Daimler “raised the bar” 4 for general jurisdiction and “require[s] more than the ‘substantial, continuous, and 5 systematic course of business’ that was once thought to suffice.”
How later courts described this case
- Daimler “raised the bar” 4 for general jurisdiction and “require[s] more than the ‘substantial, continuous, and 5 systematic course of business’ that was once thought to suffice.”
- no general jurisdiction where the plaintiff failed to 15 make a comparative assessment and instead solely focused on the defendant’s extensive 16 contacts in California
Written by the judges who cited it.
The opinion
1
2
3
4
5
6
7
8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10 ERIC KETAYI, MIRYAM KETAYI, both Case No.: 20-CV-1198-GPC-KSC
individually and on behalf of all others
11
similarly situated, and for the benefit of ORDER:
12 the general public,
(1) GRANTING IN PART
13 Plaintiffs,
PLAINTIFFS’ REQUEST FOR
14 v. JURISDICTIONAL DISCOVERY;
15 HEALTH ENROLLMENT GROUP, et
(2) GRANTING IN PART CCG’S
al.,
16 MOTION TO DISMISS;
Defendants.
17
(2) GRANTING HPI/HII’S MOTION
18 TO DISMISS;
19
(3) GRANTING ACI’S MOTION TO
20 DISMISS;
21
(4) GRANTING ACI’S MOTION FOR
22 JUDGMENT ON THE PLEADINGS;
and
23
24 (5) GRANTING IN PART OCG’S
MOTION TO DISMISS;
25
26
27
[ECF Nos. 142, 143, 145, 158]
28
1 Before the Court are Motions to Dismiss in Part the Third Amended Complaint of
2 Plaintiffs Eric Ketayi and Miryam Ketayi (“Plaintiffs”), filed by Defendants Health Plan
3 Intermediaries Holdings, LLC (“HPI”), Health Insurance Innovations Holdings, Inc.
4 (“HII”), Administrative Concepts, Inc. (“ACI”), and Ocean Consulting Group (“OCG”).
5 ECF Nos. 142, 145, 153. Also before the Court is a Motion to Dismiss Defendant Cost
6 Containment Group, Inc. (“CCG”) from the case for lack of personal jurisdiction. ECF
7 No. 143. The motions have been fully briefed.1 For the reasons set forth below, the
8 Court GRANTS IN PART Defendants’ motions to dismiss and motion for judgment on
9 the pleadings, and GRANTS IN PART Plaintiffs’ request for jurisdictional discovery.
10 Further, the Court finds that this matter is suitable for disposition without a hearing
11 pursuant to Civil Local Rule 7.1(d)(1) and hereby VACATES the hearing.
12 I. BACKGROUND
13 The Court has previously summarized the factual allegations underlying Plaintiff’s
14 claims in its Orders on earlier motions to dismiss filed by Defendants who filed the
15 instant motions, and others. ECF No. 130 at 2-5.
16 Plaintiffs Eric Ketayi and Miryam Ketayi filed their initial putative class action
17 complaint on June 26, 2020. ECF No. 1. On September 11, 2020, Plaintiffs filed their
18 First Amended Complaint (“FAC”). On February 2, 2021, the Court granted in part and
19 denied in part Defendants’ motions to dismiss the FAC. ECF No. 89. On April 23, 2021,
20 Plaintiffs filed the Second Amended Complaint (“SAC”). On July 8, 2021, the Court
21 granted in part and denied in part Defendants’ motions to dismiss the SAC. On July 28,
22 2021, Plaintiffs filed their Third Amended Complaint (“TAC”), which is very similar to
23 the TAC. ECF No. 134, Pls.’ Compl.; see ECF No. 134-1. The TAC asserts putative
24 class claims for (1) violations of California Unfair Competition Law (“UCL”), Cal. Bus.
25
26
1 Plaintiffs’ opposition papers and each Defendant’s reply briefs are filed, respectively, at: ECF Nos.
27 156 and 167 (HII/HPI); ECF Nos. 157 and 166 (ACI); ECF Nos. 165 and 170 (OCG); and 158 and 168
(CCG).
28
1 & Prof. Code §17200 et seq.; (2) false and misleading advertising under the False
2 Advertising Law (“FAL”), Cal. Bus. Prof. Code § 17500 et. seq. (against HEG, HPI, HII,
3 and the Axis Defendants); (3) fraud and deceit, Cal. Civ. Code §1709 (against HEG, HPI,
4 HII, and the Axis Defendants; (4) aiding and abetting fraud; (5) conspiracy to commit
5 fraud; (6) violation of Cal Ins. Code §782 (against Axis Insurance Company only); (7)
6 violation of the Racketeer Influence and Corrupt Organizations Act (“RICO”), 18 U.S.C.
7 §1961 et seq.; and (8) conspiracy to violate federal civil RICO, 18 U.S.C. §1961 et seq.
8 ECF No. 134 ¶¶ 173-257.
9 On August 18, 2021, HPI and HII filed their motion to dismiss counts 1 and 2 of
10 the TAC under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter
11 jurisdiction. ECF No. 142, HPI/HII Mot. On August 19, 2021, Defendant ACI moved to
12 join HPI and HII’s motion to dismiss under 12(b)(1), and moved for judgment on the
13 pleadings under 12(b)(3) as to count 1 for violation of the UCL. ECF No. 145, ACI Mot.
14 On September 3, 2021, OCG also moved to dismiss count 1 for violation of the UCL.
15 ECF No. 153, OCG Mot., at 3. On August 18, 2021, CCG filed its motion to dismiss
16 under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. ECF
17 No. 143, CCG Mot.
18 II. CCG’s Motion to Dismiss for Lack of Personal Jurisdiction
19 Defendant CCG moves to dismiss all claims from the TAC for lack of personal
20 jurisdiction under Federal Rule of Civil Procedure (“Rule”) 12(b)(2). ECF No. 143.
21 Plaintiffs opposes the motion. ECF No. 158.
22 a. Legal Standard
23 A defendant may move to dismiss a case based on lack of personal jurisdiction
24 under Federal Rule of Civil Procedure 12(b)(2). When the defendant challenges personal
25 jurisdiction, “the plaintiff bears the burden of establishing that jurisdiction is proper.”
