INC. S MOTION TO DISMISS THE TWIN CITY FIRE INSURANCE

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1 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 1 of 30 1 STROOCK & STROOCK & LAVAN LLP Michael F. Penis (State Bar No ) 2 muerlis@stroock.com Richard R. Johnson (State Bar No ) 3 rjohnsonstroock.com 2029 Century Park East 4 Los Angeles, CA Telephone: Facsimile: lacalendar@stroock. corn 6 Attomfor Defendants CITY FIRE INSURANCE COMPANY and THE HARTFORD FINANCIAL SERVICES GROUP, INC. 8 UNITED STATES DISTRICT COURT 10 CENTRAL DISTRICT OF CALIFORNIA MARIO R. FERLA, an individual; ) Case No. CV VBF (FFMX) STEVE SALEEN, an individual; 13 THOMAS DEL FRANCO, an The Honorable Valerie Baker individual; MARTIN H. KARO, an 14 individual; and JACK PITLUK, an Fairbank individual 15 Plaintiffs, TWIN CITY INSURANCE COMPANY AND THE HARTFORD 16 vs. FINANCIAL SERVICES GROUP, 17 INC. S MOTION TO DISMISS THE TWIN CITY FIRE INSURANCE 18 COMPANY, an Indiana Corooration; COMPLAINT THE HARTFORD FINANCIAL Date: Sejtember 14, SERVICES GROUP, INC., a Delaware corporation, Time: 1: 0 p.m. Ctrm: 9 20 Defendants. 21 (Declaration of Michael F. Perlis and (Proposed] Order filed 22 concurrently herewith] 23 Complaint Filed: June 22, LA v1

2 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 2 of 30 1 TABLE OF CONTENTS 2 I. introduction 2 3 II. BACKGROUND 4 4 A. THE RELEVANT insurance POLICY 5 5 B. THE UNDERLYING THOMASON ACTION 5 6 III. ARGUMENT 6 7 A. STANDARDS APPLICABLE TO THIS MOTION TO DISMISS 6 8 B. THE COMPLAINT VIOLATES FRCP C. PLAINTIFFS CANNOT STATE A CLAIM FOR BREACH OF ANY CONTRACTUAL DUTY TO DEFEND OR TO indemnify THE 10 THOMASON ACTION 11 z The Thomason Action Is Uninsurable Pursuant to Section a. Section 533 Precludes Indemnity Coverage for the Thomason Action 11 b. While the Breach-of-Contract Claim Is Moot Because Twin 14 City Has Agreed To Provide A Defense, Twin City Has No Duty To Defend the Thomason Action Because There Is No 15 Potential for Indemnity Coverage The Duty to Indemnify Claim Is Unripe In Any Event D. PLAINTIFFS CANNOT STATE A CLAIM FOR BAD FAITH E. PLAINTIFFS CANNOT STATE AN UNFAIR BUSINESS PRACTICES CLAIM F. PLAINTIFFS ALTER EGO ALLEGATIONS ARE LEGALLY 20 INSUFFICIENT G. PLAINTIFFS CANNOT STATE A CLAIM FOR TORTIOUS INTERFERENCE H. PLAINTIFFS DECLARATORY RELIEF CLAIM SHOULD BE 23 DISMISSED IV. CONCLUSION LA v1

3 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 3 of 30 1 TABLE OF AUTHORITIES 2 CASES 3 Aetna Life Insurance Co. of Hartford, Conn. v. Haworth, U.S. 227, 57 S. Ct. 461 (1937) 23 Agnew v. Moody, 5 330F.2d868(9thCir. 1964) 10 6 Allstate Insurance Co. v. Hansten, F. Supp. 614 (N.D. Cal. 1991) 12 Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 8 7 Cal. 4th 503, 28 Cal. Rptr. 2d 475 (1994) 22 9 Bank of the West v. Superior Court, 2 Cal. 4th 1254, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992) 10 5 Bradley v. Chiron Corp., z F.3d 1317 (Fed. Cir. 1998) Buss v. Supenor Court, 16 Cal. 4th35 (1997) Calderon v. Ashmus, U.S.740, Ct. 1694(1998) 23 Hc).. 15 Carngan v. California State Legislature, 263 F.2d 560 ( 9th Cir. 1959) Cholla Ready Mix, Inc. v. Civish, F.3d 969 (9th Cir. 2004) 7 18 Communist Party of the USA v. 522 Valencia, Inc., Cal. App. 4th 980 (1995) 20 Downey Venture v. LMI Insurance Co., Cal. App. 4th 478 (1998) 5, 12, 15, Dykstra v. Foremost Insurance Co., Cal. App. 4th 361 (1993) 12 Ellingson v. Burlington Northern, Inc., F.2d1327(9thCir. 1981) Empl. Insurance of Wausau v. Musick, Peeler, & Garrett, 871 F. Supp. 381 (S.D. Cal. 1994) Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., F.2d1542(9thCir. 1989) 7 27 Hatch v. Reliance Insurance Co., 758 F.2d409(9thCir. 1985) LA v1 - ii -

4 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 4 of 30 1 Hurley Construction Co. v. State Farm Fire & Casualty Co., 10 Cal. App. 4th 533 (1992) 14 2 J.B. Aguerre, thc. v. American Guarantee & Liability Insurance Co., 3 59 Cal. App. 4th 6 (1997) 6 4 J.C. Penney Casualty Insurance Co. v. M.K., 52 Cal. 3d 1009 (1991) 5,12 5 Jaffe v. Cranford Insurance Co., Cal. App. 3d930(1985) 5 7 Kasparian v. County of Los Angeles, 38 Cal. App. 4th 242, 45 Cal. Rptr. 2d 90 (1995) 22 8 Love v. Fire Insurance Exch., Cal. App. 3d 1136, 271 Cal. Rptr. 246 (1990) Madrid v. Perot Systems Corp., 130 Cal. App. 4th440 (1990) 20 z 11 Maloney v. Scottsdale Ins. Co., Fed. Appx. 29 (9th Cir. 2007) McHenry v. Renne, - U 84F.3d 1172 (9thCir. 1996) McLoughlin v. Blooms Sons Company, Inc., Cal. App. 2d 848 (1962) Papasan v. Allain, o 478 U.S. 265, 106 S. Ct. 2932,92 L. Ed. 2d209 (1986) 7 17 H Schmidt v. Herrman, F.2d1221 (9thCir. 1980) Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523 (2000) State Farm General Insurance Co. v. Mintarsih, 21 No. B202888, 2009 WL (Cal. Ct. App. June 25, 2009) 13, Thomason Automobile Group, LLC v. Ferla, et al., Case No. 08-cv JLL-CCC (D. N.J. Aug. 14, 2008) passim 23 In re Tobacco II Cases, Cal. 4th 298, 93 Cal. Rptr. 3d 559 (May 18, 2009) Turner v. Cook, 362 F.3d 1219 (9th Cir. 2004) Uhrich v. State Farm Fire & Casualty Co., Cal. App. 4th598 (2003) Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) 19 LA v1 111

