“[F]or a complaint to survive a motion to dismiss, the non-conclusory “factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”
How later courts described this case
- “[F]or a complaint to survive a motion to dismiss, the non-conclusory “factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Present: The Honorable CHRISTINA A. SNYDER
Catherine Jeang Not Present N/A
Deputy Clerk Court Reporter / Recorder Tape No.
Attorneys Present for Plaintiffs: Attorneys Present for Defendants:
Not Present Not Present
Proceedings: (IN CHAMBERS) - DEFENDANT’S MOTION TO DISMISS
PLAINTIFFS’ FIRST AMENDED COMPLAINT (Dkt. [| 26 ], filed
October 23, 2019)
I. INTRODUCTION
On July 25, 2019, plaintiffs filed this action against defendant Transamerica Life
Insurance Company (“Transamerica”). Dkt. 1. Plaintiffs allege that Transamerica
wrongfully increased the monthly deduction rates (“MDRs”) of certain universal life
insurance policies. Id.
Plaintiffs filed the operative first amended complaint on October 2, 2019. Dkt. 26
(“FAC”). The FAC asserts claims for: (1) breach of contract; (2) contractual breach of the
implied covenant of good faith and fair dealing; (3) tortious breach of the implied covenant
of good faith and fair dealing; (4) conversion; and (5) declaratory relief. See generally id.
Transamerica filed a motion to dismiss the FAC on October 23, 2019. Dkt. 29-1
(“Mot.”). Plaintiffs filed an opposition on November 27, 2019. Dkt. 31 (‘Opp.”).
Transamerica filed a reply on December 20, 2019. Dkt. 32 (“Reply”).
The Court held a hearing on January 23, 2020. Having carefully considered the
parties’ arguments, the Court finds and concludes as follows.
I. BACKGROUND
A. The Parties
1. The FCI Entities
Plaintiff Financial Credit Investment II Trust A (“FCI II Trust A”) is a Delaware
statutory trust that maintains its principal place of business in Minnesota. FAC § 38.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Plaintiff Financial Credit Investment II Trust C (“FCI II Trust C’’) is a Delaware statutory
trust that maintains its principal place of business in Minnesota. FAC 4 39. Plaintiff
Financial Credit Investment II Trust D (“FCI II Trust D”) is a Delaware statutory trust that
maintains its principal place of business in Minnesota. Id, § 40. Plaintiff Financial Credit
Investment IT WT (“FCI II Trust WT”) is a Delaware statutory trust that maintains its
principal place of business in Michigan. Id. § 41. Plaintiff Financial Credit Investment II
Limited (“FCI II Ltd.”) is a private limited liability company, incorporated under the laws
of Ireland, that maintains its principal place of business in Ireland. Id. 42. Plaintiff
Financial Credit Investment III Trust A (“FCI III Trust A”) is a Delaware statutory trust
that maintains its principal place of business in Minnesota. Id, 43. Plaintiff Financial
Credit Investment III Trust B (“FCI III Trust B”) is a Delaware statutory trust that
maintains its principal place of business in Minnesota. Id. § 44. Plaintiff Financial Credit
Investment IIT SPV-A (Cayman), L.P. (“FCI III SPV-A”) is a Cayman Islands exempted
limited partnership that maintains its principal place of business in Ireland. Id. § 45.
Plaintiff Financial Credit Investment III SPV-B (Cayman), L.P. (“FCI III SPV-B”) is a
Cayman Islands exempted limited partnership that maintains its principal place of business
in Ireland.
FCI II Trust A, FCI II Trust C , FCI II Trust D, FCI II Trust WT, FCI II Ltd., FCI
Ill Trust A, FCI III Trust B, FCI II] SPV-A, and FCI III SPV-B (together, “the FCI
Entities”) are the ultimate owners and beneficiaries of 86 universal life insurance policies
issued by Transamerica. FAC § 49. 57 of these policies were issued in California. Id.
The policies’ death benefits range in value from $250,000.00 to $15,000,000.00. Id.
2. The Securities Intermediaries
Plaintiff Wells Fargo Bank, National Association (“Wells Fargo Bank’) is a national
banking association that maintains its principal place of business in South Dakota. FAC 4
35. Wells Fargo Acts as the securities intermediary for FCI I Trust D, FCI III Trust A,
and FCI III SPV-A. Id.
Plaintiff U.S. Bank National Association (“U.S. Bank”) is a national banking
association that maintains its principal place of business in Minnesota. FAC § 34. U.S.
Bank acts as the securities intermediary for FCI Trust A, FCI II Trust C, FCI III Trust B,
and FCI III SPV-B. Id.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Plaintiff Wilmington Savings Fund Society, FSB (“WSFS”) is a federal savings bank
that maintains its principal place of business in Delaware. FAC § 36. WSFS acts as
securities intermediary for FCI II Ltd. Id.
Wilmington Trust, National Association (“Wilmington Trust’) is a national banking
association that maintains its principal place of business in Delaware. FAC 4 37. It acts
as the securities intermediary for FCI III SPV-A. Id.
3. Transamerica
Transamerica is an Iowa corporation with its principal place of business in Iowa.
FAC 4 48. Plaintiffs allege that Transamerica is authorized to do (and does substantial)
business in California. Id.
B. Transamerica’s MDR Increases
At issue in this case are Transamerica’s universal life insurance policies, which
contain two components: (1) a “mortality” component, for which Transamerica charges a
cost to cover the risk of the insured’s death ( “the cost of insurance”); and (b) a “cash value”
component, where premiums paid in excess of the cost of insurance and other charges
accumulate (“the Accumulation Value”) and earn interest. FAC § 8. No fixed premiums
are due under Transamerica’s universal life insurance policies—instead, Transamerica
deducts funds from the accounts (the MDRs) to cover the cost of insurance and other
charges. Id. § 12. Ifa particular universal life insurance policy’s balance is insufficient to
cover these monthly charges, the policy will enter a grace period and lapse unless additional
premiums are paid. Id.
Transamerica’s universal life insurance policies include both guaranteed and non-
guaranteed elements. FAC § 13. Guaranteed elements—including the guaranteed
minimum interest rate on which interest on the Accumulation Values accrue—are fixed
and determined at a specific time, such as when a given policy is issued. Id, Transamerica,
however, may adjust non-guaranteed elements, such as the MDRs, consistent with the
universal life insurance policy’s terms. Id.
Plaintiffs’ policies state either that Transamerica “will determine the [MDRs] for
each policy month at the beginning of that policy month,” or that Transamerica “will
determine the [MDRs] for each policy year at the beginning of that year.” FAC § 63.