26 Mavrix Photo, Inc. v. Brand Technologies, Inc., 647 F.3d 1218, 1223 (9th Cir. 2011).
27 “Federal courts ordinarily follow state law in determining the bounds of their jurisdiction
28
1 over persons.” Daimler AG v. Bauman, 571 U.S. 117, 125 (2014); see Mavrix Photo, 647
2 F.3d at 1223 (“Where, as here, no federal statute authorizes personal jurisdiction, the
3 district court applies the law of the state in which the court sits.”); see also Fed. R. Civ.
4 P. 4(k)(1)(A). Under California’s long-arm statute, California state courts may exercise
5 personal jurisdiction “on any basis not inconsistent with the Constitution of this state or
6 of the United States.” Cal. Civ. Proc. Code § 410.10. California’s long-arm statute is
7 coextensive with federal due process requirements, so “the jurisdictional analyses under
8 state law and federal due process are the same.” Schwarzenegger v. Fred Martin Motor
9 Co., 374 F.3d 797, 800–01 (9th Cir. 2004); Mavrix Photo, 647 F.3d at 1225. For the
10 exercise of jurisdiction to be consistent with due process, a defendant must have
11 sufficient “minimum contacts” with the forum state such that “maintenance of the suit
12 does not offend traditional notions of fair play and substantial justice.” Int’l Shoe Co. v.
13 Washington, 326 U.S. 310, 316 (1945) (quotations omitted).
14 When there has been no evidentiary hearing, a plaintiff need only put forth a prima
15 facie showing of jurisdictional facts. See CollegeSource, 653 F.3d at 1073; Data Disc,
16 Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). “Although the
17 plaintiff cannot simply rest on the bare allegations of its complaint, uncontroverted
18 allegations in the complaint must be taken as true.” Schwarzenegger, 374 F.3d at 800
19 (internal citations and quotation marks omitted). “It is only if the court takes evidence on
20 the issue or rules on the personal jurisdiction question in the context of a trial that a
21 heightened, preponderance of the evidence standard applies.” Mwani v. bin Laden, 417
22 F.3d 1, 7 (D.C. Cir. 2005).
23 / / /
24 / / /
25 / / /
26 / / /
27 / / /
28
1 b. Discussion
2 Plaintiffs primarily argue that the Court has specific personal jurisdiction over
3 CCG. Defendant CCG argues the Court lacks both general and specific jurisdiction, so
4 the Court considers each jurisdictional basis in turn.
5 i. General Personal Jurisdiction
6 “A court may assert general jurisdiction over foreign (sister-state or foreign
7 country) corporations to hear any and all claims against them when their affiliations with
8 the State are so ‘continuous and systematic’ as to render them essentially at home in the
9 forum State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919
10 (2011). As to corporations, “the place of incorporation and principal place of business
11 are ‘paradig[m] . . . bases for general jurisdiction.” Daimler, 571 U.S. at 137 (citation
12 omitted). Beyond these paradigm bases, only “in an exceptional case” should a court find
13 a corporation’s operations in the forum to be “so substantial and of such a nature as to
14 render the corporation at home in that State.” Id. at 139 n.19. Exceptional circumstances,
15 as noted in Daimler, do not exist merely whenever “a foreign corporation’s in-forum
16 contacts can be said to be in some sense ‘continuous and systematic,”’ but only when
17 “that corporation’s ‘affiliations with the State are so ‘continuous and systematic’ as to
18 render [it] essentially at home in the forum State.’” Id. at 139 (quoting Goodyear, 564
19 U.S. at 919). The Supreme Court in Daimler cited to its decision in Perkins v. Benguet
20 Consolidated Mining Co., 342 U.S. 437 (1952) to exemplify what constitutes “an
21 exceptional case.” Id. at 139 n.19. In Perkins, the Court held that an Ohio court could
22 exert general jurisdiction over an out-of-state corporation located in the Philippines,
23 because Ohio was the corporations’ principal, albeit temporary, place of business during
24 the Japanese wartime occupation of the Philippines, 342 U.S. at 447–48.
25 The Ninth Circuit has noted the “demanding nature of the standard for general
26 personal jurisdiction over a corporation.” Martinez v. Aero Caribbean, 764 F.3d 1062,
27 1070 (9th Cir. 2014). The Daimler court rejected the argument that a court has general
28
1 jurisdiction over a corporation when it “engages in a substantial, continuous, and
2 systematic course of business” in a state. Daimler, 571 U.S. at 138; see also Kipp v. Ski
3 Enter. Corp. of Wisconsin, 783 F.3d 695, 698 (7th Cir. 2015) (Daimler “raised the bar”
4 for general jurisdiction and “require[s] more than the ‘substantial, continuous, and
5 systematic course of business’ that was once thought to suffice.”); Amiri v. DynCorp
6 Int’l, Inc., Case No. 14cv3333 SC, 2015 WL 166910, at *3 (N.D. Cal. Jan. 13, 2015)
7 (noting that “in the overwhelming majority of cases there will be no occasion to explore
8 whether a Perkins-type exception might apply”).
9 The general jurisdiction inquiry does not “focus solely on the magnitude of the
10 defendant’s in-state contacts,” but must take into account a “corporation’s activities in
11 their entirety, nationwide and worldwide.” Daimler, 571 U.S. at 139 n.20. Therefore, any
12 general jurisdiction analysis must involve a comparative assessment of the defendant’s
13 business activities in different locations. See Lindora, LLC v. Isagenix Int’l, LLC, 198 F.
14 Supp. 3d 1127, 1137 (S.D. Cal. 2016) (no general jurisdiction where the plaintiff failed to
15 make a comparative assessment and instead solely focused on the defendant’s extensive
16 contacts in California). “If the magnitude of a corporation’s business activities in the
17 forum state substantially exceeds the magnitude of the corporation’s activities in other
18 places, general jurisdiction may be appropriate in the forum state.” Id.