5 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 5 of 30 U o Wady v. Provident Life & Ace. Insurance Co. of America, F. Supp. 2d 1060 (C.D. Cal. 2002) 21 Wailer v. Truck Insurance Exchange. Inc., 3 11 Cal.4thl,44Ca1.Rptr.2d370(1995) 16 4 Washington v. Baenziger, F. Supp (N.D. Cal. 1987) 10 Wyatt, Virgin Islands, Inc. v. Government of Virgin Islands, F.3d 801 (3rd Cir. 2004) 23 7 STATUTES 8 18U.S.C U.S.C U.S.C U.S.C.1962(d) U.S.C.1962(c) 6 Cal. Bus. & Prof. Code passim 14 Cal. Bus. & Prof. Code , Cal. Civ. Code Cal. Ins. Code 533 passim 17 Fed R. Civ. Proc. 8(a)(2) 7 18 FedR.Civ.Proc.8(d)(1) 7 19 Fed R. Civ. Proc. 9(b) OTHER AUTHORITY 22 Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2008) 16, Wright & Miller, Federal Practice & Procedure, 3rd ed., Vol. 5, Ch. 4, LA v1 -iv-

6 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 6 of 30 1 TO THE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD: 2 PLEASE TAKE NOTICE that on September 14, 2009 at 1:30 p.m., or as 3 soon thereafter as this matter may be heard before the Honorable Valerie Baker 4 Fairbank, in Courtroom 9 of the above-captioned Court, located at 312 North Spring 5 Street, Los Angeles, California 90012, defendants Twin City Fire Insurance 6 Company and The Hartford Financial Services Group, Inc. will and hereby do move 7 this Court, pursuant to Rules 8(a) and 12(b)(6) of the Federal Rules of Civil 8 Procedure, to dismiss all claims for relief alleged in the Complaint filed plaintiffs 9 Mario R. Ferla, Steve Saleen, Thomas Del Franco, Martin H. Karo, and Jack Pitluk, 10 for: (1) failure to make a short and plain statement of the claim; and (2) failure to z 11 state a claim upon which relief can be granted. U 12 This Motion is made following the conference of counsel pursuant to Local - 13 Rule 7-3, which took place on July 17, The Motion is based upon this Notice c) 14 of Motion and Motion, the accompanying Memorandum of Points and Authorities, 15 the Declaration of Michael F. Perlis, the pleadings and papers on file herein, all other 16 matters of which the Court may take judicial notice and upon such other or further 17 material as may be presented at or before the hearing on the Motion. 18 Dated: July 29, 2009 Respectfully submitted, STROOCK & STROOCK & LAVAN LLP 20 MICHAEL F. PERLIS RICHARD R. JOHNSON By: /s/michael F. Penis Michael F. Penis 23 Attorneys for Defendants 24 TWIN CITY FIRE INSURANCE COMPANY and THE HARTFORD 25 FINANCIAL SERVICES GROUP, INC LA v1 1

7 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 7 of 30 U 1 MEMORANDUM OF POINTS AND AUTHORITIES 2 I. INTRODUCTION 3 Defendants, Twin City Fire Insurance Company ( Twin City ) and The Hartford Financial Services Group, Inc. ( HFSG ), hereby move to dismiss the 5 Complaint of Mario R. Ferla, Steve Saleen, Thomas Del Franco, Martin H. Karo, and 6 Jack Pitluk ( Plaintiffs ), pursuant to Federal Rules of Civil Procedure 8(a) and 1 2(b)(6), for: (1) failure to make a short and plain statement of the claim; and 8 (2) failure to state a claim upon which relief can be granted. The Complaint should be dismissed because it says too much to be comprehensible and yet too little to be 10 viable. ii While this action boils down to a straightforward insurance coverage dispute, 12 i.e., a breach-of-contract claim (albeit one that is both untenable and unripe), 13 Plaintiffs 62-page narrative is so prolix and convoluted as to make it difficult to 14 discern the alleged factual basis for Plaintiffs purported claims. In short, Plaintiffs 15 appear to allege that Twin City has breached the relevant insurance policy (the 16 Policy ) by refusing to defend, or to indemnity any settlement of or judgment in, the 17 underlying RICO lawsuit, Thomason Auto Group, LLC v. Ferla, et al., Case No cv jll-ccc (D. N.J.) (the Thomason action ). This breach-of-contract 19 claim, which is the underpinning of the whole action, fails as a matter of law, 20 because, as shown below, Twin City has no duty to defend or to indemnify the 21 Thomason action. 22 As a matter of well-established California law, Twin City has no duty to 23 defend or to indemnify the Thomason action because the Thomason action alleges 24 only wilful, fraudulent, and deliberately criminal conduct that is uninsurable pursuant 25 to California Insurance Code Section 5331 Plaintiffs breach-of-contract claim is not 26 only untenable in light of Section 533; it is also unripe (and merely hypothetical), in 27 1 While there are also exclusions and other pplicable bases for disclaiming or 28 limiting coverage under the Policy for the Thomason action, those additional coverage issues need not be addressed here, as they are unnecessary to the resolution of this motion. -2- LA v1