Plaintiffs allege that at least some of their policies provide that “[a]ny change in the
[MDRs] will be prospective and will be subject to our expectations as to future cost factors.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Such cost factors may include, but are not limited to: mortality; expenses: interest:
persistency; and any applicable federal, state and local taxes.” Id. Plaintiffs further allege
that their policies state that Transamerica “does not distribute past surplus or recover past
losses by changing the [MDRs].” FAC 4 64. Plaintiffs therefore allege that the policies’
terms limit Transamerica’s ability to raise the MDRs in two critical ways, any change in
the MDRS: “‘(a) can only be based on Transamerica’s expectations as to future cost factors;
and (b) must be prospective only: Transamerica cannot change [the MDRs] to recover past
losses (or distribute past surplus).” Id. § 65.
Plaintiffs allege that Transamerica began raising the MDRs in June 2015 in a manner
that violated the policies’ terms. FAC § 66. According to plaintiffs, “[b]y raising the
[MDRs] on the [p]olicies, in some cases by as much as 93%, without a proper basis, and
by continuing to bill, collect and retain the unlawful increase of the [MDRs], Transamerica
has breached and continues to breach the express and implied terms of the [p]olicies.” Id.
Plaintiffs further contend that the purpose of these increases is “to force [p|laintiffs
and other policyholders either to (a) pay exorbitant premiums that Transamerica knows
would no longer justify the ultimate death benefits or (b) lapse or surrender their policies
and thus forfeit the premiums they have paid to date and the earnings thereon|.|” Id. § 26.
If. LEGAL STANDARDS
A. — Rule 12(b)(2)
When a defendant moves to dismiss for lack of personal jurisdiction pursuant to
Federal Rule of Civil Procedure 12(b)(2), the “plaintiff bears the burden of establishing
that jurisdiction is proper.” Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008)
(citation omitted). Where, as here, the defendant’s motion is based on written materials
rather than an evidentiary hearing, “the plaintiff need only make a prima facie showing of
jurisdictional facts to withstand the motion to dismiss.” Brayton Purcell LLP v. Recordon
& Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010) (quoting Pebble Beach Co. v. Caddy,
453 F.3d 1151, 1154 (9th Cir. 2006)). The plaintiff cannot simply rely on the “bare
allegations” of its complaint; however, uncontroverted allegations in the complaint must
be taken as true, and “[c]lonflicts between parties over statements contained in affidavits
must be resolved in the plaintiffs favor.” Schwarzenegger v. Fred Martin Motor Co., 374
F.3d 797, 800 (9th Cir. 2004).
Generally, personal jurisdiction exists if: (1) it is permitted by the forum state’s long-
arm statute; and (2) the “exercise of that jurisdiction does not violate federal due process.”
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Pebble Beach, 453 F.3d at 1154-55. “California’s long-arm statute is co-extensive with
federal standards, so a federal court may exercise personal jurisdiction if doing so comports
with federal constitutional due process.” Boschetto, 539 F.3d at 1015. “For a court to
exercise personal jurisdiction over a nonresident defendant, that defendant must have at
least ‘minimum contacts’ with the relevant forum such that the exercise of jurisdiction
‘does not offend traditional notions of fair play and substantial justice.’” Schwarzenegger,
374 F.3d at 801 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
Depending on the nature of the contacts between the defendant and the forum state,
personal jurisdiction is characterized as either general or specific.
1. General Jurisdiction
“A court may assert general jurisdiction over foreign (sister-state or foreign-country)
corporations to hear any and all claims against them when their affiliations with the State
are so “continuous and systematic’ as to render them essentially at home in the forum
State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)
(quoting International Shoe, 326 U.S. at 317). A corporation’s place of incorporation and
principal place of business are the paradigmatic bases for general jurisdiction. Daimler
AG v. Bauman, 571 US. 117, 137 (2014). Otherwise, “[t]he standard is met only by
“continuous corporate operations within a state [that are] thought so substantial and of such
a nature as to justify suit against [the defendant] on causes of action arising from dealings
entirely distinct from those activities.” King v. Am. Family Mut. Ins. Co., 632 F.3d 570,
579 (9th Cir. 2011) (quoting International Shoe, 326 U.S. at 318). The standard for general
jurisdiction “is an exacting standard, as it should be, because a finding of general
jurisdiction permits a defendant to be haled into court in the forum state to answer for any
of its activities anywhere in the world.” Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d
1218, 1224 (9th Cir. 2011).
2. Specific Jurisdiction
A court may assert specific jurisdiction over a claim for relief that arises out of a
defendant’s forum-related activities. Rano v. Sipa Press, Inc., 987 F.2d 580, 588 (9th Cir.
1993). The test for specific personal jurisdiction has three parts:
(1) The defendant must perform an act or consummate a transaction within
the forum, purposefully availing himself of the privilege of conducting
activities in the forum and invoking the benefits and protections of its laws;
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
(2) The claim must arise out of or result from the defendant’s forum-related
activities; and
(3) Exercise of jurisdiction must be reasonable.
Id.; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (1985). The plaintiff
bears the burden of satisfying the first two prongs, and if either is not satisfied, personal
jurisdiction is not established. Schwarzenegger, 374 F.3d at 802.
In contracts cases, courts conduct a “purposeful availment” analysis to determine the
first prong of the specific jurisdiction test. Id. Because a contract is “ordinarily but an
intermediate step serving to tie up prior business negotiations with future consequences
which themselves are the real object of the business transaction,” a court must evaluate
four factors to determine whether purposeful availment has occurred: (1) prior
negotiations, (2) contemplated future consequences, (3) the terms of the contract, and (4)
the parties’ actual course of dealing. Burger King, 471 U.S. at 478-79. A single contract
for the sale of goods to a plaintiff in the forum state may be sufficient for specific
jurisdiction over a defendant, but only where the contract creates a “substantial connection”
with the forum state. Boschetto, 539 F.3d at 1017. “The foreseeability of causing injury
in another state is not a sufficient basis on which to exercise jurisdiction,” without more.
Gray & Co. v. Firstenberg Mach. Co., Inc., 913 F.2d 758, 760 (9th Cir. 1990).
If the plaintiff establishes the first two prongs regarding purposeful availment and
the defendant’s forum-related activities, then it is the defendant’s burden to “present a
compelling case” that the third prong, reasonableness, has not been satisfied.
Schwarzenegger, 374 F.3d at 802 (quoting Burger King, 471 U.S. at 477). The third prong
requires the Court to balance seven factors: (1) the extent of the defendant’s purposeful
availment, (2) the burden on the defendant, (3) conflicts of law between the forum state
and the defendant’s state, (4) the forum’s interest in adjudicating the dispute, (5) judicial
efficiency, (6) the plaintiff s interest in convenient and effective relief, and (7) the existence
of an alternative forum. Roth v. Garcia Marquez, 942 F.2d 617, 623 (9th Cir. 1991).
B. Rule 12(b)(6)
A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly
dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence of sufficient
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
facts alleged under a cognizable legal theory.’” Conservation Force v. Salazar, 646 F.3d
1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t, 901 F.2d 696, 699
(9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiffs obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal citations omitted). “Factual allegations must be enough to
raise a right to relief above the speculative level.” Id. (internal citations omitted).