19 In the February 2, 2021 Order addressing motions to dismiss the First Amended
20 Complaint, the Court previously found that Plaintiffs had failed to allege facts that a
21 group of Defendants were “essentially at home” in California, nor had they alleged facts
22 that amounted to “an exceptional case” that would justify the exercise of general personal
23 jurisdiction. ECF No. 89 at 11 (quoting Daimler, 571 U.S. at 119, 139 n. 19). So too
24 here. The facts in the TAC allege that CCG “is not licensed to sell, market, enroll,
25 underwrite, or administer insurance in California.” TAC ¶ 91. Therefore, the claims
26 against CCG arise primarily through its financing, management and direction of OCG.
27 Id. ¶¶ 93-94. Plaintiffs allege CCG itself and through OCG, entered a multi-party
28
1 contract with Plaintiffs through which CCG provided insurance-related needs, medical
2 savings and enhancement programs, and other applications and fulfillment process
3 materials and that they are “fully integrated into the insurance market and into this
4 scheme with the other Defendants.” TAC ¶ 96-97. As the Court found previously,
5 merely doing business or contracting to do business with other Defendants in California
6 does not give CCG sufficient continuous and systematic contacts with California to
7 support the exercise of general personal jurisdiction. See ECF No. 89 at 11. Further,
8 Plaintiffs have not made any serious attempt to allege facts that would lead the Court to
9 conclude CCG is more “at home” in California than they are in other states. See Ranza v.
10 Nike, Inc., 793 F.3d 1059, 1070 (9th Cir. 2015); Lindora, 198 F. Supp. 3d at 1137.
11 ii. Specific Personal Jurisdiction
12 Where a court seeks to assert specific jurisdiction over an out-of-state defendant
13 who has not consented to suit in the forum, the exercise of jurisdiction is consistent with
14 due process if the defendant has “purposefully directed” activities at residents of the
15 forum, Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984), and the litigation
16 results from alleged injuries that “arise out of or relate to” those activities, Helicopteros
17 Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). The Ninth Circuit
18 applies the following three-prong test for determining if the court has specific jurisdiction
19 over a non-resident defendant:
20 (1) the non-resident defendant must purposefully direct his activities or
consummate some transaction with the forum or resident thereof; or perform some
21
act by which he purposefully avails himself of the privilege of conducting
22 activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant’s forum-
23
related activities; and
24 (3) the exercise of jurisdiction must comport with fair play and substantial justice,
i.e., it must be reasonable.
25
26 Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1227 (9th Cir. 2011) (citing
27 Schwarzenegger, 374 F.3d at 802).
28
1 Opposing CCG’s motion, Plaintiffs have argued all three prongs are fulfilled
2 because CCG purposefully directed its conduct toward California, the allegations in the
3 complaint arise out of or relate to CCG’s activities in the forum, and CCG has not
4 demonstrated this Court’s jurisdiction is unreasonable. ECF No. 158 at 15-28. In the
5 TAC, Plaintiffs allege that CCG “directs Ocean Consulting Group’s day-to-day
6 operations,” and both CCG and OCG developed and provided plan documents,
7 fulfillment documents, and insurance ID cards. TAC ¶ 97. In addition, “together with
8 HII, HPI and the Axis Defendants was responsible for the development of the
9 ACUSA/Liberty Health fulfillment materials and ID card provided to Plaintiffs and the
10 putative class members.” Id. And Plaintiffs further maintain that CCG “does, in fact, do
11 business in California,” has been registered with the California Secretary of State since
12 2013, and reaches into California to provide insurance related services”. Id. ¶ 99.
13 CCG puts forth the declaration of Robert Hodes, Chief Executive Officer of Cost
14 Containment Group, attesting to CCG’s operations. ECF No. 143-1 (“Hodes Decl.”). Mr.
15 Hodes attests that “CCG has no employees in California,” that “CCG is not an insurance
16 carrier and does not issue insurance policies to residents of California or any other state,”
17 that “CCG does not hold a resident or nonresident insurance license issued by California,
18 Florida, or any other state,” that “CCG does not solicit business in California,” and “does
19 not sell or market insurance products,” and that “CCG has no contract, agreements or
20 arrangements with any insurance agents to sell or market insurance products.” Hodes
21 Decl. ¶ 2. However, “CCG is a holding company for its subsidiary corporations, and it
22 provides administrative services and support to its subsidiaries.” Id.
23 In their opposition papers, Plaintiffs put forth the Declaration of Joanna Fox in
24 which she attests that her office made a demand on various defendants, including the HII
25 defendants in August 2020, for all personal information concerning Plaintiffs. ECF No.
26 158-1, Fox Decl. ¶ 2. In response to the demand, HII Defendants produced a letter dated
27 February 4, 2020 from HII’s counsel to the California Department of Insurance. Id. ¶ 3.
28
1 In the letter, HII’s counsel explained “Once Mr. Ketayi made the decision to purchase the
2 policy, he was transferred to Cost Containment Group (“CCG”) to complete the
3 transaction . . . CCG was responsible for verification of Mr. Ketayi’s purchase, his
4 enrollment in the plan and customer service. We have confirmed with CCG that Mr.
5 Ketayi spoke to one of their staff.” ECF No. 158-2, Ex. A. to Fox Decl., at 2-3. Ms. Fox
6 further attests that “[o]n more than one occasion after that date, I asked CCG’s counsel
7 for relevant documents to show that CCG was not involved in this scheme, including any
8 applicable contracts with Axis, HII, or other defendants. None were ever provided.” Fox
9 Decl. ¶ 4.
10 CCG has contested the accuracy of HII’s representations in the HII letter.
11 Specifically, Mr. Hodes attested Plaintiffs “incorrectly allege that CCG was ‘responsible
12 for verification of Mr. Ketayi’s purchase.’” Hodes Decl. ¶ 6 (citing TAC ¶ 90, 99). Mr.
