281 F.R.D. 413 | C.D. Cal. | 2012
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS
Before the Court is a Motion to Dismiss (“Motion”) filed by Defendant Allstate. (Dkt. 6). The Court finds the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local R. 7-15. After considering the moving, opposing, and replying papers, the Court GRANTS IN PART AND DENIES IN PART the Motion.
The Court DENIES the Motion regarding the Complaint’s fraud and negligent misrepresentation claims because: (1) Defendant is incorrect in arguing that the Complaint’s negligent misrepresentation claims must meet the heightened pleading standard of Rule 9(b); (2) alternatively, both the Complaint’s fraud and negligent misrepresentation claims satisfy Rule 9(b); and (3) the fraud claim alleges facts showing Defendant’s intent not to perform. The Court GRANTS the Motion regarding the claim brought under California Business & Professions Code Section 17200 because Plaintiff does not oppose its dismissal.
I. Background
The gravamen of Plaintiff Steve Petersen’s Complaint is that Defendant Allstate Indemnity Company, an insurer, promised via its policy to cover future medical expenses arising from an automobile accident, paid approximately $11,000 of the expenses arising from a subsequent accident, but then suddenly denied coverage when Defendant received more than $100,000 of expenses and has refused to further explain its reasons for denying coverage for five months. The Complaint alleges the following facts.
a. Defendant Insurer’s Policy
“Prior to June 5, 2008,” Plaintiff allegedly “purchased an automobile policy” that “required ALLSTATE to pay to Plaintiff ... all medical payments ... up to ... $100,000.00” and contained an “underinsured motorist provision with a policy limit of ... $50,000.00.” Compl. at ¶8. The Complaint provides a policy number. Id.
b. Accident
On June 8, 2008, Plaintiff was allegedly in an accident with “another driver who was at fault and had policy limits of only $50,000.00.” Id. at ¶ 8.
c. Defendant’s Payment and Nonpayment of Medical Bills
“[Sjtarting from March 16, 2009, through May 5, 2009,” Defendant’s claim services agent “received six medical bill payment requests from medical caregivers totaling $22,891.00.” Id. at ¶ 11.
On December 18, 2009, Defendant’s claim services agent received additional “hospital bills” totaling “$114,511.08.” Id. at ¶ 11.
On January 27, 2012, Defendant’s claim services agent sent multiple letters to Plaintiff stating that it was “denying ... the requests received from March 16, 2009, forward” because “‘[t]his procedure was performed for a condition not related to the motor vehicle accident.’ ” Id. at ¶ 12.
d. Defendant’s Settling of Underinsured Motorist Claim
On March 1, 2010, Plaintiff settled with the other driver’s insurance “for the total of her policy,” which is $50,000. Id. at ¶ 8. That same date, Plaintiffs counsel “requested the policy limits of the [Defendant’s] policy.’” Id. at ¶ 11. “On February 16, 2011, after [Plaintiff] demanded the arbitration and insisted [Defendant] choose an arbitrator and then insisted that [Defendant] must choose an arbitration date, [Defendant] finally settled for” the full amount of the underinsured motorist provision. Id. at ¶ 8.
e. The Present Lawsuit and Defendant’s Motion to Dismiss
In September 2011, Plaintiff filed the present Complaint against Defendant and “Does” in state court. Compl. at 17. Defendant removed the case to federal Court. See Notice of Removal (Dkt. 1). On February 6, 2012, Defendant brought the present motion to dismiss three of Plaintiffs nine causes of action for: (1) Fraud; (2) Negligent Misrepresentation; and (3) California Business & Professions Code Section 17200. See Mot. (Dkt. 6).
II. Legal Standard
“After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A judgment on the pleadings is proper if, taking all of the non-moving party’s “allegations in its pleadings as true,” the movant is entitled to judgment as a matter of law. Compton Unified Sch. Dist. v. Addison, 598 F.3d 1181, 1184 (9th Cir.2010); Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir.1989). “Judgment on the pleadings is proper when the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law.” Hal Roach Studios, 896 F.2d at 1550. Thus, the defendant is not entitled to judgment on the pleadings if the complaint raises issues of fact, which, if proved, would support recovery. See id.
