Opinion
EP-21-CV-00106-FM
08-10-2021
ROBERT K. HUDNALL AND SHARON ELIAS HUDNALL, Plaintiffs, v. TY SMITH, Individually and as agent for Smith and Ramirez Restoration LLC; ALEJANDRO C. RAMIREZ, individually and agent for Smith and Ramirez Restoration LLC; KURT G. PAXSON, individually and agent for Mounce, Green, Myers, Safi, Paxson and Galatzan; GARRETT J. YANCEY, individually and as agent for Mounce, Green, Myers, Safi, Paxson and Galatzan; JAMES A. MARTINEZ, individually and as agent for Mounce, Green, Myers, Safi, Paxson and Galatzan; SMITH AND RAMIREZ RESTORATION LLC; EVANSTON INSURANCE COMPANY, Insurance company for Smith and Ramirez Restoration LLC; GUY BLUFF; MOUNCE, GREEN, MEYERS, SAFI, PAXSON, AND GALATZAN; CATHERINE HANNA, individually and as agent for Hanna and Plaut LLP; HANNA AND PLAUT LLP; LIBERTY LOYDS OF TEXAS INSURANCE COMPANY; and Does 1-100, Defendants.
ORDER GRANTING GUY M. BLUFF'S MOTION TO DISMISS
FRANK MONTALVO UNITED STATES DISTRICT JUDGE
Before the court are "Defendant Guy M. Bluffs Amended Motion to Dismiss for Failure to State a Claim Upon Which Relief May be Granted" ("Motion") [ECF No. 45], filed July 1, 2021 by Guy M. Bluff ("Bluff); "Plaintiffs [sic] Response to Defendant Guy M. Bluffs Amended Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted" ("Response") [ECF No. 46], filed July 6,2021 by Robert K. Hudnall and Sharon Elias Hudnall (collectively, "Plaintiffs"); "Defendant Guy M. Bluffs Reply to Plaintiffs' Response to His Amended Motion to Dismiss for Failure to State a Claim Upon Which Relief May be Granted" ("Reply") [ECF No. 47], filed My 7, 2021 by Bluff; and "Plaintiffs [sic] Response to Guy M. Bluffs Reply" ("Sur-reply") [ECF No. 54], filed July 9, 2021 Bluff moves for dismissal of all claims against him under Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"). After due consideration of the Motion, Response, Reply, Sur-reply, and applicable law, the Motion is GRANTED.
Pursuant to the local rules, sur-replies are not permitted absent leave of court. Local Rule CV-7(f)(1). In the interest of justice, the court exercises its discretion to consider Plaintiffs' sur-reply.
"Defendant Guy M. Bluffs Amended Motion to Dismiss for Failure to State a Claim Upon Which Relief May be Granted" ("Mot") 21, ECF No. 45, filed July 1, 2021
I. BACKGROUND
This case arises from a contract between Plaintiffs and Defendants Ty Smith, Alejandro C. Ramirez, and Smith & Ramirez Restoration, LLC (collectively, the "SR Defendants") to replace Plaintiffs' roof. A dispute over the performance of this conflict escalated to breach of contract litigation in the 448th District Court in El Paso, Texas. The action was ultimately referred to arbitration pursuant to the arbitration agreement contained in the roofing contractBluff acted as arbitrator over the dispute.
See generally "First Amended Complaint" ("Am. Compl.") ECF No. 14, filed June 1,2021.
Id. at ¶9.
Id. at ¶ 16,
Id. at ¶ 31.
Plaintiffs allege Bluff conspired with the SR Defendants and the SR Defendants' attorneys to increase fees collected for his services by prolonging arbitration. In furtherance of the alleged conspiracy, Bluff declined to grant Plaintiffs' summary judgment motion despite conclusive evidence supporting Plaintiffs' theory of recovery. Plaintiffs further allege Bluff wrongfully permitted parties to introduce protected healthcare information to the arbitration proceedings. Specifically, Plaintiffs allege that Robert Hudnall's entitlement to grants from the Department of Veteran's Affair under the Special Adaptive Housing ("S AH") Program based on his disability is protected information.