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn from
them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in
the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266
F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to dismiss can
choose to begin by identifying pleadings that, because they are no more than conclusions,
are not entitled to the assumption of truth. While legal conclusions can provide the
framework of a complaint, they must be supported by factual allegations.” Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service, 572 F.3d 962,
969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory
“factual content,’ and reasonable inferences from that content, must be plausibly suggestive
of a claim entitling the plaintiff to relief.”). Ultimately, “[d]etermining whether a
complaint states a plausible claim for relief will . . . be a context-specific task that requires
the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S.
at 679.
Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment,
a court cannot consider material outside of the complaint (e.g., facts presented in briefs,
affidavits, or discovery materials). In re American Cont’! Corp./Lincoln Sav. & Loan Sec.
Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom Lexecon, Inc.
v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however,
consider exhibits submitted with or alleged in the complaint and matters that may be
judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc.
Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999): Lee v. City of Los Angeles, 250 F.3d 668,
689 (9th Cir. 2001).
As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when □□□□
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co.,
806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
2000).
IV. DISCUSSION
A. Personal Jurisdiction
Transamerica first moves to dismiss plaintiffs’ claims on the grounds that the Court
cannot exercise personal jurisdiction over Transamerica. Mot. at 8. Transamerica contends
that the Court may not exercise general jurisdiction over it because Transamerica is
incorporated in Iowa and maintains its principal place of business in Iowa. Id. at 9.
Transamerica further asserts that the Court may not exercise specific personal jurisdiction
over it because, according to Transamerica, “[p]laintiffs allege no substantial connection
between the conduct that allegedly harmed them . . . and California.” Id. at 10.
1. Purposeful Availment
The first prong of the specific jurisdiction analysis requires that a non-resident
defendant “purposefully avail [itself] of the privileges of conducting activities in the forum,
thereby invoking the benefits and protections of its laws|.]” Inre W. States Wholesale Nat.
Gas Antitrust Litig., 715 F.3d 716, 741-42 (9th Cir. 2013) (anternal citation omitted). For
a case sounding in contract, “[a] showing that a defendant purposefully availed [itself] . . .
typically consists of evidence of the defendant’s actions in the forum, such as executing or
performing a contract there.” Schwarzenegger, 374 F.3d at 802. “For tort-based claims,
the Ninth Circuit has stated that a court may exercise personal jurisdiction over a defendant
whose only contact with the forum state is the purposeful direction of a foreign act having
effect in the forum state.” Healthcare Ally Mgmt. of California, LLC v. Med. Mut. of
Ohio, No. 2:14-cv-09428-SJO-JEM, 2015 WL 12746216, at *5 (C.D. Cal. Jan. 26, 2015).
Plaintiffs offer evidence demonstrating that, notwithstanding Transamerica’s Iowa
citizenship, Transamerica has purposely availed itself of the privileges of this forum. For
example, plaintiffs allege that: Transamerica has registered with the California Secretary
of State’s Office; Transamerica is licensed with the California Department of Insurance;
Transamerica signed each of the 86 policies at issue in this case in Los Angeles, California;
18 of the policies list Transamerica’s “home office” as being in Los Angeles, California:
and 68 of the policies list Transamerica’s “marketing office” as being in Los Angeles,
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
California. FAC §§{ 2-3; Opp. at 12-13; Dkt. 31-1, Declaration of Khai LeQuang
(“LeQuang Decl.”) §§ 2-6. In at least three other cases challenging Transamerica’s
allegedly impermissible MDR increases, the Court has found similar factors sufficient to
conclude that Transamerica has purposely availed itself of the privileges of doing business
in California. See Brighton Trustees v. Transamerica Life Ins. Co., No. 2:19-cv-04210-
CAS-GJS, 2019 WL 6315541, at *7 (C.D. Cal. Aug. 28, 2019); Hamra v. Transamerica
Life Ins. Co., No. 2:18-cv-06262-CAS-GJS, 2019 WL 468803, at *5 (C.D. Cal. Feb. 6,
2019); Feller v. Transamerica Life Ins. Co., No. 2:16-cv-01378-CAS-AJW, 2017 WL
6453262, at *5 (C.D. Cal. Dec. 11, 2017).
Accordingly, the Court finds that plaintiffs have made an adequate showing under
the purposeful availment prong sufficient to support the Court’s exercise of specific
personal jurisdiction over Transamerica.
2. Forum-Related Activities
The second prong of the specific personal jurisdiction analysis requires that
plaintiffs’ claims arise out of, or relate to, Transamerica’s forum-related activities. Picot
v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (internal citation omitted). The Ninth
Circuit applies a “but for” test to determine whether claims relate to forum-related
activities. Monster Energy Co. v. Vital Pharm.., Inc., No. 5:18-cv-01882-JGB-SHK, 2019
WL 2619666, at *7 (C.D. Cal. May 20, 2019) (citing Ballard v. Savage, 65 F.3d 1495,
1500 (9th Cir. 1995)). Under this test, the question is: but for Transamerica’s conduct in
California, would plaintiffs’ claims have arisen? As the Court has previously observed,
“any event in the causal chain leading to the plaintiff's injury 1s sufficiently related to the
claim to support the exercise of specific jurisdiction.” Feller, 2017 WL 6453262, at *6
(citing Dubose v. Bristol-Myers Squibb Co., No. 17-cv-00244-JST, 2017 WL 2775034, at
*3 (N.D. Cal. June 27, 2017)).
Transamerica contends that plaintiffs cannot make the required showing of a nexus
between plaintiffs’ claims and Transamerica’s California contacts. Mot. at 10. That is
because, according to Transamerica, “|p|laintiffs’ reliance on conduct at or before the
[p]olicies were issued and on this Court’s decisions in prior cases against [Transamerica]
is misplaced because [p]laintiffs’ claims are pleaded differently.” Reply at S.
Transamerica’s argument on this basis 1s unavailing.
Here, plaintiffs have presented a causal chain sufficient to establish a nexus between
their claims and Transamerica’s California contacts. According to plaintiffs, “the policies
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
were developed, priced and marketed in Los Angeles; Transamerica signed and issued the
policies from its Los Angeles office; several of the policies identify Los Angeles as
Transamerica’s ‘Home Office’ or ‘Marketing Office’; Transamerica issued illustrations
from its Los Angeles office; and key Transamerica employees behind the MDR increases
operated out of Los Angeles.” Opp. at 13.
These allegations are sufficient to establish, at this juncture, that but-for
Transamerica’s conduct in California, including signing each of the 86 policies at issue in
this case and the work of Transamerica’s Los Angeles employees, plaintiffs’ claims would
not have arisen. See LSH CO v. Transamerica Life Ins. Co., No. 2:18-cv-09711-SJO-KS,
2019 WL 3064422, at *6 (C.D. Cal. Mar. 20, 2019) (finding sufficient nexus between
plaintiffs’ claims related to MDR increases and Transamerica’s contacts with California
where fifteen of twenty-two policies identified Los Angeles as Transamerica’s home office
and remaining seven identified Los Angeles as Transamerica’s marketing office); Feller,
2017 WL 6453262, at *6 (finding sufficient nexus based, in part, on similar allegations
regarding involvement of former Los Angeles-based employees in Transamerica’s MDR
increases). Accordingly, the Court finds that there is “an affiliation between the forum and
the underlying controversy” sufficient to allow the Court to exercise specific personal
jurisdiction over Transamerica. Bristol-Myers Squibb Co. v. Superior Court of California.
