no
5 conceivable theory raise a single issue which could bring it within the policy coverage.”
6 La Jolla Beach & Tennis Club, Inc. v. Indus. Indem. Co., 9 Cal. 4th 27, 39 (1994) (citations
7 omitted).
8 “[T]he existence of a duty to defend turns . . . upon those facts known by the insurer
9 at the inception of a third party lawsuit.” Montrose, 6 Cal. 4th at 295 (citation omitted).
10 The court “compar[es] the allegations of the third party complaint with the terms of the
11 policy.” El-Com Hardware, Inc. v. Fireman’s Fund Ins. Co., 92 Cal. App. 4th 205, 212
12 (2001). The proper focus is on the facts alleged, rather than the theories for recovery. See
13 Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 276 (1966) (en banc). “[T]he duty to defend arises
14 when the facts alleged in the underlying complaint give rise to a potentially covered claim
15 regardless of the technical legal cause of action pleaded by the third party.” Barnett v.
16 Fireman’s Fund Ins. Co., 90 Cal. App. 4th 500, 510 (2001) (citation omitted).
17 In this case, Sodexo alleges that it is an additional insured under the insurance policy
18 issued to Cargill by Old Republic. The policy states that Old Republic will “pay those sums
19 that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or
20 ‘property damage’ to which this insurance applies. [Old Republic] will have the right and
21 duty to defend the insured against any ‘suit’ seeking those damages.” (Policy, ECF No. 6-
22 2 at 1414). Bodily injury is “bodily injury, sickness or disease sustained by a person,
23 including death resulting from any of these at any time.” (Id. at 153). The insured includes
24

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26 4 Under the “incorporation by reference” doctrine, the court on a motion to dismiss may consider
“documents ‘whose contents are alleged in a complaint and whose authenticity no party questions, but
27 which are not physically attached to the [plaintiff’s] pleading.’” Knievel v. ESPN, 393 F.3d 1068, 1076
(9th Cir. 2005) (alteration in original) (quoting In re Silicon Graphic Inc. Sec. Litig., 183 F.3d 970, 986
28
1 Cargill and “[a]ny person or organization with whom [Cargill] ha[s] agreed to include as
2 an additional insured under a written contract, provided such contract was executed prior
3 to the date of loss,” for liability for bodily injury “caused, in whole or in part, by [Cargill’s]
4 acts or omissions or the acts or omissions of those acting on [Cargill’s] behalf in the
5 performance of [Cargill’s] ongoing operations . . . .” (Id. at 157). The Supplementary
6 Payments Provision of the policy further provides criteria for Old Republic’s defense of an
7 “indemnitee of the insured,” including that “no conflict appears to exist between the
8 interests of the insured and the interests of the indemnitee.” (Id. at 149).
9 In the Complaint, Sodexo alleges that it entered into contract with Cargill that
10 required Cargill to include Sodexo as an additional insured under its Old Republic
11 insurance policy. Sodexo alleges that Marines and Marine recruits filed ten actions against
12 Sodexo in San Diego state and federal court “in connection with an illness allegedly caused
13 by the ingestion of ground beef manufactured by Cargill and prepared by Sodexo in
14 October 2017.” (Ex. A to Notice of Removal, ECF No. 1-2 at 6 ¶ 10). The Underlying
15 Actions in federal court name both Sodexo and Cargill as defendants and allege that the
16 Marines became sick from ingesting ground beef that was contaminated with e-coli during
17 Cargill’s manufacture or production of the ground beef and served by Sodexo without
18 reaching the required internal temperature. Sodexo and Cargill seek indemnification from
19 each other. The Underlying Actions in California state court do not name Cargill as a
20 defendant, but they allege that the Marines became sick from ingesting ground beef that
21 was contaminated with e-coli and served without reaching the required internal temperature
22 and are based on the same facts as the Underlying Actions in federal court. Sodexo alleges
23 that it tendered the defense of the Underlying Actions to Old Republic, and Old Republic
24 refused to provide a defense.
25 The Court concludes that the Old Republic policy, the complaints in the Underlying
26 Actions, and Sodexo’s factual allegations support an inference that the plaintiffs in the
27 Underlying Actions alleged damages for bodily injury against Sodexo caused in whole or
28 in part by Cargill and support an inference that there is a possibility that Sodexo is covered
1 as an additional insured under the policy. The Old Republic policy, the complaints in the
2 Underlying Actions, and Sodexo’s factual allegations support an inference that there is a
3 possibility of coverage triggering Old Republic’s duty to defend Sodexo in the Underlying
4 Actions, and Old Republic breached the duty to defend. The Motion to Dismiss the claims
5 for breach of contract (failure to defend) and for declaratory relief (duty to defend) is
6 denied.
7 d. Duty to Indemnify
8 Sodexo brings claims against Old Republic for breach of contract (failure to
9 indemnify) and for declaratory relief (duty to indemnify). Old Republic contends that it has
10 no duty to indemnify Sodexo in the Underlying Actions because the Underlying Actions
11 are still being litigated, and no liability against Sodexo has been established.