Id. at ¶ 38.
Am. Comply ¶ 38.
Id. at ¶ 96.
On these facts, Plaintiffs assert Bluff violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") by colluding with the SR Defendants and the SR Defendants' attorneys. They also contend that permitting the introduction of confidential medical information violated Health Insurance Portability and Accountability Act ("HIPAA") and the Texas Medical Records Privacy Act. Plaintiffs also pleaded a number of state law offenses including fraud, fraudulent inducement, fraudulent misrepresentation, breach of contract, and promissory estoppel. Bluff is excluded from Plaintiffs' promissory estoppel claim. He is named in all others, but at times only in the remedies portions of the count. To the extent he is named in any factual allegations corresponding to these claims, Plaintiffs allege only that he conspired with or tacitly supported other defendants. At all times, Plaintiffs' allegations against Bluff refer to decisions Bluff made as an arbitrator.
Id. at ¶¶ 40-80. See also 18 U.S.C. §§ 1961-1968.
Am. Compl. ¶¶ 93-97. See also 42 U.S.C § 1320-6; TEX, HEALTH & SAFETY CODE ch. 181.
Id. at ¶ 81-92.
II. LEGAL STANDARD
Rule 12(b)(6) allows dismissal of a complaint for "failure to state a claim for which relief can be granted." "The central issue is whether, in the light most favorable to the plaintiff, the complaint states a valid claim for relief." To survive a motion to dismiss, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." "[F]acial plausibility" exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Therefore, a complaint is not required to set out "detailed factual allegations," but it must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." Although the court must accept well-pleaded allegations in a complaint as true, it does not afford conclusory allegations similar treatment.
Great Plains Trust Co. v. Morgan Stanley Dean Witter &Co.,3 13 F.3d 305, 313 (5th Cir. 2002) (internal quotation marks and citation omitted); see also In re Katrina Canal Breaches Litig, 495 F.3d 191,205 (5th Cir. 2007).
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Id. (citing Twombly, 550 U.S. at 556).
Twombly, 550 U.S. at 555.
See Kaiser Aluminum & Chem. Sales, Inc., 677 F.2d 1045,1050 (5th Cir. 1982) (citing Associated Builders, Inc. v. Alabama Power Co., 505 F.2d 97, 100 (5th Cir. 1974)).
Federal Rule of Civil Procedure 9(b) requires that, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." This heightened pleading standard applies to RICO claims based on fraudulent predicate acts.
Molina-Aranda v. Black Magic Enters., LLC, 983 F.3d 779,784 (5th Cir. 2020); Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992).
III. DISCUSSION
A. Conversion to 12(c) Motion
A motion pursuant to Rule 12(b)(6) must be made before pleading. Therefore, a motion to dismiss for failure to state a claim filed after the defendant's answer is untimely. However, a district court faced with an untimely 12(b) motion may choose to convert it to a Federal Rule of Civil Procedure 12(c) ("Rule 12(c)") motion for judgment on the pleadings. Such a motion is appropriate after the pleadings are closed but early enough so that its consideration will not delay trial. The standard for dismissal under Rule 12(c) is the same as that for dismissal for failure to state a claim under Rule 12(b)(6). As Bluff moved to dismiss Plaintiffs' claims after filing an answer to Plaintiffs' amended complaint, his motion is untimely. However, the court exercises its discretion to convert it into a motion for judgment on the pleadings as this proceeding is in its infancy and consideration of the motion will not delay trial. Further, the motion can be decided as a matter of law.
Jones v. Greninger, 188 F.3d 322,324 (5th Cir. 1999).
Johnson v. Johnson, 385 F.3d 503, 529 (5th Cir. 2004).
See Greenberg v. Gen. Mills Fun Grp., Inc., 478 F.2d 254,256 (5th Cir. 1973).