8 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 8 of 30 U - 13 ii because there can be no bad faith claim in the absence of an underlying breach of 12 contract. Accordingly, California courts dismiss insurance bad faith claims where, as here, the insurer has not withheld any benefits actually due under the Policy. 14 Likewise, the unfair business practices claim (Business and Professions Code 15 Section 17200) fails in absence of any immediate injury in fact. A plaintiff cannot 16 satisfsi the injury in fact standing requirement (Section 17204) when, as in this 17 case, its relationship with the defendant is circumscribed by a contract, and there has 18 been no breach. 19 Plaintiffs alter-ego allegations against Twin City s parent, I{FSG, are also 20 non-meritorious. While Plaintiffs devote approximately twenty pages of the 21 Complaint to allegations regarding the relationship between Twin City and HFSG 22 (see, pp. 2-22), they fail to satisfsr the alter-ego pleading requirements under 23 California law, because they fail to state facts showing: (1) that there is such a unity 24 of interest between Twin City and HFSG as to render them inseparable; and 25 (2) (most significantly) that respecting the separate existence of Twin City and 26 HFSG would result in grave injustice or inequity to Plaintiffs. For example, 27 plaintiffs give no indication that Twin City is insolvent, undercapitalized, or 28 otherwise unable to pay any judgment awarded against it on Plaintiffs contract LA v1 1 light of the fact that there is no settlement or judgment for Twin City to indemnifr. 2 (Moreover, in an abundance of caution, Twin City has agreed to defend the Plaintiffs 3 in the Thomason action, subject to a full reservation of rights.) Accordingly, 4 Plaintiffs have not stated, and at this time based upon the facts at issue here cannot 5 state, any breach-of-contract claim upon which relief can be granted. 6 In an apparent attempt to compensate for and distract from the absence of a 7 viable contract claim, Plaintiffs embellish their Complaint with a panoply of equally 8 non-meritorious tag-along allegations regarding bad faith, unfair business 9 practices, alter ego, and tortious interference. As we show, each of these tag- 10 along claims is fatally defective. The bad faith claim fails as a matter of law -3-

9 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 9 of 30 U claim. Accordingly, the conclusory, factually-unsupported alter-ego allegations 2 against HFSG should be rejected by the Court. 3 In addition, Plaintiffs claim against HFSG for tortious interference with 4 insurance contract is untenable in light of Plaintiffs alter-ego allegations (which are 5 expressly incorporated by reference into the interference claim). It is well-settled 6 California law that a party to a contract cannot be held liable for tortiously interfering 7 with its own contract. Accordingly, since HFSG is identical with Twin City 8 according to Plaintiffs alter-ego allegations, it ipso facto cannot be held liable for 9 interfering with the insurance contract between itself (i.e., Twin City) and Plaintiffs. 10 Finally, Plaintiffs claim for declaratory relief should be dismissed because ii there is no coverage for the Thomason action, and thus no actual and justiciable 12 controversy between the parties. Moreover, Twin City has agreed to defend the Thomason action subject to a full reservation of rights (despite the fact that it has no 14 duty to do so according to Section 533) and there is currently no judgment or j 15 settlement for Twin City to indemnify. Therefore, since federal courts do not issue 16 advisory opinions regarding unripe hypothetical disputes, the declaratory relief claim 17 should be dismissed without prejudice, pending the materialization of some actual 18 and justiciable controversy between the parties (e.g., after a judgment or settlement 2 19 in the Thomason action). 20 II. BACKGROUND 21 The only facts relevant to this Motion to Dismiss are those that can be 22 ascertained from the contents of two documents that are attached as exhibits to the In an effort to avoid burdening the Court with this Motion to Dismiss, and pursuant to Civil Local Rule 7-3, Defendants counsel notified Plaintiffs counsel by letter 26 dated July 16, 2009 of the grounds on which it would bring this Motion, asked Plaintiffs to dismiss the Complaint voluntarily without preudice, and further met and 27 conferred telephonically with Plaintiffs counsel on Jul,r 17, 2009 regarding the same issues. (Penis Declaration, J 2-3, Ex. A.) Plaintiffs counsel advised Defendants 28 counsel that he would wait to see the Motion before deciding whether to dismiss or amend the Complaint. (Id., 3.) Therefore, Defendants have no alternative under the Federal Rules of Civil Procedure but to file the instant Motion. -4- LA v1

10 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 10 of 30 1 Complaint, and subject to judicial notice: (1) the Policy (Complaint, Ex. A); and 2 (2) the complaint in the underlying Thomason action (Complaint, Ex. B). A. THE RELEVANT INSURANCE POLICY: The relevant insurance policy is Twin City Fire Insurance Company Private Choice Encore! Policy Number 00 KB (the Policy ). While Plaintiffs 6 devote at least six pages of their Complaint to the quotation of various terms and 7 provisions of the Policy, those various terms and provisions are not relevant to, and 8 need not be considered in connection with any ruling on, this Motion to Dismiss. 9 Likewise, while Twin City has identified various Policy-based defenses to coverage, 10 and has reserved its right to decline coverage on any applicable basis, the other z defenses need not be considered in connection with this Motion to Dismiss, because 12 this entire coverage dispute can be resolved pursuant to California Insurance Code 13 Section 533 (and/or the longstanding common-law prohibition against Oç indemnification of restitutionary disgorgement). 15 Section 533 provides: 16 An insurer is not liable for a loss caused by the willful act of the insured; but he is not exonerated by the negligence of the insured, or of 17 the insured s agents or others. 18 Cal. Ins. Code Section 533 is an implied exclusionary clause which, by statute, must be read 20 into all insurance policies. Downey Venture v. LMI Ins. Co., 66 Cal. App. 4th 478, (1998), quoting, IC. Penney Casualty Ins. Co. v. MK., 52 Cal. 3d 1009, 1019 (1991). 23 B. THE UNDERLYING THOMASON ACTION 24 The underlying litigation for which Plaintiffs seek coverage is Thomason Auto Group, LLC v. Ferla, et al., Case No. 08-cv JLL-CCC (D. N.J.) (the Thomason action ). While the Thomason action was filed in the District of New 27 See e.g. Bank of the West v. Superior Court, 2 Cal. 4th 1254, 1266, 10 Cal. Rptr. 2d P. 2d 545 (1992) ( It is well established that one may not insure against 28 the nsfc of being ordered to return money or property that has been wrongfully acquired ); citing, Jaffe v. Cranford Ins. Co., l6s Cal. App. 3d 930, (1985) (restitution of medical overpayments not insurable damages ). LA v1