“Judgment on the pleadings is improper when the district court goes beyond the pleadings to resolve an issue; such a proceeding must properly be treated as a motion for summary judgment.” Hal Roach, 896 F.2d at 1550 (citing Fed.R.Civ.P. 12(c)). However, the Court may consider facts that “are contained in materials of which the Court may take judicial notice.” Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 (9th Cir.1999). A Court may take judicial notice of facts “not subject to reasonable dispute” because they are either “(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b).
III. Discussion
Defendant argues that: (1) the Complaint’s negligent misrepresentation claims must meet the heightened pleading standard of Rule 9(b); (2) both the Complaint’s fraud and negligent misrepresentation claims fail to meet Rule 9(b); and (3) the fraud claim fails to allege facts showing Defendant’s intent not to perform. In addition, Defendant moves to dismiss the claim brought under California Business & Professions Code Section 17200, and Plaintiff does not oppose dismissal.
a. Rule 9(b) applies only to allegations of fraud and not to allegations of negligent misrepresentation
i. The heightened pleading standard of Federal Rule of Civil Procedure 9(b)
Federal Rule of Civil Procedure 9(b) states that an allegation of “fraud or mistake must
However, “intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b); see also Neubronner, 6 F.3d at 672 (explaining that Rule 9(b)’s heightened pleading standard may be relaxed when the allegations of fraud relate to matters particularly within the opposing party’s knowledge, such that a plaintiff cannot be expected to have personal knowledge).
The policy supporting Rule 9(b)’s heightened pleading requirements is that it “protects potential defendants — especially professionals whose reputations in their fields of expertise are most sensitive to slander — -from the harm that comes from being charged with the commission of fraudulent acts.” Semegen, 780 F.2d at 731. Providing detailed notice to defendants also prevents plaintiffs from filing complaints “as a pretext for the discovery of unknown wrongs.” Bly-Magee v. California, 236 F.3d 1014,1018 (9th Cir.2001) (quoting In re Stac Elecs. Secs. Litig., 89 F.3d 1399, 1405 (9th Cir.1996)).
ii. Rule 9(b) does not apply to negligent misrepresentation claims
Defendant argues that Plaintiffs claim for negligent misrepresentation must meet the heightened pleading requirements of Rule 9(b), citing cases from previous decades that reach this conclusion. See e.g., Glen Holly Entertainment, Inc. v. Tektronix, Inc., 100 F.Supp.2d 1086,1093,1097-98 (C.D.Cal.1999) (dismissing claim for “negligent misrepresentation” for failure to comply with Rule 9(b)); U.S. Concord, Inc. v. Harris Graphics Corp., 757 F.Supp. 1053, 1058 (N.D.Cal.1991).
These two eases appear to be the wellspring for a river of district court authority that unquestioningly parrots this holding, leading one court to declare that it “is well-established in the Ninth Circuit that both claims for fraud and negligent misrepresentation must meet Rule 9(b)’s particularity requirements.” Neilson v. Union Bank of Cal., N.A., 290 F.Supp.2d 1101, 1141 (C.D.Cal.2003) (citing only Glen Holly and U.S. Concord for the proposition). However, the Ninth Circuit “has not yet decided” the issue of whether negligent misrepresentation claims are subjected to Rule 9(b). Anschutz Corp. v. Merrill Lynch & Co., 785 F.Supp.2d 799, 823, 828 (N.D.Cal.2011) (assuming without deciding that Rule 9(b) applied because the complaint satisfied even that heightened standard).
This Court rejects Defendant’s rule because: (1) Glen Holly and U.S. Concord cite no authority to support their holding; (2) applying a heightened pleading standard to negligence is contrary to the express language and policy of Rule(9); and (3) more recent, better-reasoned cases do not apply Rule 9(b).