B. Arbitral Immunity
The resemblance of an arbitrator's role to that of a judge gives rise to immunity from suit similar to judicial immunity. The scope of arbitral immunity does not exceed the bounds of judicial immunity. This immunity protects arbitrators from civil liability arising from actions taken in the course of conducting arbitration proceedings. Arbitral immunity "is essential to protect decision-makers from undue influence and the process from reprisals by dissatisfied litigants." As such, immunity extends to intentional misconduct, fraud, and bias.
EC: Ernst, Inc. v. Manhattan Const. Co. of Texas, 551 F.2d 1026, 1033 (5th Cir. 1977).
See id.
Hawkins v. Nat'l Ass 'n of Sec. Dealers, 149 F.3d 330, 332 (5th Cir. 1998), abrogated on other grounds by Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 578 U.S. 901 (2016).
Jason v. Am. Arb. Ass 'n, Inc., 62 Fed.Appx. 557 (5th Cir. 2003) (unpublished) (quoting New England Cleaning Serv., Inc. v. Am. Arb. Ass'n, 199 F.3d 542, 545 (1st Cir. 1999)).
See Hawkins, 149 F.3d at 331 (dismissing claims for bias, misadministration and conspiracy to harm the plaintiff). Cf. Stump v. Sparkman, 435 U.S. 349, 356-57 (1978) ("A judge will not be deprived of immunity because the action he took was in error, was done maliciously, or was in excess of his authority; rather, he will be subject to liability only when he has acted in the 'clear absence of all jurisdiction.'").
Bluff, as an arbitrator, is immune from civil liability for all actions taken in the scope of that role. Plaintiffs emphasize that Bluffs immunity is not absolute. Specifically, they argue the doctrine of arbitral immunity does not apply as Bluff did not act neutrally and did not have "proper jurisdiction." Despite the limitations of arbitral immunity, it encompasses all allegations against Bluff. An arbitrator does not lose immunity because he is not neutral or because he is biased. Instead, Plaintiff must establish "clear absence of all jurisdiction over the subject matter," a markedly higher bar. The Supreme Court long ago differentiated acts "in excess of jurisdiction," for which immunity from civil liability applies and acts taken in "the clear absence of all jurisdiction," for which there is no legal protection. The distinction lies in whether existing authority is wrongly exercised or not held at all. A probate judge who tries a criminal case acts in the absence of all jurisdiction and may be civilly liable. A judge presiding over a criminal court acts in excess of his jurisdiction by convicting a defendant of a non-existent crime and is immune.
"Plaintiffs [sic] Response to Defendant Guy M. Bluffs Amended Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted" ("Resp.") 1-2, ECF No. 46, filed July 6,2021.
See Hawkins, 149 F.3d at 331; Stump, 435 U.S. at 356-57.
Bradley v. Fisher, 80 U.S. 335, 351-52 (1871).
See Bradley, 80 U.S. at 351-52 (holding a judge to be immune from civil liability for disbarring an attorney without sufficient notice to the attorney as disbarment was in excess of his jurisdiction, not without jurisdiction); Stump v. Sparkman, 435 U.S. 349,356-57 (1978) (holding that a judge was immune from civil liability for ordering the sterilization of a minor without her knowledge as the order was in excess of his jurisdiction, not without jurisdiction).
Bradley, 80 U.S. at 352.
Id.
The cases cited by Plaintiffs limiting arbitral immunity are inapposite. The allegations here are not comparable to those in Harper v. Merckle. There, the Fifth Circuit declined to extend immunity to a judge who ordered an impromptu hearing and arrest in his chambers stemming from a social visit. The judge ordered bailiffs to chase, detain, and then incarcerate the plaintiff for the weekend due to a domestic dispute between the plaintiff and the judge's employee. The court found there had not been any "judicial act" as no party "invoked the judicial machinery for any purpose at all."
Harper v. Merckle, 638 F.2d 848, 859 (5th Cir. 1981).
Id. at 851.
Id. at 859.
