“A court may . . . consider 8 certain materials—documents attached to the complaint, documents incorporated by 9 reference in the complaint, or matters of judicial notice—without converting [a] 10 motion to dismiss into a motion for summary judgment.”
How later courts described this case
- “A court may . . . consider 8 certain materials—documents attached to the complaint, documents incorporated by 9 reference in the complaint, or matters of judicial notice—without converting [a] 10 motion to dismiss into a motion for summary judgment.”
Written by the judges who cited it.
The opinion
Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 1 of 10 Page ID #:1452
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8 United States District Court
9 Central District of California
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11 WILD CHANG et al., Case № 2:22-cv-02548-ODW (MARx)
12 Plaintiffs,
ORDER GRANTING MOTION TO
13 v.
DISMISS [13]
14 FARMERS INSURANCE COMPANY,
INC. et al.,
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Defendants.
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18 I. INTRODUCTION
19 On April 15, 2022, Plaintiffs Wild Chang Sr., Wild Chang Jr., and Kenneth Lo,
20 proceeding pro se, filed this action in federal court against Defendants Farmers
21 Insurance Company, Inc. (“Farmers Insurance”), Fire Insurance Exchange (“Fire
22 Insurance”), Woolls Peer Dollinger & Scher (“Woolls Peer”), and Stacy Chern.
23 (Compl., ECF No. 1.) Plaintiffs allege that Defendants violated the Racketeer
24 Influenced and Corrupt Organizations Act (“RICO”), including by fraudulently
25 attempting to shield Farmers Insurance from liability under an insurance policy. (Id.)
26 Defendants now move to dismiss Plaintiffs’ Complaint under Federal Rule of Civil
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Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 2 of 10 Page ID #:1453
1 Procedure (“Rule”) 12(b)(6). (Mot. Dismiss (“Mot.” or “Motion”), ECF No. 13.) For
2 the following reasons, the Court GRANTS Defendants’ Motion.1
3 II. BACKGROUND
4 In resolving a Rule 12(b)(6) motion, the Court takes Plaintiffs’ well-pleaded
5 factual allegations as true. Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir.
6 2001). In addition, the Court may consider Plaintiffs’ exhibits to the Complaint. See
7 United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (“A court may . . . consider
8 certain materials—documents attached to the complaint, documents incorporated by
9 reference in the complaint, or matters of judicial notice—without converting [a]
10 motion to dismiss into a motion for summary judgment.”). However, the Court “need
11 not . . . accept as true allegations that contradict matters properly subject to judicial
12 notice or by exhibit.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.
13 2001).
14 Farmers Insurance is a corporation engaged in providing property insurance.
15 (Compl. ¶ 12; id. Ex. 13 (“Giles Declaration” or “Giles Decl.”) ¶¶ 15–16.) Fire
16 Insurance is an inter-insurance exchange that sells insurance policies nationwide
17 through contracted insurance agents. (Giles Decl. ¶¶ 4–6.) Chern is an agent
18 authorized to sell insurance products on behalf of Fire Insurance and other Farmers
19 Insurance companies. (Compl. ¶ 14; id. Ex. 14 (“Chern Declaration” or “Chern
20 Decl.”) ¶ 3.)
21 On April 29, 2014, Chang Sr. and Lo purchased an insurance policy while
22 refinancing a property in Rowland Heights, California (“Property”). (Compl. ¶¶ 26,
23 33, 77.) At the time of their purchase, Chang Sr. and Lo understood the insurer for
24 this policy to be Farmers Insurance. (Id.)
25 On December 16, 2014, Chang Sr. entered the crawlspace underneath the
26 Property’s foundation and used a lighter and bug spray to attempt to kill spiders,
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28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the
matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15.
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Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 3 of 10 Page ID #:1454
1 causing an accidental structural fire that damaged the Property. (Id. ¶¶ 35, 38, 40; id.
2 Ex. 6 (“Fire Report & Arson Investigation”).) Plaintiffs filed an insurance claim for
3 damages related to the fire. (Compl. ¶ 35.)
4 On March 17, 2015, after Plaintiffs requested a copy of their insurance policy,
5 Fire Exchange mailed Plaintiffs a copy of the policy, which was “disguised” as an
6 insurance policy from Farmers Insurance. (Id. ¶¶ 35–36, 78; id. Ex. 5 (“Policy”).)