1. Glen Holly and US Concord cite no authority and provide no reason why Rule 9(b) should apply to negligent misrepresentation claims
After conducting its own research, this Court concludes that the holding that negli
2. The express language of Rule 9(b) limits its application to fraud or mistake and Rule 9(b)’s policy does not support applying it to negligent misrepresentation
Rule 9(b) is expressly limited to allegations of “fraud or mistake.” Fed.R.Civ.P. 9(b). Because the California tort of “negligent misrepresentation” has a critically different element from the tort of “fraud,” analyzing negligent misrepresentation under Rule 9(b) is contrary to both the express language and policy of the statute.
The California tort of “negligent misrepresentation” requires that the defendant “lacked any reasonable ground for believing [its] statement to be true,” whereas California fraud requires that the defendant “made an intentionally false statement.” Charnay v. Cobert, 145 Cal.App.4th 170, 184, 51 Cal.Rptr.3d 471 (2006); see also Eddy v. Sharp, 199 Cal.App.3d 858, 864, 245 Cal. Rptr. 211 (1988) (defining cause of action for “negligent misrepresentation” by an insurer “is a form of deceit” under California Civil Code Section 1710(2)); Cal. Civ.Code § 1710(2) (defining “[d]eceit” to include “[t]he assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true”).
Thus, while negligent misrepresentation shares four elements with fraud, it differs regarding the fifth element: mental state.
Finally, because an allegation of negligent misrepresentation suggests only that the defendant failed to use reasonable care — an objective standard — it does not result in the
3. Later cases with better reasoning have held that Rule 9(b) does not apply to negligent misrepresentation claims
Furthermore, recent persuasive authority suggests that the tide of precedent is turning. In the past seven years, both the Fifth and Seventh Circuit — hardly champions of the plaintiffs bar — have held that “negligent misrepresentation” claims brought under Texas and Illinois law are not subject to Rule 9(b) because the express language of Rule 9(b) reserves that standard only for fraud or mistake. See GE Capital Corp. v. Posey, 415 F.3d 391, 394 & n. 2 (5th Cir.2005); Tricontinental Indus. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.2007). These non-California laws for negligent misrepresentation have the same objective standard — failure to use reasonable care — that California negligent misrepresentation requires. Compare GE Capital, 415 F.3d at 396 (defining Texas “negligent misrepresentation” to require that “the defendant did not exercise reasonable care or competence in obtaining or communicating the information”) and Tricontinental, 475 F.3d at 833 (defining Illinois “negligent misrepresentation” to require “carelessness or negligence in ascertaining the truth of the statement by the party making it”) with Fox, 181 Cal. App.3d at 962, 226 Cal.Rptr. 532 (defining California negligent misrepresentation to require making a statement “without reasonable grounds for believing it to be true”).
In addition, in Vess, the Ninth Circuit reversed the dismissal of a claim for failure to satisfy Rule 9(b) because it was error to apply a heightened pleading standard to allegations that the defendant “ ‘negligently’ failed to disclose” information. Vess, 317 F.3d at 1106. The Ninth Circuit concluded that such allegations of negligence “are not based on fraud.” Id. at 1106. The Ninth Circuit reached its conclusion by citing the Fifth Circuit’s rule with approval to hold that “where fraud is not an essential element of a claim, only allegations ... of fraudulent conduct must satisfy the heightened pleading requirements of Rule 9(b).” Id. at 1105; see also id. at 1104 (quoting Melder v. Morris, 27 F.3d 1097, 1100 n. 6 (5th Cir.1994) for the proposition that if “claims are grounded in fraud rather than negligence ... Rule 9(b) applies”). In doing so, the Ninth Circuit also quoted with approval the Eighth Circuit’s rule that “allegations of innocent or negligent misrepresentation ... would survive” even if they do not satisfy the heightened pleading requirements of Rule 9(b). Id.