13 Hodes attests that the agent who spoke with Mr. Ketayi was with Health Enrollment
14 Group and that Mr. Martinez confirmed as much in a letter to the California Department
15 of Insurance. See ECF No. 143-2, Ex.1 to Hodes Decl. Further, “CCG was not
16 responsible for the marketing, sale, enrollment or verification process of the Liberty
17 Health Plan to Plaintiffs” and “CCG also did not create or distribute fulfillment books or
18 ID cards for Plaintiffs’ Liberty Health Plan” and “[i]n fact, CCG did not contact Plaintiffs
19 in any capacity” and “CCG does not do any work on behalf of Axis Insurance Company
20 or any of its related entities.” Hodes Decl. ¶¶ 8-9.
21 The Court must only accept as true the “uncontroverted allegations in the
22 complaint.” Schwarzenegger, 374 F.3d at 800. Defendants contest the truth of Plaintiffs’
23 allegations which support exercise of specific personal jurisdiction, essentially claiming
24 that it was other corporations among Defendants who were responsible for the
25 transactions which Plaintiffs attributes to CCG. See Hodes Decl. ¶ 9 (“Axis’ letter
26 specifies each entity involved in each step of the process. Neither CCG or Ocean
27 Consulting are referenced at any point in this letter”). And further, CCG argue that
28
1 “CCG has presented evidence that it was not involved in the verification process, while
2 Plaintiffs rely only on an unsworn letter written by an attorney with no personal
3 knowledge of the underlying facts,” so Plaintiffs have failed to support their assertions
4 about CCG’s involvement because they rely only on their own allegations, rather than
5 any evidence contravening CCG’s refutations. ECF No. 168, CCG Reply, at 5.
6 The Court first considers whether these facts suffice to show that ACI purposefully
7 directed activity towards California or purposefully availed itself of doing business in
8 California. Plaintiffs assert that because the complaint alleges tort claims, the Court
9 should apply the “effects” test laid out in Calder v. Jones, 465 U.S. 783 (1984), which
10 requires the defendant to have “(1) committed an intentional act, (2) expressly aimed at
11 the forum state, (3) causing harm that the defendant knows is likely to be suffered in the
12 forum state.” AMA Multimedia, LLC v. Wanat, 970 F.3d 1201, 1208 (9th Cir. 2020)
13 (quoting Mavrix, 647 F.3d at 1228). See ECF No. 158, Pls.’ Opp., at 16. CCG does not
14 argue one way or the other, but seemingly proceeds under the purposeful availment
15 theory. ECF No. 143, CCG Mot., at 12-16.
16 As to the first prong, it is a close question whether Plaintiffs have alleged specific
17 conduct by CCG that could be considered an “intentional act” which CCG has not also
18 contested and provided evidence which tends to rebut its involvement in that conduct.
19 The only direct conduct by CCG alleged by Plaintiffs is that a CCG agent spoke with Mr.
20 Ketayi during the verification process. TAC ¶ 90. However, CCG directly contests this
21 allegation, and provides documentary evidence that would tend to refute these facts.
22 They are therefore not “uncontroverted facts” for the purpose of this inquiry. If indeed
23 CCG was responsible for the verification of Mr. Ketayi’s insurance enrollment and an
24 agent of CCG completed the process over the phone, as alleged in the HII letter, then all
25 three prongs would likely be fulfilled. The crux of the purposefulness inquiry is whether
26 the defendant’s involvement in the forum state is merely “random, fortuitous, or
27 attenuated contacts” or the “unilateral activity” of the plaintiff. Walden v. Fiore, 571
28
1 U.S. 277, 286 (2014) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475
2 (1985). In this case, there are no uncontested facts which support a conclusion that CCG
3 directed activities at California.
4 Plaintiffs also seek to establish this Court’s personal jurisdiction over CCG through
5 an agency theory, as OCG is a subsidiary of and “alter ego” of CCG. Here, Plaintiffs
6 have put forth a prima facie case that CCG directs the actions of OCG, and that CCG
7 itself played a role in the facts alleged in the complaint. However, again, many of
8 Plaintiffs’ assertions are contested by CCG in their motion. For example, Plaintiffs
9 alleged that CCG and OCG’s alter-ego relationship is such that they do not maintain
10 separate bank accounts or other basic corporate formalities. TAC ¶ 89. Mr. Hodes
11 contested that allegation, stating “CCG and Ocean Consulting enter into contracts on
12 their own behalf, maintain their own separate bank accounts, finances, and accounting
13 records. There is no co-mingling of funds between CCG and Ocean Consulting.” Hodes
14 Decl. ¶ 4. The Court is unable to find any concrete evidence that CCG directed, ratified,
15 or had control over the actions of OCG in California in this case. Accordingly, the Court
16 finds that Plaintiffs have failed to establish that this Court may properly exercise specific
17 jurisdiction over defendant CCG because there is no uncontroverted evidence that CCG
18 purposefully directed its activities at California, nor that CCG had any forum-related
19 activities. The Court therefore GRANTS CCG’s motion to dismiss for lack of personal
20 jurisdiction.
21 iii. Jurisdictional Discovery
22 In their opposition, Plaintiffs request jurisdictional discovery should the motions to
23 dismiss for lack of personal jurisdiction be granted. ECF No. 158 at 29. Jurisdictional
24 “[d]iscovery should ordinarily be granted where ‘pertinent facts bearing on the question
25 of jurisdiction are controverted or where a more satisfactory showing of the facts is
26 necessary.’” Butcher’s Union Local No. 498, United Food & Commercial Workers v.
27 SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986) (quoting Data Disc, 557 F.2d at 1285
28
1 n.1). The decision to permit or deny jurisdictional discovery lies in the Court’s discretion,
2 but “[i]t would . . . be counterintuitive to require a plaintiff, prior to conducting
3 discovery, to meet the same burden that would be required in order to defeat a motion to
4 dismiss.” Orchid Biosciences, Inc., v. St. Louis Univ., 198 F.R.D. 670, 673 (S.D. Cal.
5 2001). At the same time, however, the plaintiff “must at least make a ‘colorable’
6 showing that the Court can exercise personal jurisdiction over the defendant.” Mitan v.