12 Sodexo contends that it sufficiently states claims related to the duty to indemnify.
13 Sodexo contends that “[w]hile the amount of indemnity remains unknown, due to the
14 ongoing nature of the Underlying Actions, Old Republic’s actions are nothing short of bad
15 faith.” (ECF No. 16 at 20).
16 “Although correlative, the duty to indemnify and the duty to defend are not
17 ‘coterminous.’ They differ in their triggering: Whereas the duty to indemnify can arise only
18 after damages are fixed in their amount the duty to defend may arise as soon as damages
19 are sought in some amount.” Certain Underwriters at Lloyd’s of London v. Superior Court,
20 24 Cal. 4th 945, 958 (2001) (citations omitted). “[A]n insured . . . has a duty to indemnify
21 only where a judgment has been entered” against the insured “on a theory which is actually
22 (not potentially) covered by the policy.” Collin v. Am. Empire Ins. Co., 21 Cal. App. 4th
23 787, 803 (1994) (citations omitted). “[T]he question whether an insurer has a duty to
24 indemnify the insured on a particular claim is ripe for consideration only if the insured has
25 already incurred liability in the underlying action.” Armstrong World Indus., Inc. v. Aetna
26 Cas. & Sur. Co., 45 Cal. App. 4th 1, 108 (1996).
27 In this case, Sodexo does not allege that any judgment has been entered against it in
28 any of the Underlying Actions. The Underlying Actions are ongoing, and the dockets do
1 not reflect that Sodexo has incurred liability. Accordingly, Sodexo fails to allege facts
2 sufficient to support an inference that Old Republic has a duty to indemnify Sodexo in the
3 Underlying Actions. The claims for breach of contract (failure to indemnify) and for
4 declaratory relief (duty to indemnify) are premature. The Motion to Dismiss the claims for
5 breach of contract (failure to indemnify) and for declaratory relief (duty to indemnify) is
6 granted.
7 e. Good Faith and Fair Dealing
8 Sodexo brings a claim against Old Republic for breach of the implied covenant of
9 good faith and fair dealing. Old Republic contends that there has been no breach of contract
10 by Old Republic, so there is no breach of the duty of good faith and fair dealing. Sodexo
11 contends that Old Republic’s actions constitute bad faith.
12 “It has long been settled that an implied covenant of good faith and fair dealing exists
13 in every insurance contract that neither party will do anything to injure the right of the other
14 to receive benefits under the agreement.” Schwartz v. State Farm Fire & Cas. Co., 88 Cal.
15 App. 4th 1329, 1336 (2001) (citing Comunale v. Traders & Gen. Ins. Co., 50 Cal. 2d 654,
16 658 (1958)), as modified on denial of reh’g (June 5, 2001). “An insurer owes the duty of
17 good faith and fair dealing to each of its insureds, and cannot favor the interests of one
18 insured over the other.” Lehto v. Allstate Ins. Co., 31 Cal. App. 4th 60, 72 (1994) (citing
19 Strauss v. Farmers Ins. Exch., 26 Cal. App. 4th 1017, 1021 (1994)), as modified (Jan. 13,
20 1994). “[T]he insurer ‘must give at least as much consideration to the [insured’s] interests
21 as it does to its own.’” Schwartz, 88 Cal. App. 4th at 1336 (second alteration in original)
22 (quoting Egan v. Mut. of Omaha Ins. Co., 24 Cal. 3d 809, 818 (1979)). To establish a claim
23 for breach of the implied covenant of good faith and fair dealing, “(1) benefits due under
24 the policy must have been withheld; and (2) the reason for withholding benefits must have
25 been unreasonable or without proper cause.” Love v. Fire Ins. Exch., 221 Cal. App. 3d
26 1136, 1151 (1990).
27 In this case, the Court has determined that Sodexo sufficiently states a claim for
28 breach of the duty to defend. Sodexo alleges that Old Republic deliberately and
1 |/unreasonably breached the duty of good faith and fair dealing including by failing to
2 conduct a reasonable investigation into Sodexo’s request for a defense in the Underlying
3 || Actions, failing to timely respond to Sodexo’s tender, and refusing to provide a defense to
4 ||Soxedo in the Underlying Actions. The Court concludes that Sodexo sufficiently states a
5 ||claim for breach of the implied covenant of good faith and fair dealing. The Motion to
6 ||Dismiss the claim for breach of the implied covenant of good faith and fair dealing 1s
7 || denied.
8 CONCLUSION
9 IT IS HEREBY ORDERED that the Motion to Dismiss Complaint filed by
10 || Defendant Old Republic Insurance Company (ECF No. 6) is granted in part and denied in
11 The Motion to Dismiss is granted as to the claims for breach of contract (failure to
12 ||indemnify) and for declaratory relief (duty to indemnify) and is otherwise denied.
13 || Dated: January 25, 2021 Nitta Ze. A a
14 Hon, William Q. Hayes
15 United States District Court
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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10082930. Public record. Not legal advice.