Finally, an unpublished case by the Ninth Circuit reversed the district court’s application of Rule 9(b) to a California negligent misrepresentation claim and analyzed the claim under the ordinary pleading requirements of Rule 8. See Miller ¶. Int’l Bus. Mach. Corp., 138 Fed.Appx. 12, 17 (9th Cir. 2005); but see Kelley v. Rambus, Inc., 384 Fed.Appx. 570, 573 (9th Cir.Cal.2010) (holding in one sentence that the “state law claims for common law fraud and negligent misrepresentation fail to meet the heightened pleading standards of Rule 9(b)”).
4. Conclusion
Thus, the Court holds that the California tort of negligent misrepresentation need not satisfy the heightened pleading standard of Rule 9(b). The Court reaches this conclusion because: (1) Glen Holly and U.S. Concord cite no authority to support their holding; (2) applying a heightened pleading standard to negligence is contrary to the express language of Rule(9); and (3) more recent, better-reasoned cases do not apply Rule 9(b). Thus, the Court DENIES Defendant’s motion to the extent it seeks to dismiss the Complaint’s negligent misrepresentation claim for failure to satisfy Rule 9(b).
b. Alternatively, the Complaint Satisfies Rule 9(b)
Alternatively, the Court concludes that both the negligent misrepresentation and fraud claims meet the Rule 9(b) standard. See Frisby-Cadillo v. Mylan, Inc., No. C 09-05816 SI, 2010 WL 1838729, at *2, 2010 U.S. Dist. LEXIS 43868, at *6-7 (N.D.Cal. May 5, 2010) (questioning the hold
First, Plaintiff has pled what the fraud was, how it was accomplished, and why the Defendant’s statements are false by alleging that Defendant’s insurance policy “required ALLSTATE to pay to Plaintiff ... all medical payments ... up to ... $100,000.00” but that Defendant has refused to do so for an implausible reason, namely, that Plaintiffs “procedure was performed for a condition not related to the motor vehicle accident.” Compl. at ¶¶ 8,12. As another district court in this circuit has found regarding a fraud claim against the same defendant, a complaint satisfies Rule 9(b) when it “alleges that Allstate represented that it intended to pay for all losses when in fact it had no such intent.” Watts v. Allstate Indem. Co., NO. CIV. S-08-1877 LKK/GGH, 2009 U.S. Dist. LEXIS 26618 at *8, 22 (E.D.Cal. Mar. 31, 2009) (denying motion to dismiss fraud claim against insurer because plaintiff satisfied Rule 9(b) when he alleged that defendant insurer had practice “of refusing to pay for repairs to seatbelts” and such repairs were covered by the insurance policy).
Second, the where and when of the alleged fraud is easily discernable from the policy number provided in the Complaint. Compl. at ¶ 8. With this information, Defendant can find the policy — which should be in its position — to confirm the date and location of its execution, if such facts are relevant.
Finally, Plaintiff has pled who committed the fraud by alleging that the policy which contains the fraudulent misrepresentations is the Defendant’s policy. Compl. at ¶ 8.
c. The Complaint alleges facts showing Defendant’s misrepresentation regarding its intent to perform
i. Elements of promissory fraud
The elements of the California tort of “fraud” are: (1) “misrepresentation,” which includes either a “false representation, concealment or nondisclosure”; (2) “knowledge of falsity,” also referred to as “scienter”; (3) “intent to defraud,” which includes an intent “to induce reliance”; (4) “justifiable reliance”; and (5) damages. Lazar v. Superior Court, 12 Cal.4th 631, 637, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996) (citing California Civil Code Section 1710); Vess v. Ciba-Geigy Corp. USA 317 F.3d 1097, 1105 (9th Cir. 2003) (defining fraud under California law); Orient Handel v. United States Fid. & Guar. Co., 192 Cal.App.3d 684, 693, 237 Cal.Rptr. 667 (1987) (applying Section 1710 definition of fraud to insurer).