11 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 11 of 30 1 Jersey, Plaintiffs are currently moving to transfer venue to the Central District of 2 California, which is where the facts and circumstances giving rise to the Thomason 3 action occurred in substantial part. (See, Complaint, 15.) 4 The complaint in the Thomason action asserts the following causes of action 5 against the Plaintiffs herein: (1) Violations of the Racketeer Influenced and Corrupt 6 Organizations Act ( RICO ), 18 U.S.C. 1962(c); (2) RICO Violations, 18 U.S.C (c); (3) RICO Conspiracy, 18 U.S.C. 1962(d); (4) Tortious Interference with 8 Prospective Business Relations; (5) Fraud in the Inducement; (6) Unjust Enrichment; 9 (7) Conversion; (8) Common Law Fraud; (9) Intentional Misrepresentation; 10 (10) Negligent Misrepresentation; (11) Equitable Fraud; (12) Aiding and Abetting 11 the Commission of a Tort; (13) Conspiracy to Commit a Tort; (14) Breach of U R 12 Fiduciary Duty; and (15) Constructive Trust. (Complaint, Exhibit E, pp , 13 J ) 14 The Thomason complaint seeks the following remedies: (a) a declaration that 15 benefits acquired by defendants as a result of breaches of fiduciary duty are held in 16 constructive trust for the benefit of plaintiff; (b) an order directing defendants to pay 17 the monies held in the constructive trust to plaintiff; (c) compensatory damages and 18 prejudgment interest; (d) RICO treble damages pursuant to 18 U.S.C. 1964; 19 (e) disgorgement of amounts by which defendants have been unjustly enriched; (f) an 20 award of plaintiffs attorneys fees and costs; and (g) punitive and exemplary 4 21 damages. 22 III. ARGUMENT 23 A. STANDARDS APPLICABLE TO THIS MOTION TO DISMISS 24 This Motion to Dismiss is based solely upon the allegations in the Complaint 25 and other matters of which this Court may properly take judicial notice, including: 26 The unjust enrichment and constructive trust remedies are uninsurable as a matter 27 of law pursuant to California s longstanding prohibition on indemnification of restitutionary disgorgement. Punitive damages, and settlement paid to avoid the 28 imposition of punitive damages, are also uninsurable pursuant to Section 533. See, e.g., lb. Aguerre, Inc. v. American Guarantee & Liability Ins. Co., 59 Cal. App. 4th 6, 14, 16 (1997). - LA v1-6

12 and statement Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 12 of 30 1 (1) the Policy (Complaint, Ex. A); and (2) the Thomason complaint (Complaint, Ex. 2 E). Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 (9th 3 Cir. 1989). 4 This Motion to Dismiss accepts as true, and construes in the light most 5 favorable to Plaintiffs, all facts pled in the Complaint. However, it does not, nor 6 need this Court, accept any legal conclusions pled in the Complaint, or any 7 allegations that are merely conclusory, unwarranted deductions of fact, or 8 unreasonable inferences. Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, , 92 L. Ed. 2d 209 (1986); Cholla Ready Mix, Inc. v. Civish, 382 F.3d 969, (9thCir. 2004). B. THE COMPLAINT VIOLATES FRCP Federal Rule of Civil Procedure 8(a)(2) provides that a pleading that states a claim for relief must contain... a short and plain statement of the claim showing o that the pleader is entitled to reliefl.] Similarly, Federal Rule of Civil Procedure (d)(l) requires that each allegation must be simple, concise, and direct. The 16 requirement of a short plain statement protects a defendant s constitutional due 17 process right to notice of the charges asserted against it in an intelligible format that 18 permits a meaningful response. 19 This Complaint is precisely the opposite of a short and plain statement of the 20 claim showing that [Plaintiff] is entitled to reliefl.] It is a rambling, disorganized, 21 confusing, and repetitive yet incomplete and uninformative that 22 fails to show that Plaintiffs are entitled to any relief. 23 First, after acknowledging in the Introductory Statement on page 1 that this 24 is basically a coverage dispute, Plaintiffs fail to discuss any specific details regarding 25 the dispute until page 35. The lengthy, thirty-four page interval consists largely of 26 extraneous background material. 27 Next, after taking only half a page to identify themselves ([J 1-5, pp. 1-2), 28 Plaintiffs devote seven-and-a-half pages to identifying Defendants. (JJ 6-1 1, pp. LA v1-7-

13 none discussing Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 13 of 30 U ) In so doing, Plaintiffs, inter alia, cite several websites, quote from some 2 unrelated court filing in Texas, display a picture of the Hartford logo, quote from the 3 Policy s Kidnap and Ransom/Extortion Coverage, and discuss Hartford s SEC filings 4 j 15 of which have anything to do with this case. 5 This rambling narrative is punctuated with dramatic accusations about 6 irrelevant matters (e.g., this assertion is demonstrably false [J 9, p. 8 {emphasis in 7 original whether HFSG is a holding company }]), and legally 8 insignificant buzzwords (e.g., unopposed diktat ( 9(u), p. 8)), but fails to 9 communicate how, if at all, the allegations are actionable or relevant to any claim 10 upon which relief can be granted. Defendants should not be required to wade, at 11 their peril, through this morass of irrelevant details, in search of the basis for 12 Plaintiffs purported claims. Next, Plaintiffs devote eight pages to what they characterize as a discussion of 14 Jurisdiction and Venue. (JJ 12-15, pp ) To the contrary, the bulk of this section consists of a litany of accusations, on information and belief, that HFSG is 28 LA v1 16 secretly engaged in the business of insurance in this forum. acting as the.. 17 puppeteer for... Hartford subsidiaries and should know that it would be haled into 18 court in this forum as a result of its [unspecified] bad faith conduct directed to and 19 harming individuals and entities who reside and do business in this forum. (J 14(a)- 20 (n), pp ) None of this irrelevant innuendo changes the fact that Twin City is 21 the party with whom Plaintiffs contracted for insurance coverage; nor does it 22 adequately allege that HFSG is the alter ego of Twin City. It is all beside the point. 23 (Twin City does not even dispute jurisdiction and venue.) Then, Plaintiffs devote 24 over four pages to Agency, Alter Ego, and Joint Venture/Enterprise Liability 25 Allegations that add nothing to the Complaint, let alone any valid basis for naming 26 HFSG as a defendant in this contract dispute between Plaintiffs and Twin City. 27 (J 16-19, pp ) -8-