7 Feeney, 497 F. Supp. 2d 1113, 1119 (C.D. Cal. 2007). Jurisdictional discovery should be
8 denied where “it is clear that further discovery would not demonstrate facts sufficient to
9 constitute a basis for jurisdiction.” Wells Fargo & Co v. Wells Fargo Express Co., 556
10 F.2d 406, 430 n.24 (9th Cir. 1977). A district court does not abuse its discretion when the
11 plaintiff’s request for jurisdictional discovery is “based on little more than a hunch that it
12 might yield jurisdictionally relevant facts.” Boschetto v. Hansing, 539 F.3d 1011, 1020
13 (9th Cir. 2008).
14 The Court continues to recognize that Plaintiffs have alleged that “Defendants
15 purposefully disguise the entity that is responsible for each step in Defendants’
16 coordinated scheme.” TAC ¶ 106. And furthermore, Plaintiffs assert they have
17 attempted to clarify CCG’s role in the conduct alleged in the complaint, to no avail. See
18 Fox Decl. As a result, the extent of CCG’s own involvement in, as well as its oversight,
19 control, and direction of OCG’s activities as alleged by Plaintiffs’ complaint all remains
20 very unclear and is contested by the parties. While Plaintiffs’ allegations do not support a
21 finding of specific personal jurisdiction because CCG contested the underlying facts,
22 Plaintiffs have made a colorable showing that there may be a basis for the Court to
23 exercise personal jurisdiction over CCG. Of concern to the Court is that while Mr. Hodes
24 attests certain facts that contradict Plaintiffs’ complaint, Plaintiffs have also alleged that
25 “[e]ven upon significant investigation it is near impossible to discern what role each
26 individual Defendant played and Defendants themselves have misidentified their roles to
27 the California Department of Insurance.” Id. The Court acknowledges the reality of the
28
1 situation: Plaintiffs have based their allegations on the little information they are able to
2 acquire, which is not sufficient for personal jurisdiction. At the same time, the Court
3 should also not blindly rely on the attestations of interested individuals, nor can the Court
4 make a determination as to whether the Axis letter or the HII letter is more accurate in
5 describing CCG’s involvement or lack thereof without more information than that which
6 is currently before the Court. The Court will therefore GRANTS IN PART Plaintiffs’
7 motion for jurisdictional discovery, and will allow Plaintiffs limited jurisdictional
8 discovery into CCG’s involvement in the verification, enrollment, and fulfillment process
9 for Plaintiffs’ insurance plans.
10 IV. Motions to Dismiss for Lack of Standing to Seek Injunctive Relief
11 Defendants HPI/HII ask the Court to dismiss under Rule 12(b)(1) Plaintiffs’ claims
12 for violations of the UCL (count 1) and FAL (count 2) because Plaintiffs lack standing
13 for injunctive relief. ECF No. 142, HPI/HII Mot., at 8-18. Defendant ACI moves to join
14 HPI/HII’s motion to dismiss.2 ECF No. 145 at 5-6. Defendant OCG asks the Court to
15 dismiss Plaintiffs’ UCL claim for failure to state a claim under Rule 12(b)(6), because
16 Plaintiffs are not entitled to restitution and because Plaintiffs lack standing for injunctive
17 relief. ECF No. 153, OCG Mot., at 4-8. Even though each of these motions is fashioned
18 slightly differently, under Rules 12(b)(1) and 12(b)(6), Defendants are asking for
19 substantially the same thing—dismissal of these counts because Plaintiffs lack standing
20 for injunctive relief.3 The Court will therefore first determine whether Plaintiffs’ TAC
21 sufficiently establishes standing for the injunctive relief they pursue under the UCL (all
22 three defendants) and FAL (as to HII/HPI only).
23
24
2 In their motion, ACI moves to join HPI/HII’s motion to dismiss under Rule 12(b)(1). Because
25 Plaintiff’s complaint names ACI in its claims for violation of the UCL, but not the FAL, the Court
interprets the motion as one only seeking to join as to the UCL, which is count 1. ACI also moves for
26
judgment on the pleadings under Rule 12(c). The Court addresses the motion for judgment on the
27 pleadings separately, below.
3 Plaintiffs no longer seek restitution in the TAC.
28
1 a. Legal Standard
2 To have standing to seek injunctive relief, a “plaintiff must demonstrate that he has
3 suffered or is threatened with a ‘concrete and particularized’ legal harm, coupled with ‘a
4 sufficient likelihood that he will again be wronged in a similar way,’” such that plaintiff’s
5 injuries could be redressed by the injunction. Bates v. United Parcel Serv., Inc., 511 F.3d
6 974, 985 (9th Cir. 2007) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
7 (1992); City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). In the context of injuries
8 that may apply to other persons, “a plaintiff still must allege a distinct and palpable injury
9 to himself, even if it is an injury shared by a large class of other possible litigants.”
10 Warth v. Seldin, 422 U.S. 490, 501 (1975).
11 In the Ninth Circuit, such an analysis is governed by the court’s holding in
12 Davidson v. Kimberly-Clark Corp., 889 F.3d 969-71 (9th Cir. 2018). In Davidson, the
13 court considered whether a consumer alleged she had previously been deceived by the
14 defendant’s false claims that their personal cleansing wipes were “flushable” had
15 standing to enjoin the defendant from making such claims in the future, id. at 970-71.
16 The court held that “a previously deceived consumer may have standing to seek an
17 injunction,” even if the consumer now knows of the fraudulent practices, but the
18 consumer must allege an actual threat of future harm. Id. at 969-71. In such
19 circumstances, a consumer may have standing under two theories: first, “she will be
20 unable to rely on the product’s advertising or labeling in the future, and so will not
21 purchase the product although she would like to,” or second, she “might purchase the
22 product in the future, despite the fact that it was one marred by false advertising or
23 labeling, as she may reasonably, but incorrectly, assume the product was improved.” Id.