The first element — “misrepresentation”— exists where the defendant makes a “promise” and at the same time lacks the “intention to perform,” also referred to as “promissory fraud” by California courts. See Lazar v. Superior Court, 12 Cal.4th 631, 637, 49 Cal. Rptr.2d 377, 909 P.2d 981 (1996). It is well-established that an insurer’s intent not to perform a promise in its policy can be “inferred from its subsequent conduct.” Miller v. Nat’l American Life Ins. Co. of CA 54 Cal.App.3d 331, 338, 126 Cal.Rptr. 731 (1976);
ii. The Complaint adequately pleads promissory fraud
The Complaint adequately pleads Defendant’s misrepresentation as to its willingness to perform under its policy.
In Wetherbee v. United Insurance, the Court upheld a jury verdict for fraud because the insurer’s “misrepresentation as to its willingness” to perform under its policy was shown by the insurer’s eagerness to cease costly performance after two years based on minimal evidence that its obligation had ended. Wetherbee v. United Ins. Co. of Am., 265 Cal.App.2d 921, 932, 71 Cal.Rptr. 764 (1968). The plaintiff had purchased an accident insurance policy that promised to pay her a monthly sum if she developed a “confining sickness” as defined by the policy. Id. at 925, 71 Cal.Rptr. 764. While covered under the policy, Plaintiff suffered a stroke. Id. at 925-26, 71 Cal.Rptr. 764. The insurer investigated plaintiffs “disability and confinement” three times. Id. at 926, 71 Cal.Rptr. 764. Each investigation confirmed that plaintiff likely satisfied the policy’s definition because she “left her home only to visit her doctor and required crutches or a wheelchair and the assistance of another person on such occasions.” Id. The insurer paid monthly sums for two years, although they were frequently “late.” Id. In its fourth investigation, the insurer sent a letter to the plaintiffs doctor that included a “postscript” stating “[I]t appears that [plaintiff] is not continuously confined within the house. Is this correct?” Id. Based on the doctor’s affirmative answer and despite the doctor’s clarifications that plaintiff did not walk unaided, the insurer ceased payments. Id. at 926-27, 71 Cal. Rptr. 764. On appeal, the insurer argued that the evidence was “insufficient as a matter of law” to support plaintiffs fraud claim. Id. at 931, 71 Cal.Rptr. 764. The court disagreed, reasoning that the insurer’s “eagerness to seize upon the admission by plaintiffs doctor as a ground for cancellation of plaintiffs benefits furnishes ample support for a finding that it never intended to fulfill ... the representations in ... policies.” Id. at 932, 71 Cal.Rptr. 764.
Like in Wetherbee, here Defendant’s misrepresentation as to its willingness to perform under its policy is shown by the facts in the Complaint indicating Defendant’s eagerness to cease costly performance based on minimal evidence that its obligation had ended. Like the insurer’s promise in Wetherbee, here Plaintiffs policy “required ALLSTATE to pay to Plaintiff ... all medical payments ... up to ... $100,000.” See Compl. at ¶ 8. Like in Wetherbee, Defendant partially performed by paying some money, $11,092.69. See id. at ¶ 11. However, like in Wetherbee, after performance became more costly — that is, after Defendant received bills totaling $137,402.34 — Defendant informed Plaintiff that it would no longer pay for Plaintiffs medical care because Plaintiffs condition was not covered by the policy. See Compl. at ¶ 11. Thus, like in Wetherbee, Defendant’s decision to deny coverage only after further performance would become very costly supports the inference that its initial promise of coverage was made without intent to perform. See Miller v. Nat’l American Life Ins. Co. of CA, 54 Cal.App.3d 331, 338, 126 Cal.Rptr. 731 (1976) (upholding judgment for insured because insurer’s use of misleading wording on its forms, policy of terminating benefits in response to doctor’s answers “without inquiry as to the doctor’s intended meaning,” and failure to consult one of plaintiffs doctors regarding an acknowledged uncertainty on plaintiffs form before terminating his benefits supported “an inference of an
