Cibus LLC v. Capital Insurance Group ( 2021 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Cibus LLC, No. CV-20-00277-TUC-JGZ (DTF) 10 Plaintiff, ORDER 11 v. 12 Capital Insurance Group, et al., 13 Defendants. 14 15 Pending before the Court is Magistrate Judge D. Thomas Ferraro’s Report and 16 Recommendation (Report) recommending that the District Court grant Defendant Eagle 17 West Insurance Company’s (Eagle West) Motion to Dismiss. (Doc. 48.) Eagle West filed 18 a limited objection to the Report, and Plaintiff filed a response to the objection. (Docs. 49, 19 51.) Eagle West subsequently filed a motion to strike portions of Plaintiff’s response. (Doc. 20 52.) The motion to strike is fully briefed. (Docs. 53, 54.) 21 After an independent review of the parties’ briefing and of the record, the Court will 22 grant Eagle West’s motion to strike and adopt Magistrate Judge Ferraro’s recommendation 23 to dismiss the complaint. 24 STANDARD OF REVIEW 25 When reviewing a magistrate judge’s R&R, this Court “may accept, reject, or 26 modify, in whole or in part, the findings or recommendations made by the magistrate 27 judge.” 28 U.S.C. § 636(b)(1). “[T]he district judge must review the magistrate judge’s 28 findings and recommendations de novo if objection is made, but not otherwise.” United 1 States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (emphasis in 2 original). District courts are not required to conduct “any review at all . . . of any issue that 3 is not the subject of an objection.” Thomas v. Arn, 474 U.S. 140, 149 (1985); see also 28 4 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72. Further, a party is not entitled as of right to de novo 5 review of evidence or arguments which are raised for the first time in an objection to the 6 report and recommendation, and the Court’s decision to consider newly-raised arguments 7 is discretionary. Brown v. Roe, 279 F.3d 742, 744 (9th Cir. 2002); United States v. Howell, 8 231 F.3d 615, 621-622 (9th Cir. 2000). 9 BACKGROUND 10 Plaintiff owns and operates a restaurant in Tucson, Arizona. The restaurant is 11 insured by Eagle West.1 In light of the COVID-19 pandemic and subsequent state and local 12 orders closing and limiting occupancy at non-essential businesses, Plaintiff “shut its doors 13 to its restaurant and lost all of its perishable inventory.” Eagle West rejected Plaintiff’s 14 claim for loss under its policy on the grounds that Plaintiff did not suffer physical damage 15 to its property and the loss was excepted from coverage under the Pathogenic Organisms 16 Exclusion in the policy. 17 The Magistrate Judge recommended dismissing Plaintiff’s claim as precluded by 18 the Pathogenic Organisms Exclusion. Magistrate Judge Ferraro concluded that the 19 exclusion clearly and unambiguously applied to exclude the claimed losses, and that the 20 reasonable expectations doctrine did not otherwise create coverage. Magistrate Judge 21 Ferraro cited numerous cases in support. Because the virus exclusion clearly precluded 22 coverage, Magistrate Judge Ferraro determined that targeted discovery on the meaning of 23 exclusion was not warranted and leave to amend would be futile. 24 In the Report, Magistrate Judge Ferraro also provided the Court with the alternative 25 recommendation that, if the Court disagreed that the Pathogenic Organism Exclusion 26 excluded coverage, the Court should deny the motion to dismiss because the allegations in 27 1 The R&R sets forth the full factual background. The Court restates the facts 28 necessary to address Defendant’s objection. The parties do not raise a specific objection to the statement of facts in the Report. 1 the First Amended Complaint are sufficient to state that there was necessary suspension of 2 business caused by direct physical loss. (Doc. 48, p. 11.) 3 The parties had fourteen days to file an objection to the Report. (Doc. 48, p. 14.) 4 On February 4, 2021, Eagle West timely filed a limited objection challenging Judge 5 Ferraro’s alternative ruling. On February 18, 2021, Cibus filed a response to Eagle West’s 6 limited objection. (Doc. 51.) Cibus’s response addresses Eagle West’s objection, but also 7 objects to Magistrate Judge Ferraro’s conclusion that the Virus Exclusion bars coverage, 8 and Cibus requests that the Court deny Eagle West’s motion to dismiss Plaintiff’s 9 complaint. 10 DISCUSSION 11 I. Motion to Strike 12 Eagle West requests that the Court strike those portions of Plaintiff’s response to 13 the objection that are not related to the issues raised in Eagle West’s objection, and which 14 are more appropriately characterized as an untimely objection to the Report. The Court 15 agrees. Plaintiff failed to file an objection to the Report. Plaintiff’s s response was filed 16 outside of the fourteen day limit, and Plaintiff has not shown good cause for its untimely 17 filing. See Fed. R. Civ. P. 72(b)(2) (setting deadline for timely objection). Accordingly, the 18 Court will strike those portions of the Plaintiff’s response that assert arguments that are not 19 responsive to arguments raised by Eagle West in its limited objection. 20 II. Eagle West’s Objection 21 Eagle West requests that the Court only adopt that portion of the Report concluding 22 that the Pathogenic Organisms Exclusion bars coverage. Eagle West urges the Court to 23 not adopt the Report’s analysis entitled “Business Income and Extra Expenses coverages” 24 and “Civil Authority” coverages because the applicability of the exclusion makes it 25 unnecessary to find coverage in the first instance. Upon review, the Court concludes that it 26 need not reach Judge Ferraro’s alternative ruling, and finds that the Pathogenic Organisms 27 Exclusion is sufficient to grant dismissal.2 See Border Chicken AZ L.L.C. v. Nationwide 28 2 Because the Court does not adopt the alternative ruling, the Court need not address Eagle West’s substantive arguments as to this ruling. Mutual Ins., CV-20-00785-PHX-JJT, 2020 WL 6827742, at *3 (D. Ariz. Nov. 20, 2020) 2|| (“Because the Court finds that the Virus Exclusion plainly and unambiguously bars || coverage for losses claimed by Plaintiff. . . it does not reach a conclusion on Defendant’s other arguments.”); see also Boxed Foods Co. v. Cal. Capital Ins., 20-CV-4571-CRB, 2020 WL 6271021, at *3 n.4 (N.D. Cal. Oct. 27, 2020) (same). Accordingly, the Court will not || adopt the sections of the Report entitled “Business Income and Extra Expenses coverages” || and “Civil Authority.” 8 CONCLUSION 9 For the foregoing reasons, 10 IT IS ORDERED: 11 1. Defendant’s Motion to Strike (Doc. 52) is GRANTED. 12 2. Plaintiffs Response to Defendant’s Limited Objection to Report and 13 Recommendation as to its Motion to Dismiss (Doc. 51) is STRICKEN in part at 14 Sections TJI.A. (second and third paragraph), III-C. (in its entirety), III.D. (in its 15 entirety), and IV (last nine words). 16 3. The Report and Recommendation (Doc. 48) is ADOPTED in part as set forth in 17 this order. 18 4. The Motion to Dismiss (Doc. 21) is GRANTED. 19 5. Plaintiff's request for targeted discovery and leave to amend the complaint (Doc. 20 40) is DENIED. 21 6. This action is DISMISSED with prejudice. 22 7. The Clerk of the Court is directed to close its file in this action. 23 Dated this 23rd day of March, 2021. 24 25 □ 26 pote Soipe Honoral le Jennife ve Zfpps United States District Judge 28 -4-