24 at 969-70. The Ninth Circuit concluded that the plaintiff did have standing because she
25 had alleged an actual threat of future harm that was sufficiently concrete and
26 particularized because she continued to desire to purchase cleansing wipes that were
27 genuinely flushable, and would purchase the defendant’s product, but was unable to rely
28
1 on the information defendant advertised when making her purchasing decisions. Id. at
2 971-72. Importantly, the court also found the plaintiff satisfied the redressability prong
3 of the standing analysis because, in her case, an injunction would require the defendant to
4 cease falsely advertising its wipes, to make only truthful representations about its
5 attributes, which would allow plaintiff to rely on those statements in the future when
6 making purchasing decisions. Id. at 972.
7 b. Discussion
8 The Court has previously addressed motions to dismiss on the grounds that
9 Plaintiffs had failed to establish standing for injunctive relief under the UCL and FAL.
10 In each order, the Court found that Plaintiffs had not “adequately pleaded standing to
11 pursue injunctive relief” under those causes of action. ECF No. 130 at 20; see ECF No.
12 89 at 43 (finding Plaintiffs had not alleged an actual threat of future harm sufficient to
13 establish standing to pursue injunctive relief). In the instant motions, Defendants
14 HII/HPI, ACI and OCG make the same argument: Plaintiffs’ claim for injunctive relief,
15 as revised in the TAC, still fails for lack of standing. See ECF No. 142, HPI/HII Mot., at
16 142; ECF No. 145, ACI Mot., at 2; ECF No. 153, OCG Mot., at 6.
17 Plaintiffs have renewed their efforts to allege facts sufficient to support standing in
18 the TAC after the Court has twice dismissed Plaintiffs’ UCL and FAL claims based on a
19 lack of standing for injunctive relief in the Orders on motions to dismiss the first and
20 second amended complaints. See TAC ¶¶ 10-13. Specifically, in the Orders on motions
21 to dismiss the Second Amended Complaint, the court said that while the allegations “in
22 large part mirror[ed] what the Ninth Circuit considered sufficient in Davidson,” there was
23 one “possible basis for distinction” which proved fatal to Plaintiffs bid for standing: “the
24 SAC d[id] not sufficiently allege that Plaintiffs currently desire to purchase health
25 insurance or have a plan to do so in the future.” ECF No. 130 at 18. While Plaintiffs
26 “urge[d] the Court to infer from the SAC that they desire to purchase health insurance in
27 the future . . . the Court cannot consider facts that are not alleged in the complaint.” Id. at
28
1 19. Against that background, the Court considers whether Plaintiffs’ TAC has remedied
2 the issues which previously defeated standing.
3 i. Allegations in the TAC
4 In the TAC, Plaintiffs allege that they are “in the market for and desire to purchase
5 inexpensive but comprehensive medical insurance coverage,” they “continually search
6 for ideal coverage for their family,” and “would consider purchasing health coverage
7 from Defendants if it was at it was represented to be.” ECF No. 134, TAC ¶ 11. Further,
8 because Plaintiffs have no way of determining where the representations made by
9 Defendants are true or false, Plaintiffs “face an imminent threat of actual future harm.”
10 Id. ¶¶ 11-12. In their moving papers, HII/HPI, ACI, and OCG argue that Plaintiffs’
11 allegations are not sufficient to establish standing for injunctive relief under Davidson
12 because they have neither alleged a concrete and particularized injury nor a sufficient
13 likelihood they will be wronged again by Defendants in a similar way. See ECF No. 142,
14 HII/HPI Mot., at 9-18; ECF No. 153, OCG Mot., at 4-8.
15 ii. Concrete and Particularized Injury
16 As discussed supra, under Davidson, to allege a concrete and particularized injury
17 sufficient for standing, the TAC must allege that Plaintiffs would like to purchase
18 Defendants’ medical insurance coverage, but will not do so because they do not know if
19 the advertised features accurately represent Defendants’ products, or that Plaintiffs are at
20 risk of purchasing the same coverage from Defendants because they might assume that
21 Defendants have changed or fixed the coverage plan to align with the advertised features.
22 See Davidson, 889 F.3d at 969-70.
23 Here, Plaintiffs have alleged they are currently in the market for and continually
24 search for health insurance coverage that is inexpensive, comprehensive, and suits their
25 family’s needs. TAC ¶¶ 11-12. The Court finds that Plaintiffs’ assertions that they
26 “would consider” buying Defendants’ coverage again is insufficient under Davidson and
27 its progeny. Davidson, 889 F.3d at 970 (finding that plaintiff plausibly alleged “she will
28
1 be unable to rely on the product’s advertising or labeling in the future, and so will not
2 purchase the product although she would like to.” See Morizur v. Seaworld Parks &
3 Ent., Inc., No. 15-CV-12172-JSW, 2020 WL 6044043, at *12 (N.D. Cal. Oct. 13, 2020)
4 (“in order to establish standing under Davidson, a plaintiff must prove they want to or
5 intend to purchase the product in the future”). The Court finds that Plaintiffs’ assertions
6 that they are, generally, “in the market for and desire to purchase inexpensive, but
7 comprehensive medical insurance coverage” is not sufficient for the purposes of the
8 standing inquiry.
9 The Court therefore finds that Plaintiffs have not alleged facts sufficient to support
10 standing for injunctive relief under either the UCL or the FAL. Supreme Court
11 precedent, which strictly limits standing for injunctive relief, and Ninth Circuit precedent
12 which has laid out the parameters under which parameters might find relief in such
13 circumstances compel the conclusion that Plaintiffs here lack standing. In the instant
14 case, logic also compels such a conclusion. If Plaintiffs here had standing, one could
15 imagine that any person or group of persons—both insured and uninsured—could seek to
16 enjoin Defendants, because any person could claim that they would consider purchasing
17 Defendants’ medical coverage plans if the advertisements truthfully described the plans.
18 Such a broad reading of the harm necessary to seek such a remedy contravenes precedent.
19 Plaintiffs have not adequately alleged a concrete and particularized injury for the
20 purposes of injunctive relief.
21 ii. Likelihood of Repeat Harm
22 The second prong of the standing analysis requires Plaintiffs to demonstrate that
23 the threat of future harm is “actual and imminent, not conjectural or hypothetical.”
24 Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009).
