442 F.Supp.3d 1178
N.D. Cal.2020Background:
- Plaintiffs (homeowners whose houses were destroyed in the October 2017 Northern California wildfires) sued State Farm and Verisk subsidiaries, alleging homeowners policies understated replacement cost because State Farm used Verisk software (360Value and Xactimate) to set policy limits and post-loss estimates.
- TAC asserts negligent misrepresentation, negligence, UCL (fraud/unlawful/unfair), California Cartwright Act, and two Sherman Act conspiracy theories (vertical and hub-and-spoke).
- Plaintiffs relied on generalized allegations and “Specific Allegations” about interactions with State Farm agents but did not plead specific affirmative misrepresentations by agents or that plaintiffs saw State Farm’s web statements; policies and vendor reports contained prominent disclaimers warning estimates may be inaccurate.
- Defendants moved to dismiss; the Verisk defendants also raised the economic-loss rule and McCarran–Ferguson Act defenses (court declined to reach these given other defects).
- Court found plaintiffs failed to plead misrepresentation or reasonable reliance (Rule 9(b) defects and disclaimers), lacked a duty-based negligence theory, failed to state UCL or antitrust claims (no antitrust injury and implausible hub-and-spoke conspiracy), and denied further leave to amend (including adding a contractor plaintiff).
- Court dismissed the Third Amended Complaint with prejudice, denied the late request for judicial notice, and entered judgment for defendants.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Negligent misrepresentation | State Farm (via agents and website) represented 360Value/Xactimate produce accurate replacement-cost estimates; plaintiffs relied on those representations | Plaintiffs never allege they saw the web statements or identify specific agent statements; policy and statutory disclaimers made reliance unreasonable; Rule 9(b) not satisfied | Claim dismissed with prejudice for failure to plead particularized misrepresentation or reasonable reliance |
| Negligence (against State Farm & Verisk) | Use of defective software creates duty to provide accurate coverage; Verisk knew insurers would rely on its product | No facts showing Verisk made representations to plaintiffs; no third-party-beneficiary basis; claim duplicates misrepresentation and fails Rule 9(b) | Dismissed with prejudice |
| UCL § 17200 (fraud, unlawful, unfair) | Defendants’ estimation practice was fraudulent/unlawful/unfair and injured consumers | Fraud not pled with particularity; alleged unlawful conduct (e.g., contractor licensing) inapplicable; requested remedies inappropriate | Entire UCL claim dismissed with prejudice |
| Antitrust (Cartwright Act & Sherman Act; vertical & hub‑and‑spoke) | Industrywide use of Verisk tools suppressed competition and caused ‘‘diminished coverage quality’’ and below‑cost pricing; contractor purportedly suffered business loss | Plaintiffs lack antitrust injury (they paid less, not more); no plausible agreement among insurers; Twombly/Iqbal pleading failure; McCarran‑Ferguson and other defenses | Antitrust claims dismissed with prejudice; leave to add contractor denied |
| Leave to amend to add contractor plaintiff | Contractor would show antitrust injury and business losses | Multiple prior amendment opportunities; plaintiffs repeatedly failed to cure defects | Motion to amend denied |
| Request for judicial notice (post-briefing) | Cite legislative/case chronology re Fitzpatrick and related law | RJN untimely (filed after briefing closed) | Judicial notice denied |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state facts showing plausible liability)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Twombly plausibility standard for pleadings)
- Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097 (Rule 9(b) requires who, what, when, where, how)
- Fitzpatrick v. Hayes, 57 Cal. App. 4th 916 (insurance-agent duty exceptions to non‑disclosure rule)
- J'Aire Corp. v. Gregory, 24 Cal. 3d 799 (third‑party beneficiary duty analysis; inapposite here)
- Nelson v. Am. Fam. Mut. Ins. Co., 899 F.3d 475 (use of 360Value not a guarantee; disclaimer defeats negligent misrepresentation)
- Salameh v. Tarsadia Hotel, 726 F.3d 1124 (district court may deny leave to amend after prior opportunities)
- United States v. Apple Inc., 952 F. Supp. 2d 638 (example of hub‑and‑spoke conspiracy theory)
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (only direct purchasers have antitrust standing)
- Diediker v. Peelle Fin. Corp., 60 Cal. App. 4th 288 (implied assertions insufficient for negligent misrepresentation)