Opinion
NO. 01-1282
June 28, 2001.
ORDER AND REASONS
Before the Court are plaintiff Robin Passaro Louque's Motion to Remand and defendant Allstate Insurance Company's Motion to Dismiss Plaintiffs Class Action Complaint. For the following reasons the plaintiffs motion is DENIED, and the defendant's motion is GRANTED.
A. Background
Defendant Allstate Insurance Company ("Allstate") insured plaintiff Robin Passaro Louque ("Louque") under a Louisiana Automobile Indemnity Policy providing liability coverage for up to $10,000. In July 1995, Louque was involved in a two car accident in which a third party was injured. The injured party filed suit against Louque, and Allstate allegedly refused to settle the because the third arts incurred only "minor impact, soft tissue"or "MIST" injuries and because the third party was represented by an attorney. Compl. at ¶ 5.
In the instant suit, Louque contends that Allstate follows a policy of refusing to settle attorney-represented MIST cases and claims that the policy has "negatively impacted" her credit rating. Compl. ¶ 9. In particular, she argues that she and other Allstate policy holders were "denied credit, and/or [were] offered less credit, and/or [were] offered credit at a higher interest rate" because of the judgments entered against them when Allstate insisted on taking their cases to trial. Compi. ¶ 10. In her class action complaint, Louque accuses Allstate of breaching its insurance contracts, breaching its fiduciary obligations to policy holders, and violating La.Rev.Stat. § 22:1220 by arbitrarily refusing to settle claims under the MIST policy.
Allstate removed the case to this Court on April 30, 2001. Louque now asks the Court to remand the case, and Allstate asks the Court to dismiss Louque's claims.
B. Law and Analysis 1. Plaintiffs Motion to Remand
A civil action can be removed from state court if the federal courts have original subject matter jurisdiction. See 28 U.S.C. § 1441 (a). In a class action, diversity jurisdiction exists if the named parties are diverse and the amount in controversy for the named plaintiffs claim exceeds $75,000. In the case at bar, it is undisputed that diversity of citizenship exists. Louque submits that the Court lacks jurisdiction because the requisite amount in controversy has not been met. Under Louisiana Code of Civil Procedure article 595, attorneys' fees in a class action lawsuit are wholly allocable to the named plaintiff; and, when article 595 is coupled with a statutory provision mandating an award of attorneys' fees, federal courts will consider that potential award when determining the amount in controversy. See In re Abbott Labs., 51 F.3d 524, 526-27 (5th Cir. 1995).
In the case at bar, Allstate argues that Louque's claims are governed by two different Louisiana statutes, one of which authorizes an award of attorneys' fees. Section 22:1220 of the Louisiana Revised Statutes subjects an insurer to penalties if it arbitrarily fails to pay a claim within sixty days following satisfactory proof of loss. LA.REv.STAT. ANN. §§ 22:1220(A), (B)(5), (C) (West 1995). Similarly, Section 22:658 awards penalties and attorneys' fees if an insurer fails to pay a claim within thirty days of satisfactory proof of loss and the failure is found to be arbitrary, capricious, or without probable cause. LA.REv.STAT. ANN. §§ 22:658(A)(1), (B)(1) (West 1995).
Although Louque contends that she is entitled to recovery under section 1220 for Allstate's failure to promptly settle her claim, she submits that section 658 forms no part of her lawsuit. However, inHannover Corp. of America v. State Farm Mut. Auto Ins. Co., 67 F.3d 70, 75 (5th Cir. 1995), the Fifth Circuit noted that sections 658 and 1220 "are similar in that each statute provides for penalty awards when an insurer has arbitrarily, capriciously, or without probable cause failed to timely settle a claim." The Hannover court further held that, although the plaintiff included only one statute in the complaint, both statutes applied to the plaintiff's cause of action. In the instant case, Louque alleges that she suffered damages because Allstate failed "to adjust all claims fairly and promptly and to make reasonable efforts to settle [the MIST] claims with the claimants" and prays for "all just and equitable relief." Pet. at ¶ 20. In light of these allegations and the Fifth Circuit's holding in Hannover, the Court finds that Louque is entitled to relief under both sections 658 and 1220. Accordingly, attorneys' fees are available.
Louque further argues that she will waive her statutory right to attorneys' fees under section 658. However, she does not have the authority to do so. See DeAguilar v. Boeing, 47 F.3d 1404, 1413 (5th Cir. 1995) (holding that representative plaintiffs did not have the authority to limit the amount of damages recoverable by the class members); Pendleton v. Parke-Davis, 2000 WL 1808500, *5 (E.D.La. Dec. 7, 2000) (Porteous, J.) (rejecting "waiver" of attorney fees awardable under Louisiana's redhibition statutes); Manguno v. Prudential Prop. and Cas. Ins. No. 99-903-C-1, slip op. at 9-10 (M.D.La. Sept. 7, 2000) (holding that a class representative's waiver of attorneys' fees was "disingenuous"). Accordingly, the Court finds that attorneys' fees may be taken into account in determining whether Louque's claims exceed $75,000.
Because Louque intends to represent a nationwide class of "tens of thousands, if not hundreds of thousands of individuals" and seeks both damages and penalties for each class member, the Court finds that Louque's attorneys' fees will easily exceed the jurisdictional threshold. Accordingly, Louque's Motion to Remand is DENIED.
Furthermore, in accordance with the Fifth Circuit's holding in Abbott Laboratories, the Court will exercise supplemental jurisdiction over the claims of the remaining putative class members under 28 U.S.C. § 1367.
