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Cuadros v. State Farm Fire and Casualty Co.

United States District Court, D. Nevada

June 21, 2017

LUZ ELENA CUADROS, Plaintiffs,
v.
STATE FARM FIRE AND CASUALTY COMPANY, Defendants.

          ORDER

         Presently before the court is defendant State Farm Fire and Casualty Company's (“State Farm”) amended motion to dismiss. (ECF No. 10). Plaintiff Luz Elena Cuadros filed a response (ECF No. 32), and State Farm filed a reply (ECF No. 37).

         I. Introduction

         Plaintiff submitted a class action complaint in Nevada state court on June 23, 2016, in relation to State Farm's alleged practice of applying a reduced actual cash valuation for total loss vehicles by roughly 7% to reflect the purported difference between the sell price and the asking price of an automobile.[1] (ECF No. 1 at 20, 22). Plaintiff asserts that “[a] reasonable consumer of ordinary intelligence would not understand the reduction and would not, in fact, be able to negotiate approximately 7% off of the ask price of a vehicle. Accordingly, Defendant's practice is misleading and deceptive.” (Id. at 25).

         Plaintiff also brings this action to address the insurance policy terms between the two parties. (Id.). The various claims in her complaint are generally based on allegations that “State Farm breached the express requirements of the Policy in settling her total loss claim” and “that the Policy contains an unconscionable mandatory appraisal clause.” (ECF No. 32 at 7); see also (ECF No. 1).

         Plaintiff specifically asserts the following claims on behalf of the purported class: (1) unfair trade practices under Nevada Revised Statute (“NRS”) § 686A.310(1)(a), (e), (g), and (n); (2) violations of the Nevada Deceptive Trade Practices Act (“NDTPA”), NRS 598.0903(8), 598.0915(15), 598.0923(2), and 598.0923(3); (3) breach of contract; (4) breach of the implied covenant of good faith and fair dealing; (5) fraudulent misrepresentation, (6) unjust enrichment; and (7) injunctive and declaratory relief. (ECF No. 1).

         Defendant's motion first argues that the complaint should be dismissed because these claims are subject to the Nevada insurance commissioner's exclusive jurisdiction, and plaintiff has not administratively exhausted her claims. (ECF No. 10 at 7). Second, defendant alleges that the complaint should be dismissed because plaintiff has not alleged damages, though a named class action plaintiff must identify the same. (Id. at 12). Next, it argues that plaintiff has not satisfied the heightened pleading standard as to “[h]er [f]raud-[b]ased [c]laims” and that plaintiff does not indicate what part of the insurance policy was violated by defendant's actions. (Id. at 15, 21).

         Moreover, defendant requests that the contractual bad faith claim be dismissed because plaintiff's allegations involve the terms of the contact and the claim processing procedure. (Id. at 21-22). Finally, defendant posits that the contract prevents the unjust enrichment claim.[2] (ECF No. 10 at 22). . . . . . . . . . . . . . . .

         II. Legal Standard[3]

         The court may dismiss a plaintiff's complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide “[a] short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Although rule 8 does not require detailed factual allegations, it does require more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Furthermore, a formulaic recitation of the elements of a cause of action will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009) (citation omitted). Rule 8 does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Id. at 678-79.

         To survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Id. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. When a complaint pleads facts that are merely consistent with a defendant's liability, and shows only a mere possibility of entitlement, the complaint does not meet the requirements to show plausibility of entitlement to relief. Id.

         In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering a motion to dismiss. Id. First, the court must accept as true all of the allegations contained in a complaint. However, this requirement is inapplicable to legal conclusions. Id. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. at 678. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has “alleged - but not shown - that the pleader is entitled to relief.” Id. at 679. When the allegations in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.

         The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The Starr court held:

First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.

Id.