7 The Policy named only Lo as an insured for the Property. (Policy 512.) Later that
8 year, Plaintiffs received a notice of non-renewal that informed Plaintiffs that their
9 insurance coverage for the Property would end on January 30, 2016. (See Compl.
10 ¶ 42; id. Ex. 7 (“Notice of Non-Renewal”).)
11 While awaiting a decision on their insurance claim, Chang Sr. and his son,
12 Chang Jr., lived in a detached building located on the Property and slept on air
13 mattresses. (Compl. ¶¶ 40, 63–64; id. Ex. 29 (“Temporary Housing Denial”).)
14 During this time, Chang Sr. suffered a stroke, which Chang Jr. witnessed, resulting in
15 emotional distress. (Compl. ¶ 64.) Following this incident, Chang Sr. was confined to
16 a wheelchair and unable to swallow food for a period of several months. (Id.)
17 In January and February of 2016, Plaintiffs’ counsel communicated with Fire
18 Insurance’s claim counsel regarding the status of Plaintiffs’ insurance claim and the
19 ongoing investigation into the claim. (See id. ¶¶ 43–44; id. Exs. 8–9 (“Claim Counsel
20 Communications”).) On February 22, 2016, Fire Insurance’s claim counsel informed
21 Plaintiffs’ counsel that Fire Insurance would approve payment to repair the Property’s
22 structure, but would not cover additional living expenses for Chang Sr. and Chang Jr.,
23 who were not listed as named insureds on the Policy. (Compl. ¶ 45; see id. Ex. 10
24 (“Claim Decision”).)
25 On February 16, 2017, Chang Sr. and Lo filed a complaint in Los Angeles
26 Superior Court against Farmers Insurance, Fire Insurance, and Chern, seeking relief
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28 2 When citing a particular page in Plaintiffs’ exhibits to the Complaint, the Court cites the pagination
found in the CM/ECF header.
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Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 4 of 10 Page ID #:1455
1 for “conventional breach of contract,” “related bad faith,” and tort causes of action.3
2 (Compl. ¶ 48; Defs.’ Req. Judicial Notice ISO Mot. (“RJN”) Ex. 1 (“State Court
3 Complaint” or “State Ct. Compl.”), ECF No. 13-1. ) Defendants are represented by
4 Woolls Peer in this state action. (Compl. ¶¶ 48–60.) On January 26, 2018, the state
5 court dismissed, with prejudice, Farmers Insurance as a defendant. (Id. ¶ 49.) On
6 July 19, 2021, Plaintiffs amended the State Court Complaint to, as relevant here,
7 allege fraud as a cause of action and add Woolls Peer as a defendant. (RJN Ex. 2
8 (“Third Am. State Court Compl.”).) The defendants demurred, and the state court
9 sustained the demurrer in its entirety, allowing Plaintiffs leave to amend only the sixth
10 cause of action for emotional distress. (See RJN Ex. 3 (“Notice of Ruling on
11 Demurrer”).)
12 Plaintiffs then brought this civil RICO action in federal court under the theory
13 that Defendants conspired to fraudulently convert Plaintiffs’ policy with Farmers
14 Insurance into a policy with Fire Insurance and to shield Farmers Insurance from
15 liability under the Policy. (Compl. ¶¶ 69–98.) Plaintiffs’ RICO action is organized
16 into three counts alleging RICO violations. (Id.) Defendants now move to dismiss on
17 the basis that Plaintiffs’ RICO claim is (1) time-barred to the extent it is based on
18 unreimbursed costs and damages from the fire; and (2) premature to the extent it is
19 based on damages in the form of attorneys’ fees and costs incurred in the underlying
20 state court action. (Mot. 7–9.)
21 III. LEGAL STANDARD
22 A court may dismiss a complaint under Rule 12(b)(6) “based on the lack of a
23 cognizable legal theory or the absence of sufficient facts alleged under a cognizable
24 legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988).