14 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 14 of 30 1 It is not until page 22 that Plaintiffs begin to discuss the central issue of 2 insurance coverage. Unfortunately, the only discussion Plaintiffs offer is six pages 3 of lengthy, verbatim quotations from various definitions and other provisions in the 4 Policy, without any explanation of how, if at all, they are relevant to the instant 5 dispute. (JJ 20-28, pp ) For the most part, they are not. 6 Plaintiffs do not get around to discussing the Background until page This Background consists of six pages of confusing, and again largely irrelevant, 8 details regarding various business entities, distributorship agreements, bankruptcy 9 proceedings, and other lawsuits between Insureds that even Plaintiffs concede are not 10 covered under the Policy. (J 29-42, pp ) Only the last half-page of this 11 section, 42 at page 33, addresses the Thomason action, even though Plaintiffs 12 concede that it is the primary subject of the parties coverage dispute. Id It is not until page 33 that Plaintiffs begin to address, for five pages (albeit in a g 14 very incomplete and uninformative manner), the coverage dispute regarding the 15 Thomason action. (J 43-53, pp ) Then, at page 38, plaintiffs move on from 16 the coverage issue and, despite the fact that they have not demonstrated that they are 17 entitled to any coverage for the uninsurable Thomason action, begin to argue that 18 Twin City has breached the Policy willfully and in bad faith. This five page 19 discussion consists of repetitive, boilerplate allegations to the effect that Defendants 20 deliberately, unjustifiably and unreasonably did various things that are simply not 21 actionable, given the fact that no benefits are due under the Policy. (JJ 54-59, pp ) 23 Finally, on page 43, Plaintiffs finally get around to stating their purported 24 claims for relief. Even the claims for relief are unduly prolix, and clogged with 25 irrelevant details. Yet, Plaintiffs sixteen-page statement of purported claims for 26 re1ief, even though it is by itself longer than the entire Complaint needs to be, fails 27 to state any claims upon which relief can be granted. (JJ , pp ) 28 LA v1-9-

15 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 15 of 30 1 Thus, the Complaint is virtually a textbook example of the type of complaint 2 that is subject to dismiss under Rule 8. The Ninth Circuit Court of Appeals, in 3 affirming the dismissal of a complaint that violated Rule 8, explained the evil that 4 Rule 8 is designed to avoid: 5 Prolix, confusing complaints such as the ones plaintiffs filed in this case impose unfair burdens on litigants and judges. As a practical matter, the 6 judge and opposing counsel, in order to perform their responsibilities, cannot use a complaint such as the one plaintiffs filed, and must prepare 7 outlines to determine who is being sued for what. Defendants are then put at risk that their outline differs from the judge s, that plaintiffs will 8 surprise them with something new at trial which they reasonably did not understand to be in the case at all and that res judicata effects of 9 settlement or judgment will be different from what they reasonably expected. Tjhe rights of the defendants to be free from costly and 10 harassing litigation must be considered. [Citation.] The judge wastes half a day in chambers preparing the short and plain 11 statement which Rule 8 obligated plaintiffs to submit. He then must manage the litigation without knowing what claims are made against whom. This leads to discovery disputes and lengthy trials, prejudicing litigants in other cases who follow the rules, as well as defendants in the 13 case in which the prolix pleading is filed. 14. McHeniy v. Renne, 84 F.3d 1172, (9th Cir. 1996) (citations omitted). 5 C) Because it rambles on with convoluted recitations of irrelevant details, leaving < 16 the Court and Defendants to guess as to which of the many confusing accusations o 17 form the purported basis of the various claims asserted, the Complaint is subject to dismissal for violation of Rule 8. Moreover, as shown below, to the extent that the Courts have found parties in violation of FRCP 8 where the complaint was: 21 (1) needlessly long; (2) highly repetitive; (3) confusing; or (4) consisted of incomprehensible rambling. See, Wright & Miller, Federal Practice and Procedure, 22 Ch ; see also, e.g., Agnew v. Moody, 330 F.2d 868, 870 (9th Cir. 1964) (finding that complaint which was 55 pages, excluding the prayer for relief and 23 exhibits, violated the rule); Washington v. Baenziger 656 F. Supp. 1176, 1177 (N.D. Cal. 1987) (86 page complaint which contained 3 causes ot action against defendants was properly dismissed for failure to contain plain and short statement); Carrigan v. Ca1fornia State Legislature 263 F.2d 560, (9th Cir. 1959) 25 (finding that complaint violated Rule requirement where legal theories were alleged in 27 pages, the relief demanded in the last 9 pages, and the intervening pages contained hearsay conversations and other such matters); Hatch v. Reliance ins. Co., 758 F.2d (9th Cir. 1985) (district court did not abuse discretion in 27 concluding that complaints, which including attachments, exceeded 70 pages in length, were confusing and conclusory and not in compliance with the short and 28 plain statement requirement); Schmidt v. Herrman, 614 F.2d 1221, 1224 (9th Cir. 1980) (district court did not abuse discretion by striking confusing, distracting, ambiguous, and unintelligible pleadings). LA v1

16 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 16 of 30 1 Complaint is intelligible, it is also subject to dismissal pursuant to Rule 12(b)(6), for 2 failure to state a claim upon which relief can be granted. C. PLAINTIFFS CANNOT STATE A CLAIM FOR BREACH OF ANY 4 CONTRACTUAL DUTY TO DEFEND OR TOINDEMNIFY THE 5 THOMASON ACTION. 6 Plaintiffs cannot state a breach-of-contract claim. Plaintiffs allege that Twin City has breached its purported contractual duties to defend and indemnify the Thomason action. This claims fails, however, since Twin city has no duty to defend or indemnify the Thomason action, because: (1) there is no potential for indemnity coverage of the Thomason action, as it alleges only willful conduct (and attendant conduct that is inextricably linked to the willful conduct); and (2) Twin City therefore has no duty to defend the Thomason action. Moreover, any claim for breach of the duty to defend is moot in light of the fact that Twin City has, in an abundance of caution, agreed to defend the uninsurable Thomason action, subject to a full reservation of rights. Likewise, any claim for breach of the duty to indemnify is unripe, as the Plaintiffs are not currently legally obligated to pay any judgment or settlement as to which Twin City could be called upon to provide any indemnity The Thomason Action Is Uninsurable Pursuant to Section Section 533 precludes indemnity coverage for the Thomason action in its 21 entirety, given the deliberately fraudulent and intentionally harmful conduct alleged 22 as the basis of the claims made therein. Therefore, since there is no potential for 23 indemnity coverage, Twin City also has no contractual duty to defend the Thomason 24 action. a. Section 533 Precludes Indemnity Coverage for the Thomason 25 Action. 26 As noted above, Section 533 expressly prohibits the indemnification of wilful 27 acts[.] A wilful act[,] for purposes of Section 533, may be either: (1) an act done 28 with the intent to injure (i.e., an act deliberately done for the express purpose of causing damage or intentionally performed with knowledge that damage is highly -11- LA v1