San Francisco Cty., 137 S. Ct. 1773, 1780 (2017); accord Bnghton Trustees, 2019 WL
6315541, at *8 (finding that plaintiffs challenging Transamerica’s MDR increases had
satisfied nexus requirement so as to allow the Court to exercise specific personal
jurisdiction over Transamerica).
3. Reasonableness
Plaintiffs have established the first two prongs regarding purposeful availment and
Transamerica’s forum-related activities. Therefore, it is Transamerica’s burden to “present
a compelling case that the exercise of jurisdiction would not be reasonable.”
Schwarzenegger, 374 F. 3d at 802 (quoting Burger King, 471 U.S. at 477). The third prong
requires the Court to balance several factors: (1) the extent of the defendant’s purposeful
availment; (2) the burden on the defendant; (3) conflicts of law between the forum state
and the defendant’s state; (4) the forum’s interest in adjudicating the dispute; (5) judicial
efficiency; (6) the plaintiffs interest in convenient and effective relief; and (7) the
existence of an alternative forum. Roth, 942 F.2d at 623.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Transamerica does not contend that exercising specific personal jurisdiction in the
Central District would not “comport with fair play and substantial justice.” See Mot. at 9—
10; Reply at 4-6. This alone defeats Transamerica’s specific personal jurisdiction
challenge in light of plaintiffs’ prima facie showing regarding the first two prongs. See
LSH CO, 2019 WL 3064422, at *7 (finding that it would be reasonable to exercise specific
personal jurisdiction over Transamerica in the Central District in case challenging
Transamerica’s MDR increases because “Plaintiffs have met their burden of proving the
first two prongs of specific jurisdiction and Defendant does not contest the third.”’); accord
Galaxia Elecs. Co. v. Luxmax, U.S.A., No. 2:16-cv-05144-JAK-GJS, 2017 WL 2903182,
at *10 (C.D. Cal. May 10, 2017) (denying motion to dismiss for lack of personal
jurisdiction where plaintiffs made prima facie showing under “the first two prongs of the
test for personal jurisdiction . . . [and] Defendants have made no such arguments” that
exercise of jurisdiction would not be reasonable).
Transamerica has sufficient contacts with the forum district, and litigating in the
Central District of California, where a number of other actions remain pending involving
Transamerica and its purported MDR increases, would not impose a considerable burden.
See Hamra, 2019 WL 468803, at *6 (finding it would be reasonable to exercise specific
personal jurisdiction over Transamerica in the Central District); Feller, 2017 WL 6453262,
at *8 (same); Brighton Trustees, 2019 WL 6315541, at *9 (same). The exercise of personal
jurisdiction over Transamerica with respect to plaintiffs’ claims is proper under the Due
Process Clause, and the Court DENIES Transamerica’s motion to dismiss for lack of
personal jurisdiction.!
B. Failure to State a Claim
1. Breach of Contract Claim
Plaintiffs’ breach of contract claim alleges that Transamerica materially breached
the policies’ terms in four respects: (1) by increasing the MDRs for reasons other than
changes to its future cost expectations: (2) by increasing the MDRs in an attempt to
circumvent the guaranteed minimum interest rate; (3) by increasing the MDRs in an
attempt to recoup past losses and recover for shortfalls in expected revenues; and (4) by
Because the Court concludes that it may properly exercise specific jurisdiction over
Transamerica, the Court does not reach the issue of whether Transamerica is subject to
general jurisdiction in this forum.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
imposing excessive cost of insurance rates, including by failing to lower these rates. FAC
96(a)-(d). Transamerica moves to dismiss plaintiffs’ claim, in part, insofar as it is
premised on plaintiffs’ allegations that Transamerica increased the MDRs in an attempt to
circumvent the guaranteed minimum interest rate. Mot. at 10.
To state a claim for breach of contract under California law, a party must plead: “(1)
the existence of the contract , (2) plaintiff's performance or excuse for nonperformance,
(3) defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty,
LLC v. Goldman, 51 Cal. 4th 811, 821 (2011) (internal citation omitted). At the pleading
stage, “|w|hen reviewing whether a plaintiff has properly stated a cause of action for breach
of contract, we must determine whether the alleged agreement is ‘reasonably susceptible’
to the meaning ascribed to it in the complaint.” Hervey v. Mercury Casualty Co., 185 Cal.
App. 4th 954, 964 (2010) (emphasis added) (citation omitted). “So long as the pleading
does not place a clearly erroneous construction upon the provisions of the contract, in
passing upon the sufficiency of the complaint, we must accept as correct plaintiff's
allegations as to the meaning of the agreement.” Marzec v. California Pub. Employees
Ret. Sys., 236 Cal. App. 4th 889, 909 (2015) (citing Aragon—Haas v. Family Security Ins.
Services, Inc., 231 Cal. App. 3d 232, 239 (1991)). Where the terms of the policy are
unambiguous, the Court will not infer a limitation on defendants which is not supported by
the language of the policy. See Croskey et al., Cal. Practice Guide: Insurance Litigation
(The Rutter Group 2015) 4 4:11 (‘Clear and explicit’ policy language governs.”) (quoting
Powerine Oil Co., Inc. v. Supt. Ct., 37 Cal. 4th 377, 390 (2005)).
The Court’s previous decision in Brighton Trustees is instructive. There,
institutional investor plaintiffs likewise alleged that “Transamerica materially breached the
policies by increasing the Monthly Deduction Rates in an attempt to circumvent the
guaranteed minimum interest rate.” Brighton Trustees, 2019 WL 6315541, at *10 (internal
citations, quotation marks, and alterations omitted). The investors contended that by
increasing the MDRs by as much as 100%, “Transamerica has used an increase in MDRs
to do indirectly what it cannot do directly: it is using the Monthly Deduction Rates to
achieve an interest crediting rate that is lower than the guaranteed minimum interest
crediting rate, which violates the [investors’] Policies.” Brighton Trustees, 2019 WL
6315541, at *10.
Here, plaintiffs allege that “Transamerica materially breached” the policies “[b]ly
increasing the [MDRs] in an attempt to circumvent the guaranteed minimum interest
rate[.]” FAC § 96(b). Plaintiffs contend that they “do not allege that Transamerica
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
breached the policies because it considered interest in raising [the] MDRs. What
[p|laintiffs claim is that Transamerica cannot avoid its promise to pay guaranteed minimum
interest rates on the policies by directly offsetting those interest obligations through
increases in MDRs (thereby effectively paying less than the guaranteed minimum interest
rates).” Opp. at 19. That is precisely the argument that the Court has already rejected in
Brighton Trustees, insofar as plaintiffs’ policies allow Transamerica to consider “interest”
in setting the MDRs. See Brighton Trustees, 2019 WL 6315541, at *10.