25 To survive a motion to dismiss, a complaint need only satisfy “the minimal notice
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3 The Court grants Defendants’ Request for Judicial Notice and takes judicial notice of Defendants’
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Exhibits 1 through 5 as related filings in a state court case. See Burbank-Glendale-Pasadena Airport
28 Auth. v. City of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998) (taking judicial notice of related court
filings).
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1 pleading requirements of Rule 8(a)(2)”—“a short and plain statement of the claim.”
2 Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003) (quoting Fed. R. Civ. P. 8(a)(2)).
3 However, the “[f]actual allegations must be enough to raise a right to relief above the
4 speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, the
5 complaint must “contain sufficient factual matter, accepted as true, to state a claim to
6 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
7 (internal quotation marks omitted).
8 The determination of whether a complaint satisfies the plausibility standard is a
9 “context-specific task that requires the reviewing court to draw on its judicial
10 experience and common sense.” Id. at 679. In making that determination, a court is
11 generally limited to the pleadings and must construe “[a]ll factual allegations set forth
12 in the complaint . . . as true and . . . in the light most favorable” to the plaintiff. Lee,
13 250 F.3d at 679 (9th Cir. 2001) (internal quotation marks omitted) (quoting Epstein v.
14 Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)). Although a court must view
15 these allegations in the light most favorable to the nonmoving party, it is not required
16 to blindly accept “allegations that are merely conclusory, unwarranted deductions of
17 fact, or unreasonable inferences.” Sprewell, 266 F.3d at 988.
18 Where a district court grants a motion to dismiss, it should provide leave to
19 amend unless it is clear the complaint could not be saved by any amendment. See
20 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).
21 IV. DISCUSSION
22 Defendants seek dismissal of Plaintiffs’ RICO claim or, alternatively, a stay of
23 this action until the state court action is resolved. (Mot. 4.) Defendants argue that
24 Plaintiffs’ claim is time-barred if the underlying injury relates to the handling of
25 Plaintiffs’ insurance claims.4 (Id. 7–8.) Defendants also argue that Plaintiffs’ claim is
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4 Regardless of whether Plaintiffs’ alleged injuries are sufficient to sustain a civil RICO claim, the
28 Court considers the injuries as alleged to determine if Plaintiffs’ claim falls outside the statute of
limitations.
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Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 6 of 10 Page ID #:1457
1 premature to the extent it amounts to a malicious prosecution claim based on Woolls
2 Peer’s conduct in the state court proceedings.5 (Id. 8–9.)
3 “To state a civil RICO claim, plaintiffs must allege (1) conduct (2) of an
4 enterprise (3) through a pattern (4) of racketeering activity (5) causing injury to
5 plaintiffs’ business or property.” Ove v. Gwinn, 264 F.3d 817, 825 (9th Cir. 2001)
6 (internal quotation marks omitted) (citing 18 U.S.C. § 1964(c)). “The statute of
7 limitations for civil RICO actions is four years.” Pincay v. Andrews, 238 F.3d 1106,
8 1108 (9th Cir. 2001) (citing Agency Holding Corp. v. Malley–Duff & Assocs., Inc.,
9 483 U.S. 143, 156 (1987)). Courts in the Ninth Circuit “have continuously followed
10 the ‘injury discovery’ statute of limitations rule for civil RICO claims.” Id. (citing
11 Grimmett v. Brown, 75 F.3d 506, 511 (9th Cir. 1996)). The injury discovery rule
12 provides that “the civil RICO limitations period begins to run when a plaintiff knows
13 or should know of the injury that underlies [the] cause of action.” Grimmett, 75 F.3d
14 at 510. However, “[t]he plaintiff need not discover that the injury is part of a ‘pattern
15 of racketeering’ for the period to begin to run.” Id. Moreover, a “plaintiff is deemed
16 to have had constructive knowledge if it had enough information to warrant an
17 investigation which, if reasonably diligent, would have led to discovery of the fraud.”