25 From the outset, Plaintiffs have alleged that Defendants engaged in an elaborate
26 scheme which defrauded Plaintiffs and others similarly situated. TAC ¶¶ 1-8, 20-21,
27 113-172. The alleged scheme relied on idiosyncratic methods, including a representative
28
1 coaching Plaintiffs on how to respond to verification questions, and which portions of the
2 verification process when the agent verified their eligibility for the Liberty Health Plan.
3 In their motion, Defendants rely on the unique features of the scheme’s modus operandi
4 to argue that Plaintiffs cannot possibly be vulnerable to falling for Defendants scheme in
5 the future. ECF No. 142, HPI/HII Mot., at 14, 16-18. And thus, Plaintiffs cannot
6 sufficiently allege they are in danger of future deception, because “it is inconceivable that
7 Plaintiffs—confronted by the same sales pitch, the same instructions to ignore
8 ‘verification’ statements, and the same ‘verification’ statements disclaiming and
9 contradicting the sales pitch—would fall for the same purported deception a second
10 time.” Id. at 16.
11 Ultimately, the fact that Defendants’ scheme involves a convoluted, multi-step
12 process that Plaintiffs have investigated and detailed in their complaint, suggests that
13 Plaintiffs are not likely to be victimized again by the same scheme. The Court
14 acknowledges the irony of the fact that the sophisticated, shrouded nature of Defendants’
15 scheme now shields them from injunctive relief because the scheme was so unique. See
16 ECF No. 156. Pls.’ Opp., at 12 (“[Defendants] argue that because the Ketayis have been
17 deceived in the past, they should now be aware of Defendants’ future abusive practices
18 and somehow avoid them”). However, the Court is simply not persuaded that Plaintiffs
19 face an actual threat of being harmed again by Defendants in the future. The Court notes
20 that the Supreme Court has strictly circumscribed a plaintiff’s eligibility for the
21 extraordinary remedy of injunctive relief to those who allege a sufficient likelihood they
22 will be subject to repeated harm. See Lyons, 461 U.S. at 111 (“Absent a sufficient
23 likelihood that he will again be wronged in a similar way, Lyons is no more entitled to an
24 injunction than any other citizen of Los Angeles; and a federal court may not entertain a
25 claim by any or all citizens who no more than assert that certain practices of law
26 enforcement officers are unconstitutional.”). The convoluted process described in the
27 challenged scheme does not create a threat of future harm that is “actual and imminent.”
28
1 iii. Causation and Redressability
2 Finally, Plaintiffs must also demonstrate that the injury they’ve alleged is “fairly . .
3 . trace[able] to the challenged action of the defendant,” Simon v. Eastern Ky. Welfare
4 Rights Organization, 426 U.S. 26, 41-42,” and that it is “likely as opposed to merely
5 speculative that the injury will be redressed by a favorable decision.” Lujan, 504 U.S. at
6 561 (quoting Simon, 426 U.S. at 43) (internal quotation omitted). The causal nexus and
7 likely redress requirement is among the “irreducible constitutional minim[a]” for Article
8 III standing. Lujan, 504 U.S. at 560.
9 In Davidson, the Ninth Circuit found the plaintiff satisfied the redressability
10 requirement because enjoining Kimberly-Clark from continuing to advertise its non-
11 flushable wipes as flushable would provide a remedy for the injury plaintiff alleged.
12 Davidson, 889 F.3d at 971-72. In that case, the plaintiff alleged that without the
13 injunction against Kimberly-Clark, she would be unable to discern whether the wipes
14 were, in fact, flushable—it would have otherwise been entirely plausible that Kimberly-
15 Clark had changed their product formula to make it truly flushable, or that they just
16 continued their misleading advertising practices. The Ninth Circuit agreed, finding
17 plaintiff “m[et] the redressability prong of standing” because the injunction sought
18 “would prohibit Kimberly-Clark from using the term ‘flushable’ on their wipes until the
19 product [was] truly flushable,” a remedy that “would likely redress [plaintiff’s] injury by
20 requiring that Kimberly-Clark only make truthful representations on their wipe products
21 upon which [plaintiff] could reasonably rely.” Id. at 972.
22 Here, Plaintiffs claim that an injunction would similarly allow Plaintiffs to rely on
23 Defendants’ representations of its products and engage with the insurance market without
24 fear they would again be subject Defendants’ deception. ECF No. 134, TAC ¶¶ 11-12,
25 181; ECF No. 156, Pl.’s Opp., at 12 (“the Ketayis repeatedly allege that, in light of
26 Defendants’ past deceptions, they are left with no way to assess the representations about
27 health insurance coverage they encounter”). In the TAC, Plaintiffs allege that they are
28
1 “in the market for and desire to purchase inexpensive but comprehensive medical
2 insurance coverage,” they “continually search for ideal coverage for their family,” and
3 “would consider purchasing health coverage from Defendants if it was at it was
4 represented to be.” ECF No. 134, TAC ¶ 11. Without “employ[ing] too narrow or
5 technical an approach” in determining whether the injury alleged is likely to be repeated,
6 and the related question of whether an injunction is likely to remedy the injury, the Court
7 finds that Plaintiffs have not satisfied the redressability prong.
8 Plaintiffs may be in the market for “inexpensive but comprehensive medical
9 insurance coverage,” but, unlike the plaintiff in Davidson—where Plaintiff simply
10 wanted Kimberly-Clark to either only advertise their wipes if they were flushable in
11 fact—or similar cases, it is not clear to the Court what conduct Plaintiffs seek to enjoin.
12 See, e.g., Williams v. Apple, Inc., 19-CV-04700-LKH, 2020 WL 6743911, at *8 (N.D.
13 Cal. Nov. 17, 2020) (finding the injunctive relief sought “would allow [p]laintiffs to
14 understand whether they can rely on Apple’s iCloud contract ‘with any confidence,’”
15 where plaintiffs continued to be paying iCloud subscribers). The TAC states that
16 “Plaintiffs seek an order enjoining defendants from engaging in the illegal business acts
17 and practices alleged herein.” TAC ¶ 183. But unlike flushable wipes or an iCloud
18 contract, or other tangible or discrete consumer products, the business of medical
19 insurance coverage (and related advertising) is highly complex. In other words, were the
20 Court to enjoin Defendants’ “illegal business acts and practices,” it is not entirely clear
21 what conduct Defendants would be required to take or not take—must they alter their
22 insurance products to be more “comprehensive” while remaining just as “inexpensive”?