Plaintiffs cite to the Court’s previous decision in Feller for the proposition that “if
certain interest rate accruals are ‘guaranteed,’ a plausible reading of the policies is that
defendants may not directly offset them by increasing the MDR based on its interest
obligations.” Opp. at 20 (citing Feller v. Transamerica Life Ins. Co., No. 2:16-cv-01378-
CAS-AJW, 2016 WL 6602561, at *10 (C.D. Cal. Nov. 8, 2016)). Plaintiffs concede,
however, that “the Court only applied this reasoning in Feller to policies that did not list
“interest” as a cost factor|.|” Opp. at 20.
Following the hearing, the parties submitted a joint statement to the Court on
February 12, 2020, clarifying that “74 of the 86 [policies] include ‘interest’ as an
enumerated cost factor[.]” Dkt. 36 at 2. Accordingly, the Court DISMISSES without
prejudice plaintiffs’ breach of contract claim, as alleged in § 96(b) of the FAC, with respect
to the 74 policies that include “interest” as an enumerated cost factor. With respect to the
12 policies that do not include “interest” as an enumerated cost factor, the Court DENIES
Transamerica’s motion to dismiss plaintiffs’ breach of contract claim.
2. Tortious Breach of the Implied Covenant of Good Faith and Fair
Dealing Claim
With respect to the policies that Transamerica issued in California, plaintiffs assert,
pursuant to California law, a claim for tortious breach of the implied covenant of good faith
and fair dealing. See FAC §] 106-12. In particular, plaintiffs allege, inter alia, that
Transamerica breached the implied covenant, giving rise to a claim sounding in tort, by:
(1) “charging excessive [MDRs], thereby denying [p]laintiffs the benefit of their actual
policy Accumulation Values”; (2) “increasing the [MDRs]| to circumvent the guaranteed
minimum interest rate under each of [p]laintiffs’ [p]olicies”; and (3) “attempting to force
[p|laintiffs and other policyholders either to (1) pay exorbitant premiums that Transamerica
knows would no longer justify the ultimate death benefits or (11) lapse or surrender their
policies, thereby forfeiting the premiums that have been paid to date[.|” Id. § 109(a)(e)(f).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
The Court previously dismissed the investor plaintiffs’ tortious breach claim, based
on similar allegations, in Bighton Trustees. See Brighton Trustees v. Transamerica Life
Ins. Co., No. 2:19-cv-04210-CAS-GJS, 2019 WL 5784925, at *3-8 (C.D. Cal. Nov. 4,
2019). There, the Court distinguished between allegations that Transamerica withheld the
benefits of plaintiffs’ accumulation values and the monthly accrual of interest on those
accounts based on the guaranteed minimum interest rates with allegations that
Transamerica attempted, in bad faith, to cause policy lapses or surrenders. Brighton
Trustees, 2019 WL 5784925, at *3-8. To the extent that the investors’ tortious breach
claim was based on allegations that Transamerica charged excessive MDRs in an attempt
to minimize plaintiffs’ Accumulation Values and accrual of interest on those accounts, the
Court concluded those allegations did not give rise a claim for tortious breach because
“these benefits ar[ise] under the savings component of Transamerica’s universal life
insurance policies rather than the insurance component.”” Id. at *4 (emphasis in original)
(internal citation omitted). That is because “[i]nsurance is a contract whereby one
undertakes to indemnify another against loss, damage, or liability arising from a contingent
or unknown event,” and the investors’ allegations did not establish that Transamerica
“den[ied]| the [investors] the benefits of the insurance policy—the security against losses
and third party liability.” Id. (emphasis in original) (citing Cal. Ins. Code § 22 and Jonathan
Neil & Assoc., Inc. v. Jones, 33 Cal. 4th 917, 939 (2004)).
? The Court recognized that “the majority of cases applying the tort remedy in the
insurance context involve allegations of denial of insurance policy proceeds or mishandling
of insurance claims.” Brighton Trustees, 2019 WL 5784925, at *4. The Court noted that
the investor plaintiffs’ allegations did not fall within the line of cases recognizing the tort
remedy based on allegations that an insurer engaged in claims mishandling because
“plaintiffs do not allege that Transamerica deliberately manipulated its processes for
managing insurance claims.” Id. at * 4n. 2. On that basis, the Court rejected the investors’
reliance on two cases, Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th 911 (1999) and
Sec. Officers Serv.. Inc. v. State Comp. Ins. Fund, 17 Cal. App. 4th 887, 892, 898 (1993),
for the proposition that “because the value of the death benefit under a life insurance policy
is tied directly to the cost of insurance, raising the cost of insurance diminishes, if not
destroys, this benefit.” Brighton Trustees, 2019 WL 5784925, at *4n.2. Here, plaintiffs’
reliance on these two cases for the same proposition, see Opp. at 15, is similarly misplaced
because plaintiffs do not allege that Transamerica engaged in claims mishandling.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
The Court likewise dismissed the investors’ tort claim based on allegations that
Transamerica attempted, in bad faith, to cause policy lapses or surrenders. Bnghton
Trustees, 2019 WL 5784925, at *5—8. The Court recognized that, “[t]he California Court
of Appeal has extended the tort claim in at least two cases involving allegations outside the
context of benefits denial and claims mishandling.” Brighton Trustees, 2019 WL 57849235,
at *5. Both those cases involved allegations that insurers cancelled the insureds’ policies.
See Spindle v. Travelers Ins. Companies, 66 Cal. App. 3d 951, 959 (1977); Helfand v.
Nat’l Union Fire Ins. Co., 10 Cal. App. 4th 869, 877 (1992). The Court noted that in a
subsequent case, Jonathan Neil, the California Supreme Court did not expressly overrule
either Spindle or Helfand, because the plaintiffs in Jonathan Neil “were not in the same
vulnerable position as those who suffer from the insurer’s bad faith claims and settlement
practices—they were not denied the benefits of the insurance policy, were not required to
prosecute the insurer to vindicate their contractual rights, and had available various
administrative, contractual, and tort remedies.” Brighton Trustees, 2019 WL 5784925, at
*5_ The Court distinguished Spindle and Helfand, however, on the basis that the investors
did not allege “that Transamerica cancelled their policies.” Id. (emphasis in original).
And, considering the factors that the California Supreme Court considered in Jonathan Neil
in declining to extend the tort claim outside the contexts of denial of benefits, claims
mishandling, and policy cancellation, the Court concluded that “[c]onsideration of these
factors here does not justify extending the tort claim to plaintiffs in this case.” Id. Finally,
the Court considered and rejected the investors’ argument that because an insurance
contract is assignable, it is immaterial whether the party seeking to recover in tort is the
original insured or an assignee. Id. at *7. That is because “the proper inquiry requires the
Court to apply California law as the Court believes the California Supreme Court would
apply it” to determine “whether, in the first instance, California law recognizes a tort claim
where, as here, the allegations fall outside the denial of benefits or claims mishandling
contexts.” Id. (emphasis in original).