18 Pincay, 238 F.3d at 1110 (quoting Beneficial Standard Life Ins. Co. v. Madariaga, 851
19 F.2d 271, 275 (9th Cir. 1988)).
20 Here, Plaintiffs’ RICO claim is premised on the theory that Defendants worked
21 in concert to shield Farmers Insurance from liability, including by fraudulently
22 converting the insurance policy that Plaintiffs allege they purchased from Farmers
23 Insurance into a policy with Fire Insurance and by fraudulently litigating the state
24 court case. (Compl. ¶¶ 69–98.) In alleging that Defendants’ conduct constitutes a
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5 The Court does not reach this argument because it finds that Plaintiffs’ claim, as alleged, is
26 time-barred under the statute of limitations for a civil RICO claim. To the extent Plaintiffs seek to
recover for attorneys’ fees and costs incurred during the state court litigation, Plaintiffs’ allegations
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make clear that they knew of those injuries in January 2018. (See Compl. ¶ 79 (alleging Defendants
28 fraudulently litigated the state court case in January 2018).)
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Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 7 of 10 Page ID #:1458
1 pattern of racketeering activity, Plaintiffs identify three specific acts of racketeering.
2 (Id. ¶¶ 76–79.) First, Plaintiffs allege that, on April 29, 2014, their purchase of
3 insurance coverage was fraudulently executed as a policy with Fire Insurance, rather
4 than Farmers Insurance. (Id. ¶ 77.) Second, Plaintiffs allege that the Policy, which
5 was “disguised” as an insurance policy from Farmers Insurance, was fraudulently
6 provided to Plaintiffs on March 17, 2015. (Id. ¶¶ 36, 78.) Third, Plaintiffs allege that
7 Defendants fraudulently litigated the state court case in January 2018 to dismiss
8 Farmers Insurance as a defendant. (Id. ¶¶ 49, 79.)
9 Assuming for the sake of argument that these three acts are sufficient to sustain
10 a RICO claim, they also indicate that Plaintiffs were on notice of the facts underlying
11 the alleged fraud more than four years before filing this case. As to the second act of
12 alleged racketeering, on March 17, 2015, Plaintiffs received a copy of the Policy,
13 which identified both “Fire Insurance Exchange” and “Farmers Insurance Group” in
14 the header on the Policy’s first page. (Policy 51.) In addition, the Policy included a
15 notice “sent on behalf of the Farmers Insurance Group of Companies, whose members
16 include, but are not limited to: . . . Fire Insurance Exchange [and] Farmers Insurance
17 Company, Inc.” (Id. at 86.) Thus, the Policy was not disguised as an insurance policy
18 from Farmers Insurance, but rather, it indicated on its face that it was a product of Fire
19 Insurance and Farmers Insurance. (See generally Policy.)
20 Plaintiffs’ subsequent communications with Farmers Insurance and Fire
21 Insurance concerning Plaintiffs’ insurance claim provided further notice of the facts
22 underlying the alleged fraud. For example, Plaintiffs received the Notice of
23 Non-Renewal dated November 19, 2015. (Notice of Non-Renewal.) Although the
24 notice was signed by Farmers Insurance, it expressly stated that the Policy is
25 “Underwritten By Fire Insurance Exchange.” (Id.) Further, in January and February
26 of 2016, Plaintiffs’ counsel communicated with Fire Insurance’s claim counsel
27 regarding Plaintiffs’ insurance claim. (See Claim Counsel Communications.) Thus,
28 after receiving the Policy and communicating with Fire Insurance’s agents and
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1 representatives, Plaintiffs had sufficient information to warrant an investigation into
2 the relationship between Fire Insurance and Farmers Insurance, which would have led
3 Plaintiffs to discover the fraud they now allege. See Pincay, 238 F.3d at 1110.
4 Plaintiffs therefore had constructive notice of the fraud in 2015 or 2016, yet waited six
5 years to file their RICO action in April 2022. (See Compl.)
6 Moreover, Plaintiffs’ allegations and information subject to judicial notice
7 make clear that Plaintiffs learned of the injuries underlying their RICO action more
8 than four years before filing the Complaint. Plaintiffs allege that they suffered
9 damages in the form of the denial of benefits under the Policy and related physical and
10 emotional injuries. (See Compl. ¶¶ 63–67.) However, on February 16, 2017,
11 Plaintiffs filed the State Court Complaint against Farmers Insurance, Fire Insurance,
12 and Chern, seeking to recover for damages suffered as a result of Defendants’
13 handling of Plaintiffs’ insurance claim. (See generally State Ct. Compl.) Thus, it is
14 clear that Plaintiffs knew of these injuries by February 16, 2017. (Id.) Regardless of
15 whether Plaintiffs understood any injury to be part of a pattern of racketeering, the
16 statute of limitations began to run with Plaintiffs’ notice of the injury itself. Grimmett,
17 75 F.3d at 510.