"In a similar class action scenario, the Abbott court held that the district court should have exercised supplemental jurisdiction over the entire class because:
The district court has diversity jurisdiction over the named plaintiffs' claims; § 1367 granted it supplemental jurisdiction over the claims of the unnamed plaintiffs; and, considering that it must try the named plaintiffs' claims, it abused its discretion on the facts here in declining supplemental jurisdiction over the unnamed plaintiffs' claims.
Abbott Labs., 51 F.3d at 530.
2. Defendant's Motion to Dismiss
In a motion to dismiss for failure to state a claim upon which relief may be granted, the Court must accept all well-pleaded facts as true and view the facts in the light most favorable to the plaintiffs. See Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995). Dismissal is warranted if "it appears certain that the plaintiff[s] cannot prove any set of facts in support of [their] claim that would entitle [them] to relief." Piotrowski v.City of Houston, 51 F.3d 512, 514 (5th Cir. 1995) (quoting Leffall v. Dallas Indep. Sch. Dist., 28 F.3d 521. 524 (5th Cir. 1994)). In the case at bar, Allstate moves the Court to dismiss Louque's allegations that it breached its contractual and fiduciary obligations and violated section 22:1220 by refusing to settle attorney represented MIST claims.
a. Breach of Contract
To state a claim for breach of an insurance contract under Louisiana law, a plaintiff must allege a breach of a specific policy provision. See Bergeron v. Pan Am. Assurance Co., 731 So.2d 1037, 1045 (La.App. 4th Cir. 1999). In the instant case, although Louque claims that Allstate refused to settle "valid" claims, she fails to cite any policy provision that requires Allstate to settle claims before trial. In fact, the only policy provision Louque cites provides that Allstate has unfettered discretion in deciding whether to settle cases:
We will defend an insured person sued as the result of a covered auto accident, even if the suit is groundless, false or fraudulent. We will choose the counsel. We may settle any claim if we believe it is proper.
Def.'s Ex. A at 5.
In Employers Surplus Line Ins. Co. v. City of Baton Rouge, 362 So.2d 561, 564 (La. 1978), the Louisiana Supreme Court construed a similar policy provision. The Employers policy provided that the insurance company was authorized to "make such investigation, negotiation and settlement of any claim or suit it deems expedient." Id. at 565. The Louisiana Supreme Court explained that:
This provision vests the insurer with absolute authority to settle claims within the limits of the policy with the insured's having no power to compel the insurer to make settlements or prevent it from doing so.Id. As in Employers Surplus, Allstate is given absolute discretion over whether or not to settle a claim. Because Allstate's policy does not obligate it to settle any claim before trial, the Court finds that Louque fails to state a claim for breach of contract.
b. Breach of Fiduciary Obligation
Louque also alleges that Allstate breached a fiduciary obligation by failing to settle "valid claims" before trial. However, as stated above, Allstate was not contractually bound to settle Louque's claim; and Louisiana law does not recognize an extracontractual obligation where there is no risk of exposing the insured to excess liability. See, e.g.,Ragas v. MGA Ins. Co., 1997 WL 79357, at *2 (E.D.La. Feb. 21, 1997) (McNamara, J.) (holding that an insured has no cause of action against its insurer for bad faith refusal to settle in the absence of an adjudicated excess judgment against the insured). In the case at bar, Louque has neither an "adjudicated excess judgment" nor even any claim that Allstate's decision to go to trial exposed her to excess liability. To the contrary, Louque avers that prior to trial the "third party was claiming damages well below the $10,000 policy limits of [Louque's] policy." Compl. at ¶ 5. Because Louque does not allege that Allstate's alleged refusal to settle exposed her to excess liability, the Court finds that she has failed to state a cause of action for breach of fiduciary obligation.
3. La.Rev.Stat. § 22: 1220
Finally, Louque contends that Allstate violated section 22:1220 by arbitrarily refusing to settle her claim. In Theriot v. Midland Risk Ins. Co., 694 So.2d 184, 188 (La. 1997), the Louisiana Supreme Court determined that the specific prohibited acts enumerated in La.Rev.Stat. § 22:1220(B) comprise "an exclusive list of the types of conduct for which damages and penalties can be sought by insureds and third-party claimants pursuant to the statute." Although Louque did not allege any violations of Subsection B in her complaint, in her opposition to Allstate's motion to dismiss she raises for the first time the claim that Allstate "[m]is represent[ed] pertinent facts or insurance policy provisions." La.Rev.Stat. § 22: 1220(B)(1). Specifically, Louque argues that Allstate's policy provision that it "may settle any claim if we believe it is proper" is untrue, because Allstate allegedly would not settle a MIST claim even if it did believe settlement were proper.
However, Louisiana courts have held that claims under § 1220(B)(1) are limited to those involving "facts about the policy itself, such as the amount of coverage, lapse or expiration of the policy, or exclusions from coverage, " Strong v. Farm Bureau Ins. Co., 743 So.2d 949, 953 (La.App. 2nd Cir. 1999). None of those issues are implicated by Allstate's alleged conduct in the present case. In addition, the Court has already explained that the policy provision which allows Allstate to settle cases does not obligate it to do so. Despite Louque's belated attempt to use her opposition to plead facts sufficient to state a claim under section 1220(B), the Court finds that she fails to state a claim because Allstate cannot be held liable for conduct not specifically prescribed by the statute.
Because the Court finds that Louque has failed to state a claim for breach of contract, breach of fiduciary duty, or violations of section 1220, Allstate's motion to dismiss is GRANTED.
C. Conclusion
For the reasons stated above, IT IS ORDERED that
(1) plaintiff Robin Passaro Louque's Motion to Remand is DENIED and
(2) defendant Allstate Insurance Company's Motion to Dismiss is GRANTED.