17 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 17 of 30 c L) j 15 1 probable or substantially certain to result ); or (2) an inherently harmful act (i.e., an 2 intentional and wrongful act in which the harm is inherent in the act itself ). 3 Downey Venture v. LMI Ins. Co., 66 Cal. App. 4th 478, 500 (1998) (emphasis added, 4 internal quotes omitted); see also, J.C. Penney Cas. Ins. Co. v. M.K, 52 Cal. 3d , 1025 (1991). 6 The conduct alleged as the gravamen of the Thomason action is wilful in 7 both senses of the word. Plaintiffs allegedly made the misrepresentations at issue in 8 the Thomason action deliberately and with the express purpose of inducing 9 Thomason to invest $6,000,000 in a company that they were planning to force into 10 bankruptcy, so that they could misappropriate corporate opportunities for their own 11 personal gain. Thus, they intended to injure Thomason. In addition, fraud in the 12 inducement, intentional misrepresentation, common law fraud, equitable fraud, mail 13 fraud, wire fraud, racketeenng, and tortious interference are all inherently harmful 14 acts, in that the intent to engage in such acts is, ipso facto, an intent to harm. Likewise, aiding and abetting and conspiracy require that the defendant know that 16 the principals or co-conspirators conduct is tortious and harmful, and intentionally 17 assist that conduct. Thus, there is no doubt that the overwhelming majority of the 18 claims in the Thomason action are uninsurable as a matter of law under Section Specifically, the RICO claims require proof of criminal conduct. Turner v. 20 Cook, 362 F.3d 1219, 1229 (9th Cir. 2004). The alleged pattern of racketeering 21 activity underlying the RICO claims in the Thomason action includes the following 22 crimes: (1) Mail Fraud in violation of 18 U.S.C (cx. E, J ); and 23 (2) Wire Fraud in violation of 18 U.S.C (ex. E, J ). 24 Likewise, the claims for tortious interference, fraud in the inducement, 25 common law fraud, intentional misrepresentation, negligent misrepresentation, 26 equitable fraud, aiding and abetting, and conspiracy require proof of intentional 6 27 wrongdoing For example to prove the intentional tort of negligent misrepresentation, a plaintiff must prove that the defendant intended to induce the plaintiff to rely upon a LA v1

18 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 18 of 30 HL) 1 In fact, the Thomason complaint is replete with allegations of fraud and 2 intentional wrongdoing. (See, e.g., [ Defendants Fraudulent 3 Misrepresentations to Thomason ]; J [ Defendants Intentional 4 Concealment of Material Information from Thomason ].) The paragraph of the 5 Thomason complaint entitled Nature of the Action and Relief Sought perhaps best 6 summarizes the gravamen of the Thomason action as follows: 7 This case involves an astoundingly brazen fraud in which officers and directors of CHAMCO and ZXAuto NA have admitted, under oath, 8 that Thomason Auto s execution of the Distributorship Agreement and its resultant $6,000, investment, was procured through 9 intentional, material false representations. The Officer/Director Defendants intentionally failed to disclose these misrepresentations to 10 Thomason Auto until such time as its disclosure served their overarching purpose of illicitly gaining control of CHAMCO and 11 ZXAuto NA, usurping those entities corporate opportunities and ultimately driving those entities into bankruptcy so as to reap the 12 benefits of those opportunities for their own individual personal gain. (Complaint, Ex. E, 18,p. 4.) 13 Moreover, while conversion and breach of fiduciary duty may sometimes be premised upon conduct that is less than willful, the Thomason complaint incorporates its allegations of fraud, and further alleges additional intentionally fraudulent conduct by defendants as the gravamen of the claims. (See, e.g., Ex. E, J 270, 272, 315, ) Accordingly, these causes of action are also precluded from coverage under Section 533, because they are so closely related to the intentional misconduct as to be inseparable from it. State Farm Gen. Ins. Co. v. Mintarsih, No. B202888, 2009 WL at *8 (Cal. Ct. App. June 25, 2009) (Section 533 bars indemnification for loss caused by conduct that, standing alone, could be statement which the defendant had no reasonable basis for believing to be true. For that reason, negligent misrepresentation has been held uninsurable under Section See, e.g., Empi. Ins, of Wausau v. Musick, Peeler, & Garrett, 871 F. Supp. 381, (S.D. Cal. 1994) (fraud and negligent misrepresentation uninsurable under 26 Section 533 and Section 1668); citing, Dykstra v. Foremost Ins. Co., 14 Cal. App. 4th 361, 366 (1993) (negligent misrepresentation), Allstate Ins. Co. v. Hansten, F. Supp. 614, 616 (N.D. Cal. 1991) ( [u]nder California law, no contractual agreement may indemnify anyone from his own fraud... [n]egligent 28 misrepresentation is included within the definition of fraud ). (Moreover, the Thomason complaint makes clear that the negligent misrepresentation alleged in that case is an inseparable part of the same dehberately fraudulent scheme.) LA v1