18 To the extent that Plaintiffs seek damages in the form of attorneys’ fees and
19 costs in litigating the state court action, (see Compl. ¶ 68), a RICO claim based on
20 those injuries would also be time-barred. In the third act of racketeering, Plaintiffs
21 allege that Defendants fraudulently litigated the state court case in January 2018 to
22 dismiss Farmers Insurance as a defendant. (Id. ¶ 79.) Thus, it is clear that Plaintiffs
23 knew of their alleged injuries in January 2018, but they did not file the Complaint
24 until more than four years later. (See Compl.) Accordingly, Plaintiffs’ RICO claim is
25 time-barred.
26 Plaintiffs’ arguments to the contrary fail. Plaintiffs allege that they were not
27 aware of Defendants’ RICO violations until “[r]ecently,” after they came across news
28 headlines and “realized” that the RICO violations in those cases were “similar” to the
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Case 2:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page 9 of 10 Page ID #:1460
1 activities involved here. (Compl. ¶¶ 3, 32.) However, as discussed above, Plaintiffs
2 “need not discover that the injury is part of a ‘pattern of racketeering’ for the period to
3 begin to run.” Grimmett, 75 F.3d at 510 (quoting McCool v. Strata Oil Co., 972 F.2d
4 1452, 1464–65 (7th Cir. 1992)). Instead, the period “begins to run when a plaintiff
5 knows or should know of the injury that underlies [the] cause of action.” See id. 510–
6 11. For the reasons discussed above, Plaintiffs knew of their injury more than four
7 years before filing the Complaint, regardless of when Plaintiffs may have discovered a
8 broader pattern of racketeering.
9 Plaintiffs also argue that Defendants’ RICO violations are ongoing and, thus,
10 subject to the separate accrual rule.6 (Opp’n 13, ECF No. 20.) “The separate accrual
11 rule ‘provides that a new cause of action accrues for each new and independent injury,
12 even if the RICO violation causing the injury happened more than four years before.’”
13 Hunter v. Union Corp., 94 F.3d 651 (9th Cir. 1996). For the separate accrual rule to
14 apply, a plaintiff must identify a “new overt act[]” within the limitations period, which
15 must (1) “be a new and independent act that is not merely a reaffirmation of a
16 previous act;” and (2) “inflict new and accumulating injury on the plaintiff.”
17 Grimmett 75 F.3d at 512–13 (internal emphasis omitted). Here, however, Plaintiffs
18 fail to identify which, if any, of Defendants’ acts constitutes a new overt act inflicting
19 a new injury within the limitations period. (See generally Opp’n.; see also Compl.)
20 Accordingly, the Court finds that Plaintiffs failed to timely bring their RICO
21 claim within the four-year limitations period, and the claim is thus time-barred.
22 However, the Court provides Plaintiffs leave to amend to allege additional facts in
23 support of the application of the separate accrual doctrine.
24 ///
25 ///
26 ///
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28 6 Defendants did not file a reply or otherwise respond to Plaintiffs’ cursory invocation of the separate
accrual rule.
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Case #:22-cv-02548-ODW-MAR Document 25 Filed 12/29/22 Page10o0f10 Page ID #:1461
1 Vv. CONCLUSION
2 For the reasons discussed above, the Court GRANTS Defendants’ Motion to
3 || Dismiss, with leave to amend as described above. (ECF No. 13.) If Plaintiffs choose
4|| to amend, their First Amended Complaint is due no later than twenty-one (21) days
5 || from the date of this Order, in which case Defendants shall answer or otherwise
6 || respond within fourteen (14) days of the filing. If Plaintiffs do not amend, then the
7 || dismissal of Plaintiffs’ claim shall be deemed a dismissal with prejudice as of the
8 | lapse of Plaintiffs’ deadline to amend.
10 IT IS SO ORDERED.
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12 December 29, 2022 ss
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i Gud lliid
15 OTIS D. WRIGHT, II
6 UNITED STATES DISTRICT JUDGE
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