In contrast, Bluffs denial of Plaintiffs' dispositive motion and admission of contested evidence is clearly within his authority as arbitrator and the normal procedural bounds of arbitration. The Texas state court referred the action to arbitration using the usual "judicial machinery." Bluff then exercised only those powers corresponding to his role by hearing evidence and ruling on parties' motions. This is a far cry from what the Fifth Circuit described as "the rarest of factual settings" arising in Harper v. Merckle, which merited an "exceedingly narrow" holding. Any improper or malicious motive would certainly cause Bluffs actions to be in excess of his jurisdiction. However, this is insufficient to escape arbitral immunity as it does not clear the high threshold of being in absence of all jurisdiction. Therefore, Bluff cannot be civilly liable regardless of whether his decision was legally defensible or was part of a conspiracy to enrich himself as Plaintiffs claim.
Id.
Arbitration is a creature of contract law in which parties choose to forgo the traditional judicial process and to instead be bound by the decision of the arbitrator. As such, the contents of an arbitration agreement may also provide a source of arbitral immunity. The roofing contract between Plaintiffs and the SR Defendants contains an arbitration agreement that forms the basis of the state court's decision to refer Plaintiffs' contract claims to arbitration by Bluff.The arbitration agreement stipulates that "the rules of the American Arbitration Association ('AAA') shall be sole and exclusive means of resolving [a] dispute [arising from die roofing contract]." Under Rule 54 of the AAA, "[n]either the AAA nor any arbitrator in a proceeding under these rules is a necessary or proper party in judicial proceedings relating to the arbitration." "Parties to an arbitration under these Rules shall be deemed to have consented that neither the AAA nor any arbitrator shall be liable to any party in any action for damages, injunctive or declaratory relief for any act or omission in connection with any arbitration under these rules."
E.C. Ernst, Inc. v. Manhattan Const. Co. of Texas, 551 F.2d 1026,1033 (5th Cir. 1977) ("[The arbitrator] is a creature of contract, paid by the parties to perform a duty, and his decision binds the parties because they make a specific, private decision to be bound.").
See 9 U.S.C. § 2 ("A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction .., shall be valid, irrevocable, and enforceable.").
See Mot., "Roofing Contract" ¶ 13, ECF No. 45-1, Ex. 2.
Id.
See American Arbitration Association, Construction industry Arbitration Rules and Mediation Procedures, R-54(b) (2015).
Id. at R-54(d).
As a party to the arbitration agreement, Plaintiff is contractually obligated to accept the AAA limitations on civil liability. The AAA language forecloses Plaintiffs from recovering damages from Bluff for any action he took as an arbitrator. As the court determined that all Bluffs actions cited in the complaint occurred within the scope of the role of arbitrator, Bluff has a contractual immunity from suit.
Finally, Plaintiffs raise new allegations of wrongdoing against Bluff in their Response. Plaintiffs assert Bluff informed the process server who delivered the summons and complaint for this lawsuit that Robert Hudnall is a disbarred attorney. They further allege Bluff questioned the process server about the validity of service. Plaintiffs assert these actions amount to libel and impermissible ex parte communication. As these are not mentioned in the amended complaint, they cannot form the basis of liability in this action. Even if they were, they would not be actionable as they do not meet the requirements for either cause of action.
Resp. 3-4. Plaintiff disputes the truthfulness of the claim of disbarment.
Id.
See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (stating the procedure for determining the sufficiency of a complaint challenged by a 12(b)(6) motion to dismiss).
Bluff briefs several additional legal theories in support of his Motion. However, as the doctrine of arbitral immunity conclusively bars all Plaintiffs' claims against Bluff, it is unnecessary address them.
IV. CONCLUSION
All claims against Bluff are barred by the doctrine of arbitral immunity. As such, Plaintiffs failed to plead enough facts to state a claim to relief that is plausible on its face.
Accordingly:
1. It is HEREBY ORDERED that "Defendant Guy M. Bluffs Amended Motion to Dismiss for Failure to State a Claim Upon Which Relief May be Granted" [ECF No. 45] is GRANTED.
2. It is FURTHER ORDERED that the Clerk of Court is instructed to TERMINATE Defendant Guy M. Bluff as a party to this cause.
SIGNED AND ENTERED.