         III. Discussion

         a. Administrative exhaustion and NRS 686A.310 claims

         Defendant asserts that Allstate Ins. Co. v. Thorpe forecloses plaintiff's claims because plaintiff has not administratively exhausted her claims, which are subject to the Nevada insurance commissioner's exclusive jurisdiction. See 170 P.3d 989, 996 (Nev. 2007); see also (ECF No. 10). However, that case explicitly allows suits “for tortious and contractual bad faith against first-party insurers.” Thorpe, 170 P.3d at 996 (distinguishing these kinds of actions from those involving “private actions originating in district court claiming awards of statutory damages and interest under NRS 690B.012”); see also Rathnayake v. Farmers Ins. Exch., No. 2-13-CV-765-JAD-GWF, 2014 WL 3897960, at *1 (D. Nev. Aug. 11, 2014). Moreover, Thorpe did not mention NRS 686A.310, and the terms of NRS 690B.012 are not relevant to this case. See 170 P.3d 989; see also Nev. Rev. Stat. § 690B.012.

         However, it is true that NRS 686A.015 provides that, “[n]otwithstanding any other provision of law, the Commissioner has exclusive jurisdiction in regulating the subject of trade practices in the business of insurance in this state.” Nev. Rev. Stat. § 686A.015(1) (emphasis added); see also Weaver v. Aetna Life Ins. Co., 370 F. App'x 822, 824 (9th Cir. 2010) (citing Nev. Rev. Stat. § 686A.015(1)) (“Any right to relief for [plaintiff's] claims alleging violation of the Nevada Insurance Code resides exclusively with the Insurance Commissioner . . . .”).

         Indeed, defendant cites to both Herrera v. Allstate Fire & Cas. Ins. Co. and DeCastro v. Progressive N. Ins. Co. in support of its exclusive-jurisdiction argument. See (ECF No. 10) (citing Herrera, No. 2:13-cv-00908-MMD, 2015 WL 1951753, at *2 (D. Nev. Apr. 28, 2015) (holding that an action requiring the court to evaluate the potential violation of an insurance regulation foreclosed private enforcement of the insurance code)); DeCastro, No. 2:14-cv-0983-APG-VCF, 2015 WL 1809164, at *2 (D. Nev. Apr. 13, 2015) (“Because all of Plaintiff's allegations relate to Defendant's alleged violation of the Total Loss Regulation, any claim of wrongdoing on the part of Defendant would fall under the original jurisdiction of the [Nevada Division of Insurance].”)).

         Those cases are relevant to the instant case because, despite how plaintiff frames her first two claims for unfair trade practices and violations of the NDTPA, the factual subject matter underlying those claims generally involves topics entrusted by statute to the insurance commissioner. Nev. Rev. Stat. § 686A.015(1).

         Furthermore, the private cause of action contemplated by NRS 686A.310(2) does not apply to plaintiff's allegations that the contents of the insurance contract rendered it unconscionable. See Montes v. Bank of Am. NA, No. 2:13-CV-00660-RCJ, 2014 WL 1494234, at *14 (D. Nev. Apr. 15, 2014) (citing Schumacher v. State Farm Fire & Cas. Co., 467 F.Supp.2d 1090, 1095 (D. Nev. 2006)) (reasoning that NRS 686A.310(2) applies to how an insurer has acted to resolve a party's claim, not the form of the insurance offer). The title of that statutory provision refers to “[u]nfair practices in settling claims, ” not the formation of an insurance contract. See Id. (citing Albert H. Wohlers & Co. v. Bartgis, 969 P.2d 949, 959 (Nev. 1998) (considering a statute's title to discern its purpose)). Additionally, “by its own terms, NRS 686A.310(2) applies only to allegations related to the handling of an insured's claim.” Id. at 14.

         Therefore, plaintiff's argument that the contract terms-such as the use of the appraisal dispute resolution process-were unconscionable cannot be a basis for liability pursuant to NRS 686A.310(2) because a contract's facial propriety is an issue that predates the initiation of the insurer's claim settlement process. See id.

         However, this analysis also clarifies that there is a statutory right to bring private suit here, depending on whether the claims involve the insurance settlement process. See Id. Further, the manner of defendant's alleged calculation or application of the 7% discount is related to how plaintiff settled claims because that discount is applied during the course of resolving an insurance claim.[4]See (ECF No. 1). ...


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