3 In declining to extending the tort claim to the investors, the Court analyzed the
following factors: “(1) the ability of marketplace competition to discipline the insurer’s
alleged misconduct; (2) whether the alleged misconduct denies the insured the benefits of
the insurance policy, namely the security against losses and third party liability; (3) whether
the alleged misconduct required the insureds to prosecute the insurer in order to enforce its
rights; and (4) the availability of other administrative, contractual, and tort remedies.”
Brighton Trustees, 2019 WL 5784925, at *5 (citing Jonathan Neil, 33 Cal. 4th at 940-41).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Here, plaintiffs fail to provide a compelling basis for the Court to depart from its
reasoning in Brighton Trustees. Plaintiffs allege that the Accumulation Value and the
accrual of interest on that amount constitute “insurance components” because “[t|he
Accumulation Value is used to fund the policy charges, including the COI charges, and it
makes up part of the death benefit.” FAC § 8. However, plaintiffs also allege that the
Accumulation Value consists of “premiums paid in excess of the cost of insurance (and
certain other policy charges)” which “accumulate . . . and earn interest at a rate that will
not be lower than a ‘guaranteed minimum interest rate[.]”” Id. In this regard, “to the extent
plaintiffs’ tortious breach claim depends on allegations that Transamerica has withheld
plaintiffs’ accumulation values and related accrual of interest, plaintiffs’ claim ‘arises less
from the relationship between plaintiffs as insureds and Transamerica as insurer than it
does from the relationship between plaintiffs and Transamerica as a bank (or similar
financial institution).’”* Brighton Trustees, 2019 WL 5784925, at *4 (internal alterations
4 During the hearing, plaintiffs’ counsel argued that the Accumulation Value “is
insurance” because the agreement which creates the Accumulation Value, Transamerica’s
universal life insurance policy, is an insurance contract. That Transamerica’s universal life
insurance policies are insurance contracts for some purposes, however, does not mean that
all benefits due under the contract are insurance benefits for the purposes of the tort
remedy. For example, in another case involving Transamerica, the California Supreme
Court concluded that the purported denial of benefits owed under a surety contract did not
give rise to tort remedies. Cates Constr., Inc. v. Talbot Partners, 21 Cal. 4th 28, 51-52
(1999). Although the surety contract at issue in that case was subject to provisions of the
California Insurance Code, the Court declined to extend the tort remedy for the purported
bad faith denial of benefits due under the surety contract because “it does not follow that a
surety bond equates to a policy of insurance under the common law or common law
theories of liability. Nor does it follow that the unique policy reasons which justify
extraordinary remedies in the insurance policy context are similarly implicated for bonds
guaranteeing the performance of a commercial construction contract.” Id. at 52. In
concluding that the mere inclusion of surety contracts in the Insurance Code did not give
rise to the tort remedy, the Court noted that “[c]ase law makes clear . . . that tort remedies
for breach of the implied covenant are permitted in the insurance policy setting for policy
reasons pertaining to the distinctive nature of such contracts and the relationship between
the contracting parties.” Id. at 50. Notwithstanding the fact that Transamerica’s universal
life insurance policies create the Accumulation Values and that these policies may be
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
omitted) (citing EFG Bank AG, Cayman Branch v. AXA Equitable Life Ins. Co., 309 F.
Supp. 3d 89, 96 (S.D.N.Y. 2018)).
To the extent that plaintiffs’ tortious breach claim turns on allegations that
Transamerica attempted, in bad faith, to cause policy lapses or surrenders, the claim falls
outside the contexts where California courts have recognized the tort cause of action: denial
of insurance benefits, mishandling of claims, and cancellation of policies. The Court must
therefore “apply California law as the Court believes the California Supreme Court would
apply it.” Brghton Trustees, 2019 WL 5784925, at *7 (internal alterations omitted) (citing
Rex v. Chase Home Fin. LLC, 905 F. Supp. 2d 1111, 1156 (C.D. Cal. 2012)). In Jonathan
Neil, the California Supreme Court declined to extend the tort cause of action outside the
denial of insurance benefits, claims mishandling, and policy cancellation contexts where
the plaintiffs “had available various administrative, contractual, and tort remedies.”
Jonathan Neil, 33 Cal. 4th at 941. As such, the Court in Bnghton Trustees declined to
extend the tort claim to the investor plaintiffs because “the Court has already determined
that [the investors] have stated claims for breach of contract and breach of the implied
covenant sounding in contract—therefore, this is not a case where plaintiffs have no other
‘available various administrative contractual, and tort remedies.’” 2019 WL 5784925, at
*6,
Here, plaintiffs are similarly situated to the investors in Brighton Trustees, in that
plaintiffs have remedies available other than a claim for tortious breach of the implied
covenant. Indeed, plaintiffs have asserted claims for breach of contract and breach of the
implied covenant sounding in contract, and, at this juncture, Transamerica has not sought
dismissal of those claims. Accordingly, this is not a case where plaintiffs have no other
“available . . . administrative, contractual, and tort remedies.” ° Jonathan Neil, 33 Cal. 4th
at 941.
subject to the California Insurance Code, for the reasons discussed above, caselaw and
policy reasons indicate that the Accumulation Values are not “insurance” benefits.
Plaintiffs argue that “[e]ven through the Court may not find [p]laintiffs, as investor-
policyholders, to be as sympathetic as the Thompson plaintiffs, to deny [p|laintiffs the
ability to seek Brandt fees (at the least) denies to the entire class of assignees the ability to
defend themselves from insurance company bad faith conduct.” Opp. at 8. In Brandt v.
Superior Court, the California Supreme Court held that “[w]hen an insurer tortiously
withholds benefits, . . . attorney’s fees, reasonably incurred to compel payment of the policy
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
For the foregoing reasons, the Court concludes that plaintiffs fail to state a claim for
tortious breach of the implied covenant of good faith and fair dealing. The Court therefore
DISMISSES plaintiffs’ claim for tortious breach in its entirety without prejudice.
3. Conversion Claim
Plaintiffs also assert a claim for conversion against Transamerica. FAC ff 113-19.
The gravamen of plaintiffs’ claim is that plaintiffs “entrusted Transamerica with funds, in
the form of premium payments, which Transamerica maintained in the policy accounts
where they were used to pay the monthly deductions,” and “Transamerica diverted those
funds from these accounts for its own benefit by taking unauthorized deductions.” Opp. at
18. According to plaintiffs, “[t|his is conversion.” Id. California law recognizes “the tort
of conversion . . . as the wrongful exercise of dominion over personal property of another.”