Furthermore, Defendant’s misrepresentation of its intent to perform is shown by its alleged failure to pay a covered claim and failure to provide a more substantiated explanation for its denial of coverage. See Miller, 54 Cal.App.3d at 339, 126 Cal.Rptr. 731; Rutter Cal. Prac. Guide Ins. Lit. Ch. 11-C § 11:34 “The insurer’s refusal to pay a covered claim may give rise to an inference of fraud.”. For example, Defendant has allegedly failed to respond for five months to Plaintiffs counsel’s multiple letters requesting a more detailed explanation for denial of coverage. Compl. at ¶ 16,17 (alleging letters were sent on April 7, 2011, and June 21, 2011, and that “no reply has been received” as of the Complaint’s filing in September), 19 (describing the “sudden rejection of $137,402.34 in medical bills and subsequent refusal to provide an explanation”). Such a failure to provide a reasonable explanation, combined with Plaintiffs averments that the expenses are related to the accident, makes it plausible that there is no reasonable explanation. See Pink v. Paul Revere Life Ins. Co., No. C 96-0246 CRB, 1999 WL 179684, at *4-5, 1999 U.S. Dist. LEXIS 4486, at *12 (N.D.Cal. Mar. 24, 1999) (denying insurer’s motion for summary judgment on fraud claim because a jury could infer insurer’s “intent not to fulfill its promises” based on the lack of reasonable explanation for insurer rescinding coverage, given that insurer’s reason for rescission was that plaintiff “had failed to inform the [insurer] of information regarding health conditions that [insurer] was already generally aware of’ and plaintiffs “condition wholly unrelated to those prior conditions”).
iii. Defendant’s cases regarding promissory fraud are distinguishable
Defendant argues that the Complaint fails to allege facts showing Defendant’s “intent not to perform.” Mot. at 7. Although Defendant does not identify which element of fraud Plaintiff has failed to plead, its argument appears to challenge the existence of a misrepresentation. Defendant argues that “federal courts routinely reject attempts to convert a simple breach of contract into promissory fraud,” citing two eases that coincidentally were also brought against Defendant Allstate. Mot. at 6-7 (citing Smith v. Allstate Ins. Co., 160 F.Supp.2d 1150 (S.D.Cal.2001); Icasiano v. Allstate Ins. Co., 103 F.Supp.2d 1187 (N.D.Cal.2000)).
In Smith v. Allstate, the court dismissed a complaint alleging merely that Allstate, “through its written sales presentations and homeowner’s insurance policy, agreed to indemnify Plaintiffs’ home against fire damage,” but that “Allstate never intended to honor these representations” and did not pay for the plaintiffs’ loss. Smith v. Allstate Ins. Co., 160 F.Supp.2d 1150, 1153 (S.D.Cal.2001). The complaint alleged nothing else regarding Allstate’s intent to perform, and thus the court dismissed the fraud claim as failing to meet Rule 9(b). Id.
In Icasiano v. Allstate, the court dismissed a fraud claim where the plaintiff failed to allege any nonperformance by Allstate and made only the conclusory allegation that “Allstate never had any intention of performing.” Icasiano v. Allstate Ins. Co., 103 F.Supp.2d 1187, 1191-92 (N.D.Cal.2000). The complaint alleged that the plaintiff had a policy with Allstate to defend the plaintiff against certain types of lawsuits, but that Allstate “failed to undertake a defense ... and investigation of the accident prior to the tender of’ a lawsuit brought against the plaintiff. Id. at 1191 (emphasis added). The
Here, unlike in Smith and Icasiano, Plaintiff alleges acts by Defendant to show intent to not perform. Specifically, Plaintiff alleges that after performance became more costly— that is, only after Defendant received medical bills totaling $137,402.34 — Defendant informed Plaintiff that it would no longer pay for Plaintiffs medical care because Plaintiffs condition was not covered by the policy. See Compl. at ¶ 11. Defendant has allegedly faded to respond for five months to Plaintiffs counsel’s multiple letters requesting a more detailed explanation for denial of coverage. Compl. at ¶ 16, 17, 19. Furthermore, unlike in Icasiano, Defendant here does not argue that Plaintiff has failed to plead nonperformance; instead, Defendant insists that nonperformance is simply not enough to prove Defendant’s misrepresentation about its intent to not perform.