23 And what would that look like? In any event, because the Court previously found that
24 Plaintiffs failed to allege a concrete and particularized harm or a sufficient likelihood of
25 repeat future harm, the question whether an injunction would remedy the injury is almost
26 purely hypothetical—there is no causal nexus for which an injunction would redress
27 Plaintiffs’ injuries.
28
1 Because Plaintiffs have failed to allege a concrete and particularized harm, a
2 sufficient likelihood of repeat harm, or redressability, the Court finds that Plaintiffs lack
3 standing to seek injunctive relief under the UCL or the FAL. Accordingly, the Court
4 GRANTS the motions to dismiss by Defendants HPI/HII, ACI, and OCG to dismiss
5 counts 1 and 2 of the complaint for lack of subject-matter jurisdiction under Rule
6 12(b)(1) and for failure to state a claim upon which relief can be granted under Rule
7 12(b)(6).
8 V. ACI’s Motion for Judgment on the Pleadings
9 In addition to joining HPI/HII’s motion to dismiss for lack of standing to pursue
10 injunctive relief, ACI also moved the Court for judgment on the pleadings under Federal
11 Rule of Civil Procedure 12(c). Under Rule 12(c), “[a]fter the pleadings are closed—but
12 early enough not to delay trial—a party may move for judgment on the pleadings.” Fed.
13 R. Civ. P. 12(c). As ACI acknowledges, the standard for Rule 12(c) is “substantially
14 identical” to that applied under Rule 12(b), except that any party may move for judgment
15 on the pleadings. ECF No. 145, ACI Mot., at 5; see Fed. R. Civ. P. 12(c). In a motion for
16 judgment on the pleadings, the court accepts the allegations in the complaint as true, and
17 determines whether “the moving party clearly establishes on the face of the pleadings that
18 no material issue of fact remains to be resolved and that it is entitled to judgment as a
19 matter of law.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550
20 (9th Cir. 1989). As the Court has already found that Plaintiffs lack standing to seek
21 injunctive relief and have not stated a claim for which they are entitled to injunctive relief
22 under the UCL or FAL, and has dismissed count 1 of the complaint against ACI, the
23 Court reiterates that conclusion here: ACI’s motion for judgment on the pleadings is
24 GRANTED and count 1 of the TAC is dismissed against ACI.
25 / / /
26 / / /
27 / / /
28
1
2 VI. OCG Challenge to Restitution
3 The Court next briefly addresses the second grounds on which OCG moves to
4 dismiss Plaintiffs’ UCL claim in the TAC. ECF No. 153, OCG Mot. In OCG’s motion
5 to partially dismiss the Third Amended Complaint, they seek to do so on two separate
6 grounds: under 12(b)(6) for failure to state a claim as to Plaintiffs’ claim for restitution,
7 and because Plaintiffs do not have standing for injunctive relief. The Court has already
8 addressed the motions to dismiss by HII/HPI, ACI and OCG on the grounds that
9 Plaintiffs lack standing for injunctive relief, and addresses OCG’s argument about
10 restitution here.
11 In its motion to dismiss, OCG somewhat confusingly argues that Plaintiffs’
12 allegations “do not give rise to a right to restitution.” ECF No. 153, OCG Mot., at 5.
13 OCG goes on to note that “Plaintiffs do not request that remedy in their prayer for relief”
14 and “Plaintiffs have pled entitlement to damages, including treble damages . . . and the
15 facts alleged do not indicate that this legal remedy of damages is inadequate such that
16 restitution is needed to make Plaintiffs whole.” ECF No. 153 at 6. However, OCG was
17 added as a defendant in this case for the first time in the Third Amended Complaint, and
18 this particular line of argument seems to be an effort by OCG to cover its bases. The
19 Court’s previous two orders on the motions to dismiss considered whether, under Sonner
20 and Anderson, Plaintiffs’ First and Second Amended Complaints stated a claim for
21 restitution that differed from Plaintiffs’ claim for damages. ECF No. 130 at 20-21; See
22 ECF No. 89 at 42. The Court ultimately found that Plaintiffs had a legal remedy
23 available to them against Defendants HII and HPI because they are entitled to damages
24 for their fraud and RICO claims. ECF No. 130 at 23. Because the Court’s order
25 dismissing the count 1 of the SAC for which Plaintiffs sought restitution made specific
26 reference to Defendants HII and HPI, OCG’s motion seeks the same finding from the
27 Court. However, Plaintiffs do not seek restitution in the Third Amended Complaint, see
28
1 || ECF No. 134, TAC, at 83. Accordingly, the Court finds that OCG’s challenge to
2 || Plaintiffs’ request for restitution is moot.
3 CONCLUSION
4 || For the foregoing reasons, the Court HEREBY:
5 (1) GRANTS IN PART Plaintiffs’ request for jurisdictional discovery;
6 (2) GRANTS IN PART Defendant CCG’s motion to dismiss count | of the
7 complaint for lack of personal jurisdiction with leave to amend;
8 (3) GRANTS Defendant HPI/HII’s motion to dismiss counts | and 2 of the
9 complaint for lack of standing to seek injunctive relief;
10 (4) GRANTS Defendant ACI’s motion to dismiss count 1 of the complaint for lack
11 of standing to seek injunctive relief;
12 (5) GRANTS Defendant OCG’s motion to dismiss count | of the complaint for
13 lack of standing to seek injunctive relief; and
14 (6) DENIES as moot OCG’s challenge to Plaintiff’s request for restitution.
15 IT IS SO ORDERED.
Dated: December 2, 2021 72 sale Os
18 Hon. Gonzalo P. Curiel
19 United States District Judge
20
21
22
23
24
25
26
27
28 23
20-cv-1198-GPC