Voris v. Lampert, 7 Cal. Sth 1141, 1150 (2019) (internal citation and quotation mark
omitted). To establish a claim for conversion, a plaintiff must establish the following
elements: “(a) plaintiff's ownership or right to possession of personal property, (b)
defendant’s disposition of property in a manner inconsistent with plaintiff's property rights,
and (c) resulting damages.” Id. (internal citations and quotation marks omitted). The Court
addresses each element in turn.
a. Property Right
Plaintiffs allege that they “had a property interest in the funds Transamerica
deducted from their Accumulation Values in excess of the amounts permitted by the terms
of the Policies due to Transamerica’s wrongful increases in Monthly Deduction Rates.”
FAC § 114. Transamerica asserts that plaintiffs cannot establish the requisite property
rights needed to state a claim for conversion because: (1) plaintiffs’ “purported conversion
claim is nothing more than an effort to repackage their beach of contract claim”; (2)
because Transamerica “did not interfere with [p|laintiffs’ immediate right of possession of
an identifiable sum of money.” Mot. at 16.
i. Overcharge Theory
benefits, |are| recoverable|.|” 37 Cal. 3d 813, 815 (1985) (emphases added). Plaintiffs do
not provide authority for the proposition that Brandt fees are recoverable where no
insurance benefits have been withheld. And, the Court has already concluded that
plaintiffs’ allegations do not implicate an insurance benefit.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
The Court previously rejected Transamerica’s argument that “[i]f the Monthly
Deductions were too high as [p|laintiffs allege, they can sue for that overcharge as a breach
of contract, but it is not conversion of [p|laintiffs’ personal property.” Opp. at 19 n.15; see
Brighton Trustees, 2019 WL 5784925, at *10. In that case, the Court noted that the
investors’ complaint did not “allege that plaintiffs transferred title to their Accumulation
Values to Transamerica. To the contrary, plaintiffs allege that they ‘had a property interest
in the funds Transamerica deducted from their Accumulation Values’; that “specific funds
were placed in the custody of Transamerica for the benefit of [p]laintiffs: that
“Transamerica continues to retain these funds unlawfully’: and that ‘at no time did plaintiffs
consent to such wrongful deduction and retention of funds by Transamerica.’” Brighton
Trustees, 2019 WL 5784925, at *10 (internal alterations omitted). Accordingly, the Court
concluded that “[t|his is therefore not a case where, like the relationship between a bank
and depositor, the relation between plaintiffs and Transamerica ‘is that of a debtor and
creditor.” Gutierrez v. Wells Fargo & Co., 622 F. Supp. 2d 946, 956 (N_D. Cal. 2009).
Here, Transamerica similarly contends that “[p|laintiffs are essentially suing for the
conversion of contract rights” and that plaintiffs’ rights in the Accumulation Values “are
not personal property subject to conversion.” Mot. at 18. At the pleading stage, however,
the Court is required to take the allegations in the FAC as true. And, the FAC alleges: that
“[p|laintiffs had a property interest in the funds Transamerica deducted from their
Accumulation Values”; that these “specific funds [were] placed in the custody of
Transamerica for the benefit of [p|laintiffs”: that “Transamerica continues to retain these
funds unlawfully”; and that ‘[a]t no time did [p]laintiffs or their predecessors consent to
such wrongful deduction and retention of funds by Transamerica.” FAC 9 114-16. As
the Court determined in Bnghton Trustees, “[t]he Court does not find persuasive
Transamerica’s argument that [plaintiffs’] conversion claim is based on an overcharge
theory.” 2019 WL 5784925, at *10.
li. Immediate Right to Possession
Transamerica next argues that “[b]Jecause [p]laintiffs do not allege an immediate
right of possession to an identifiable sum of money, their conversion claim should be
dismissed.” Mot. at 18 (emphasis added). To maintain an action for conversion, a
“plaintiff must prove ownership with the right of possession, or actual possession at the
time of the alleged conversion.” McCoy v. Nw. Cas. & Sur. Co., 3 Cal. App. 2d 534, 537
(1935). Accordingly, “[a]s a general rule, the mere ownership of property, if not coupled
with possession or a right to immediate possession, is not a sufficient basis to maintain an
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
action for conversion.” Michael Paul Thomas, et al., Cal. Civ. Prac. Torts, § 15:3
(November 2019 Update).
In Brighton Trustees, the Court dismissed the investors’ conversion claim without
prejudice because the investors did not “adequately allege||] a ‘nght to immediate
possession’ of the funds that form the basis for [their] conversion claim.” 2019 WL
5784925, at *10. That is because the investors’ complaint alleged that “Accumulation
Value 1s paid out only upon the death of [the] insured, and a policyholder cannot withdraw
the Accumulation Value, except by terminating the policy or reducing the death benefit by
the same amount.” Id. (emphasis in original) (internal alterations omitted).
Here, the FAC similarly alleges that “a policyholder cannot withdraw the
Accumulation Value, except by terminating the policy or reducing the death benefit by the
same amount.” FAC § 9. Accordingly, the Court concludes that plaintiffs have not
adequately alleged a “right to immediate possession” of the funds that form the basis for
their conversion claim.
iii. Identifiable Sum of Money
Pursuant to California law, “money cannot be the subject of an action for conversion
unless a specific sum capable of identification is involved.” Voris, 7 Cal. 5th at 1151.
There is no requirement, however, that “each coin or bill be earmarked.” Id. Based on
these requirements, Transamerica contends that dismissal of plaintiffs’ conversion claim is
proper “[bJecause [p]laintiffs do not allege an immediate right of possession to an
identifiable sum of money|.]” Mot. at 18 (emphasis added)
Transamerica relies on two cases for this proposition. In PCO, Inc. v. Christensen,
Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, the California Court of Appeal affirmed
the grant of summary adjudication in favor of defendants on the plaintiffs’ conversion
claim. 150 Cal. App. 4th 384, 397 (2007). There, the plaintiffs alleged that defendants
had converted the money inside 10 duffel bags, each containing $500,000.00. Id.
However, the Court of Appeal noted that “|t|he evidence and plaintiffs’ separate statement
of undisputed facts refer to as few as eight bags or ‘8—9 bags’ and up to 18 bags of money
that were removed from Laing’s residence.” Id, Moreover, “there [wa]s evidence that one
bag contained as little as $250,000 and that other bags contained as much as $500,000.”
Id. Thus, summary adjudication was appropriate because “[t]he evidence of the sum
removed from Laing’s residence reflects amounts varying by millions of dollars” such that
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
record is not sufficient to fulfill the requirement that if money is the subject of the
conversion action, a specific sum be identified.” Id.
Similarly, in Vu v. California Commerce Club, Inc., the California Court of Appeal
affirmed the trial court’s grant of summary judgment in favor of a defendant card club,
based on the plaintiff patron’s claim that the club’s retention of funds, confiscated for
alleged cheating, constituted conversion. 58 Cal. App. 4th 229, 231 (1997). The Court of
Appeal held that summary judgment was appropriate because “neither by pleading nor
responsive proof did plaintiffs identify any specific, identifiable sums that the club took
from them.” Vu, 58 Cal. App. 4th at 235. Accordingly, “[t]hat rendered the generalized
claim for money not actionable as conversion.” Id.