In sum, because the Complaint alleges facts regarding the manner in which Defendant ceased to perform and these facts support an inference that Defendant did not intend to perform when it issued its policy, Plaintiff has sufficiently pled Defendant’s misrepresentation about its willingness to perform.
d. California Business & Professions Code Section 17200 is dismissed as unopposed
Plaintiff concedes that Defendant’s argument is “well taken” and that the claim under California Business & Professions Code Section 17200 should be dismissed. Opp’n at 12. Accordingly, the Court GRANTS Defendant’s Motion regarding that claim as UNOPPOSED and DISMISSES that claim without prejudice.
IV. Disposition
For the reasons stated above, the Court GRANTS IN PART and DENIES IN PART Defendant’s motion to dismiss. The Motion is DENIED as to Plaintiffs fraud and negligent misrepresentation claim. The Motion is GRANTED as to Plaintiffs unfair business claim, but that claim is dismissed without prejudice
Plaintiff shall file an amended complaint, if at all, by March 26, 2012.
. Both Defendant and Plaintiff also cite several California court cases regarding the pleading standards for negligent misrepresentation under California procedural law. However, these cases are inapposite because federal rules of procedure apply to state-law causes of action. See Vess, 317 F.3d at 1103 (holding that Rule 9(b) applies to state as well as federal causes of action brought in federal court).
. The two torts also differ in that a "claim for negligent misrepresentation [under California law] must be based on a 'positive assertion,' ” and "[b]y contrast, a fraud claim, under certain circumstances, can be based on omissions.” I— Enterprise Co. LLC v. Draper Fisher Jurvetson Mgmt. Co. V, LLC, 2005 WL 3590984, 2005 U.S. Dist. LEXIS 394814 (N.D.Cal. Dec. 30, 2005); Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal.App.4th 226, 243, 70 Cal. Rptr.3d 199 (2007) (negligent misrepresentation requires a "positive assertion ... an omission or an implied assertion or representation is not sufficient”).
. Neither party mentions the elements of fraud in their briefing. The Complaint’s Fifth Cause of Action bears the heading "Fraud” and the Complaint alleges that Defendant’s acts fall "within the meaning of Civil Code § 3294.” Compl. at 15-16. Although the Complaint appears to reference California Civil Code Section 3294, the Court applies the elements of fraud based on Section 1710 and as described by the California Supreme Court because Section 3294 provides for punitive damages in certain actions and is not an independent cause of action for the tort of "fraud.” See McDowell v. Union Mut. Life Ins. Co., 404 F.Supp. 136, 146 (C.D.Cal.1975) ("Section 3294 authorizes damages in some actions; it never authorizes actions.”); see also Cal. Civil Code Section § 3294(a) (stating that a plaintiff “may recover damages for the sake of example and by way of punishing the defendant” in certain actions “where it is proven by clear and convincing evidence that the defendant has been guilty of ... fraud”); id. at 3294(c)(3) (defining "[fjraud” only ”[a]s used in this section”); Rutter Cal. Prac. Guide Ins. Lit. Ch. 11-C § 11:26 (explaining that if a "insurer's conduct was ‘fraudulent’ within the meaning of § 3294(c)(3), punitive damages may be awarded under some tort theory other than fraud”).
. This express holding by the California Supreme Court in Tenzer that a defendant’s "intent” to not perform can be "inferred from” conduct after the promise belies Defendant’s argument that "Plaintiff is wrong” to contend that "intent not to perform ... can be inferred from its subsequent conduct.” Mot. at 7. Defendant, in fact, is the one wrong on the law.