19 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 19 of 30 1 characterized as negligent rather than intentional, but that is so closely related to the 2 intentional misconduct as to be inseparable from it ). 3 Therefore, since all of the conduct alleged in the Thomason complaint is 4 inherently harmful, committed with the intent to harm, and/or so closely related to 5 the intentional conduct as to be inseparable from it, the Thomason action is 6 unlnsurable as a matter of law. There is simply no potential for indemnity 7 coverage. 7 8 b. While the Breach-of-Contract Claim Is Moot Because Twin 9 City Has Agreed To Provide A Defense, Twin City Has No 10 Duty To Defend the Thomason Action Because There Is No Potential for Indemnity Coverage. z 11 As stated above, Twin City has agreed to provide a defense in this matter 12 (subject to further ruling by this Court), so any claim that Twin City is in breach of 13 its duty to defend is moot. 8 Moreover, even if Twin City were not providing a g 14 defense, California case law provides that when, as in this case, Section eliminates any potential for indemnity coverage, the Insurer has no duty to defend. 16 See, e.g., Uhrich v. State Farm Fire & Cas. Co., 109 Cal. App. 4th 598, (2003). 18 It is a well-established principle of California law that an Insurer has no duty 19 to defend a claim when there is no potential for indemnity coverage. Buss v. 20 Superior Court, 16 Cal. 4th 35, (1997). There is a limited exception to this 21 principle, which applies when an insurance policy expressly promises to provide 22 coverage for willful conduct that is legally uninsurable pursuant to Section 533. In 23 such cases, the court may impose a duty to defend in order prevent the policy s 24 promise of coverage from being entirely illusory. Thus, for example, while 25 malicious prosecution is legally uninsurable pursuant to Section 533, the court in 26 In determining its coverage obligations, an insurer need not consider claims that are 27 not pled. Cf, e.g., Hurley Construction Co. v. State Farm Fire & Casualty Co. 10 Cal. App. 4th 533, 538 (1992) ( the insured may not speculate about unpied third 28 party cairns to manufacture coverage ). See, California Civil Code Sections 1485 ( [a]n obligation is extinguished by an offer of performance ). 14 LA v1

20 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 20 of 30 1 Downey Venture held that the insurer nevertheless had a duty to defend such claims, 2 because the policy expressly promised to cover malicious prosecution. Downey 3 Venture, 66 Cal. App. 4th, at However, when, as in this case, the policy 4 promises no coverage for willful conduct, then the insurer has no duty to defend a 5 claim that is precluded from indemnity coverage by Section 533. See, e.g., Uhrich v. 6 State Farm Fire & Cas. Co., 109 Cal. App. 4th, at ; State Farm Gen. Ins. Co. 7 v. Mintarsih, 2009 WL , at *4..*6 (Cal. Ct. App. June 25, 2009). 8 Therefore, even if the duty to defend issue had not been rendered moot by the 9 fact that Twin City is providing a defense is this matter, this Court should find that 10 Twin City has no duty to defend the Thomason action, because Section 533 z 11 eliminates any potential for indemnity coverage The Duty to Indemnify Claim Is Unripe In Any Event. 13 Plaintiffs claim for breach of the duty to indemnify also fails because it is o 14 hypothetical and unripe, as there is currently no settlement or judgment for Twin v() 4 15 City to indemnify. The Policy promises indemnity coverage, subject to its terms and 16 conditions (and applicable law), only for Loss that the Insureds have become 17 legally obligated to pay[.] (See, Complaint Ex. A [the Policy], page 83, (I) 18 ( Loss means the amount that the Insureds are legally obligated to pay as a result of 19 a Claim, including... damages, settlements, judgments... ). It is hombook law, 20 and a matter of basic logic, that a defendant cannot held liable for failing to discharge 21 an obligation that has not yet arisen. 22 While Plaintiffs apparently attempt to put the cart before the horse by arguing 23 that Twin City has unjustifiably and unreasonably refus[ed] to attempt in good faith 24 to make a prompt, fair and equitable settlement of the Thomason action (J 69), an 25 insurer has no legal duty to settle a claim for which coverage is not available under LA v1-15 -

21 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 21 of the Policy (and Plaintiffs have not alleged that any settlement is even possible). 2 all of these reasons, Plaintiffs have failed to state any claim for breach of contract. D. PLAINTIFFS CANNOT STATE A CLAIM FOR BAD FAITH. 4 Plaintiffs other claims all piggyback on, and stand or fall with, their breachof-contract claims. While well-taken allegations of bad faith may sometimes 6 increase the value of a breach-of-contract claim by an order of magnitude, zero 7 multiplied by any number is still zero. Likewise, conduct that does not constitute a 8 breach of contract is simply not actionable, no matter how many allegations of bad faith are tacked onto it. Plaintiffs cannot state a claim for bad faith without 10 showing that Twin City is withholding benefits due under the Policy. z 11 The fundamental principle that a bad faith claim cannot be maintained unless 12 policy benefits are due is in accord with the policy in which the duty of good faith is 13 (firmly) rooted. Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1153, 271 Cal , 256 (1990) (parentheses added). It is well settled under California law, 15 that an insured cannot base a claim for breach of the implied covenant of good faith 16 and fair dealing upon conduct by an insurer which does not violate the express terms 17 of the insurance policy. See, Wailer v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 36, Cal. Rptr. 2d 370, 390 (1995) ( the covenant is implied as a supplement to the 19 express contractual covenants, to prevent a contracting party from engaging in 20 conduct that frustrates the other party s rights to the benefits of the agreement ); 21 citing, Love v. Fire Ins. Exchange, 221 Cal. App. 3d, at 1153 (1990) (the implied 22 covenant of good faith and fair dealing should not be endowed with an existence 23 independent of its contractual underpinnings ). 24 Therefore, since Plaintiffs have stated no valid breach-of-contract claim, they 25 have ipsofacto failed to state a claim for bad faith Moreover, [a]bsent an excess judgment, there can be no bad faith action based on declining a reasonable offer to settle within policy limits. Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2008), 12:359, p. 12B-34. For LA v1