The Court of Appeal’s decisions in PCO and Vu, both based on a developed
evidentiary record, say nothing about what is required to withstand a motion to dismiss
under Rule 12(b)(6). “At the pleading stage in federal court, it is only necessary for a
plaintiff to allege an amount of money that is ‘capable of identification,’ rather than
specifically identify the sum that would be required to prove the claim in a motion for
summary judgment.” Andreoli v. Youngevity Int'l, Inc., No. 16-cv-02922-BTM-JLB,
2018 WL 1470264, at *10 (S.D. Cal. Mar. 23, 2018). “[A]t this stage, plaintiffs need only
describe the property allegedly converted sufficiently that defendants can answer and
develop a defense.” Lennard v. Yeung, No. 2:10-cv-09322-MMM-AGR, 2011 WL
13217784, at *16 (C_D. Cal. June 7, 2011).
Here, plaintiffs identify each of the 86 policies at issue in this case by both owner
and policy number. Dkt. 26-1, Exhibit A. Accordingly, plaintiffs have alleged an amount
of money that is capable of identification sufficient to withstand a motion to dismiss. See
Natomas Gardens Inv. Grp.. LLC v. Sinadinos, 710 F. Supp. 2d 1008, 1019 (E.D. Cal.
2010) (“Considering the liberal pleading requirements in federal court, the court concludes
that at the pleading stage it is only necessary for plaintiffs to allege an amount of money
that is ‘capable of identification.” However, at summary judgment plaintiffs will be
required to prove a specific, identifiable sum.”).
b. _ Disposition of Property
According to Transamerica, “[b]ecause the Monthly Deductions were authorized,
[p|laintiffs’ conversion claim fails to allege a disposition of their property in a manner
inconsistent with their property mghts[.]” Mot. at 19. Transamerica alternatively seeks
dismissal on this basis.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
The Court previously rejected Transamerica’s argument on this basis in Brighton
Trustees. There, the Court noted that the investors “and Transamerica . . . dispute whether
Transamerica’s deductions were authorized” and “[t]his dispute forms the basis for [the
investors’ allegations that Transamerica ‘increased Monthly Deduction Rates and made
Monthly Deductions in unauthorized amounts from the Accumulation Values’ and that ‘at
no time did plaintiffs consent to such wrongful deduction and retention of funds by
Transamerica.”” Brighton Trustees, 2019 WL 5784925, at *11 (internal citations and
alterations omitted). The Court reasoned that these allegations were “sufficient, at the
pleading stage, to satisfy the disposition of property element for conversion.” Id.
Here, plaintiffs and Transamerica similarly dispute whether Transamerica’s
deductions were authorized. See Mot. at 19; Opp. at 19. That dispute forms the basis for
plaintiffs’ allegations that Transamerica “increase[ed] Monthly Deduction Rates and
ma|[de] Monthly Deductions in unauthorized amounts from the Accumulation Values” and
that “[a]t no time did [p]laintiffs or their predecessors consent to such wrongful deduction
and retention of funds by Transamerica.” FAC 9 115-16. These allegations satisfy the
disposition of property element at the pleading stage.° See ESG Capital Partners, LP v.
6 In Bally v. State Farm Life Ins. Co., another district court determined that a
consumer had raised triable issues as to the disposition of property element required for
conversion based on allegations that an insurance company deducted funds in authorized
amounts from the consumer’s universal life insurance policies. No. 18-cv-04954-CRB,
2019 WL 3891149, at *4. (N.D. Cal. Aug. 19, 2019). The court rejected the “overcharge”
argument that Transamerica advances here because the consumer’s “claim is not that she
was overcharged, but rather that State Farm transferred funds that it should not have,
because the account value belonged to the policyholder, and so when State Farm
transferred funds without authorization, that constituted conversion.” Id. Here,
Transamerica urges that “Bally was issued four days after . . . Voris and did not address
. . . is contrary to California law as expressed in Voris[,] and is factually
distinguishable[.]” Mot. at 19. The Court notes that on November 25, 2019, the court in
Bally certified its order denying summary judgment for interlocutory appeal. See Bally v.
State Farm Life Ins. Co., No. 18-cv-04954-CRB (N.D. Cal.), Dkt. 99. However, Voris and
Bally are not inconsistent. Voris considered whether earned but unpaid wages could
constitute a property right that could form the basis for a conversion claim, while Bally
considered whether the allegedly improper deduction of funds from a consumer’s universal
life insurance policy represented a disposition of property in a manner inconsistent with
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
Stratos, 828 F.3d 1023, 1038 (9th Cir. 2016) (finding that, on a motion to dismiss, investor
had stated conversion claim where investor alleged that its “attorney . . . placed its funds
into an unauthorized trust account and issued checks . . . using those funds . . . without
permission” because “an unauthorized transfer of funds is sufficient to constitute disposal
of a plaintiff's funds in a manner inconsistent with the plaintiffs rights.”).
Cc. Resulting Damage
Plaintiffs allege that “Transamerica intended to cause damage to [p]laintiffs by
increasing Monthly Deduction Rates and deducting more from [p]laintiffs’ Policies’
Accumulation Values than was authorized|.]” FAC § 118. As a result, plaintiffs contend
that they have suffered damages “in an amount to be proven at trial, but in any event that
exceeds $75,000, exclusive of interest.” Id. 119. Plaintiffs’ alleged damages, the
difference between what Transamerica deducted from plaintiffs’ Accumulation Values and
what the policies authorized, are sufficient at the pleading stage. See Cal. Civ. Code §
3336 (“The detriment caused by the wrongful conversion of personal property is presumed
to be . . . [t]he value of the property at the time of the conversion .. . or . . . an amount
sufficient to indemnify the party injured for the loss which is the natural, reasonable and
proximate result of the wrongful act complained of].]”).
V. CONCLUSION
In accordance with the foregoing, the Court orders as follows:
1. The Court DENIES Transamerica’s motion to dismiss for lack of personal
jurisdiction;
2. As to the 74 policies that include “interest” as an enumerated cost factor, the
Court DISMISSES plaintiffs’ breach of contract claim, as alleged in § 96(b)
of the FAC, without prejudice. The Court DENIES Transamerica’s motion
to dismiss plaintiffs’ breach of contract claim, as alleged in § 96(b) of the
FAC, with respect to the 12 policies that do not include “interest” as an
enumerated cost factor;
the consumer’s property interest in those funds. In other words, Voris appears to address
the first element of conversion, while Bally appears to address the second.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:19-cv-06478-CAS(GJSx) Date February 19, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION ET AL. v.
TRANSAMERICA LIFE INSURANCE COMPANY
3. The Court DISMISSES plaintiffs’ claim for tortious breach of the implied
covenant of good faith and fair dealing without prejudice:
4. The Court DISMISSES plaintiffs’ conversion claim without prejudice.
Plaintiffs shall file a second amended complaint within thirty (30) days.
IT IS SO ORDERED.
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