22 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 22 of 30 1 E. PLAINTIFFS CANNOT STATE AN UNFAIR BUSINESS 2 PRACTICES CLAIM. 3 Plaintiffs have not pled a Section claim upon which relief can be granted because: (1) Plaintiffs have not alleged the requisite standing; (2) Plaintiffs have not alleged the absence of an adequate remedy at law; and (3) Plaintiffs are not entitled to the injunctive, restitutionary, and disgorgement remedies they request. First, Plaintiffs Section claim fails for lack of standing. Section of the Business and Professions Code, which was modified by Proposition 64 in an attempt to curtail frivolous and vexatious litigation by imposing a standing requirement, provides: Actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by the Attorney General or a district attorney... or by a person who has suffered injui in fact and has lost money or property as a result of the unfair competition. Cal. Bus. & Prof. Code (emphasis added); see also, In re Tobacco II Cases, 46 Cal. 4th 298, , 93 Cal. Rptr. 3d 559 (May 18, 2009) (finding that a challenged practice must be the immediate cause of an alleged injury). 10 While Plaintiffs Unfair Competition claim is just as rambling and convoluted as their entire Complaint, it appears to be premised upon the following alleged practices: (1) Defendants alleged bad faith nationwide corporate policy and practice of withholding insurance policy benefits Defendants know to be due to their insureds (J 95-96); and (2) HFSG s alleged practice of issuing insurance policies in the name of various subsidiaries, while secretly acting as the puppeteer pulling the Generally the allegations necessary to plead a claim for violation of the UCL are: (1) plaintif 1f s status as an insured or intended beneficiary of the insurer s policy ; 25 (2) the existence of that pohcy (3) the insurer s conduct and that such conduct was an unfair, unlawful or fraudulent business practice in violation of Ca Bus & 26 Prof ; (4) plaintiff sustained injury and/or loss of money or property as a result of the insured s unfair unlawtul or fraudulent business practice ; (5) 27 plaintiff has no adequate remedy at law ; (6) a request for injunctive relief andlor restitution ; and (7) a request for attornçy fees. Croskey et al., Cal. Practice 28 Guide: Insurance Litigation (The Rutter (Jroup 2008), 15: 112, p While Plaintiffs allegations as to element 3 are dubious, Plaintiffs utterly fail to plead elements 4 and 5. LA v1-17 -

23 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 23 of 30 U 1 strings by making the relevant underwriting and coverage decisions (JJ ). 2 However, Plaintiffs do not, and cannot, explain how they have been harmed by either 3 alleged practice, when the Thomason action is uninsurable pursuant to Section While Plaintiffs claim to have suffered concrete and substantial monetary 5 harm directly as a result of Hartford s unfair, illegal and fraudulent conduct[,] the 6 only such purported harm they specifically identify is the attorneys fees and costs 7 incurred in the Thomason Federal Action (and in the State Court Actions). 8 (Complaint, 101.) However, as shown above the Thomason action is uninsurable 9 as matter of law under Section 533, and Twin City has agreed to provide a defense. 10 Moreover, Plaintiffs do not allege anywhere in the Complaint that the State Court ii Actions (which are barred by the Policy s insured versus insured exclusion) are 12 even covered When, as here, the relevant obligations of the parties to each other are 14 circumscribed by a written contract, then one party cannot characterize as injury 15 the failure of another party to do something that was not required by the contract. In 16 this case, since Twin City has no duty to defend or indemnify the Plaintiffs in the 17 Thomason action, Plaintiffs cannot allege, as the injury that purportedly gives them 18 standing, Twin City s purported failure to discharge duties to defend or indemnify 19 that it does not have Of course, it is common knowledge that parent companies often make significant 22 decisions on behalf of their wholly-owned subsidiaries, and that insurance groups or management companies handle claims and underwriting on behalf of affiliated 23 insurance companies. But who cares? If Twin City is correct in its determination that there is no coverage available for the Thomason action, what difference does it 24 make whether it is Twin City itself, or HFSG, that is pulling the strings? None. 12 In fact, Twin City is positively forbidden, by Section 533, trom providing 25 indemnity coverage tor the Thomason action, even if it wanted to. See, Downey Venture, 66 Cal. App. 4th, at 517. Courts simply do not enjoin parties from 26 complying with the law. And yet, that is precisely what a Section injunction compelling Twin City to provide coverage for the legally uninsurable Thomason 27 action would do. Plaintiffs would not be entitled to any injunction in any event, however, as they have not pled the absence of an adequate remedy at law. Ot course 28 Plaintiffs cannot plead the absence of an adequate legal remedy, because they will have an adequate legal remedy, in the form of a breach-of-contract claim, it Twin City ultimately declines to provide indemrnty coverage for a judgment or settlement. LA v1

24 Case 2:09-cv VBF-FFM Document 15 Filed 07/29/2009 Page 24 of 30 U - 13 C 1 Similarly, Plaintiffs could not have suffered any actual injury as a result of 2 HFSG s purportedly secret practice of acting as the puppeteer of its subsidiaries, like 3 Twin City, given that: (1) the Policy that they accepted conspicuously states, on the 4 Declarations page and every Endorsement, that Twin City is the Insurer; and 5 (2) Plaintiffs found every other fact allegedly showing that HFSG is the 6 puppeteer in Hartford s SEC filings, website and other publicly available sources 7 of information. Indeed, Plaintiffs do not even specifically claim to have been injured 8 by Defendants purported concealment of these facts, nor could they. These facts 9 were right in front of Plaintiffs eyes. (Besides, any such allegations would be 10 subject to FRCP 9(b) s heightened pleading requirements for fraud, which Plaintiffs ii do not even attempt to satisfy. 3) Accordingly, given the absence of any injury in 12 fact, Plaintiffs lack standing to assert their Section claim. Moreover, while plaintiffs also seek restitution and disgorgement of all ill 14 gotten gains, they do not plead a factual basis for restitution or disgorgement. 15 Instead, Plaintiffs allege that Defendants have been unjustly enriched in an amount 16 as yet unascertained, which will be determined according to proof at trial, but which 17 includes their ill-gotten receipt from Plaintiffs or the proceeds from their purchase of 18 the Securities at issue. (J 100 [emphasis added].) This lone reference to 19 unspecified Securities suggests that Plaintiffs Section claim has been cut 20 and pasted from a complaint in a different action. It has no place in this action. 21 In addition, while Plaintiffs have alleged that Defendants unlawful insurance 22 practices as alleged herein have caused Defendants to gain a cash windfall in the 23 form of earned premiums and unpaid claims such that Plaintiffs are purportedly 24 entitled to an accounting, restitution and disgorgement of all ill-gotten gains, 25 earnings, profits, compensation and benefits obtained by Defendants (J 103), it is 26 well-settled that a Section Plaintiff is not entitled to non-restitutionary See, Vess v. Ciba-Geigy Corp. USA,317 F.3d 1097) (9th Cir. 2003) (Rule 28 9(b) applies to state claims grounded in fraud even if elements of fraud need not be establihed to state a claim; only allegations of fraudulent conduct need be pleaded with particulanty). 19 LA v1