Opinion
1:21-cv-01198-CL
12-28-2021
MICHAEL L. MAYES, Plaintiff, v. AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS, Defendant.
FINDINGS AND RECOMMENDATION
MARK D. CLARKE, Magistrate Judge.
Plaintiff Michael L. Mayes (“Plaintiff'), a self-represented litigant, brings this action' against defendant for alleged tortious conduct while handling his automobile insurance claim. This case comes before the Court on Plaintiffs motion to remand this case back to state court and defendant's motion to dismiss. For the reasons discussed below, this Court recommends that the Motion for Remand (Dkt. #12) be DENIED and the Motion to Dismiss (Dkt. #6) be GRANTED. Amendment would not cure the deficiencies in Plaintiffs Complaint. Therefore, judgment should be entered in favor of defendant.
BACKGROUND
Plaintiff is a resident of Grants Pass, Oregon. Plaintiff claims that his vehicle sustained damage from driving behind a construction truck and trailer that was hauling sand. Plaintiff explains that sand fell from the trailer and came into contact with the front of his vehicle causing damage. The construction vehicle was owned and operated by JM Construction. JM Construction is not a party in this litigation. Defendant American Hallmark Insurance Company of Texas (“Hallmark”) is an insurance company that provided automobile liability insurance to JM Construction.
According to the Complaint, Plaintiff contacted Hallmark on July 23, 2019, to initiate a claim for his damaged vehicle. Hallmark sent an independent appraiser to inspect Plaintiffs vehicle on July 31, 2019. On August 8, Hallmark allegedly emailed Plaintiff the vehicle repair estimate and also mailed him a check in the amount of $4,543.05 on behalf of JM Construction. The next day, Plaintiff called Hallmark regarding concerns he had with the estimate and Hallmark allegedly told him to take his vehicle to a repair shop for further assessment and to begin repairs. Several months later, on November 17, 2019, Plaintiff emailed Hallmark an updated repair estimate for his vehicle and expressed an intent to sue Hallmark. Plaintiff allegedly spoke with a Hallmark adjuster on the phone a few days later and explained that he had experienced significant hardships regarding the claim and that he expected Hallmark to compensate him accordingly.
Plaintiff filed his Complaint against Hallmark in Jackson County Circuit Court on July 16, 2021, seeking $3,490.09 in economic damages and $1,500,000.00 in noneconomic damages.
His claims against Hallmark are titled “Property Damage/Negligence” and “Vicarious Liability/Willful Negligence.” Plaintiff alleges that Hallmark, as the insurer for JM Construction, is liable for the damage to his vehicle. Plaintiff also alleges the Hallmark's claims adjusters acted in bad faith and with the intent to cause Plaintiff distress in the course of the claims process.
On or about July 20, 2021, Hallmark received a copy of Plaintiff s Complaint. On August 13, 2021, Hallmark removed the lawsuit to this Court based upon diversity jurisdiction.
DISCUSSION
I. The Motion to Remand should be denied.
Plaintiff moves this Court for an order remanding his case back to state court on the grounds that removal was improper because Hallmark had not yet been formally served so the timeframe for removing had not yet begun. The Court finds that the motion for remand should be denied because formal service is not a required prerequisite for removal and this Court has jurisdiction.
Under the rules of civil procedure, Hallmark was entitled to remove the case to federal court as soon as it became aware of the filed complaint. 28 U.S.C. § 1446 states, “The notice of removal of a civil action or proceedings shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading ... or within 30 days after the service of summons upon the defendant....” (emphasis added). Put simply, once a defendant is formally served, it has 30 days to decide whether it is going to remove the case to . federal court. However, if the defendant learns of the lawsuit after it is filed and before it is served, the defendant may remove the case to federal court before it has been formally served. The explicit inclusion of the term “through service or otherwise” shows that Congress considered removal before formal service. This concept is well established in the law. Indeed, 28 U.S.C. § 1448 describes the procedure for serving defendants after removal. 28 U.S.C. § 1448 (“In all cases removed from any State court to any district court of the United States in which any one or more of the defendants has not been served with process or in which the service has not been perfected prior to removal, or in which process served proves to be defective, such process or service may be completed or new process issued in the same manner as in cases originally filed in such district court.”). Therefore, once Hallmark became aware of the complaint, regardless of the means by which it became aware, it became entitled to respond by one of the methods available under the law, such as removing the case to federal court on the basis of diversity jurisdiction, like it did here.
Plaintiff relies on Murphy Bros. v. Michetti Pipe Stringing, Inc., 526 U.S. 344 (1999) to support his argument that formal service on a defendant must happen before a defendant can remove a case to federal court. In Murphy Bros., the defendant removed the case to federal court within the 30-day window after formal service, but 44 days after receiving a faxed copy of the complaint. Murphy Bros., 526 U.S. at 348. The plaintiffs then filed a motion for remand on the grounds that Murphy filed the removal notice 14 days too late. Id. (emphasis added). The Supreme Court held that the “defendant's time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, ‘though service or otherwise,' after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service.” Id. The purpose of this holding is to uphold the principle that a defendant is not required to engage in litigation until it has been formally served. It does not prohibit defendants from removing before service if they so choose to do so and jurisdiction is proper. Indeed, the holding in Murphy Bros, supports Hallmark's position that it had the right to wait until it was formally served to remove the case to federal court, and that it also had the right to remove the case before formal service if it wanted to, which it did.
There is no support in the law for Plaintiffs position that defendants are prohibited from removing to federal court prior to being formally served. Moreover, Hallmark properly removed based upon diversity jurisdiction and explicitly consented to this Court having personal jurisdiction over it. Therefore, this Court has jurisdiction to hear this action. Plaintiffs motion for remand should be denied.
II. The Motion to Dismiss should be granted.
Hallmark moves to dismiss this action with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain sufficient facts that “statefs] a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). A claim is plausible on its face when the factual allegations allow the court to infer the defendant's liability based on the alleged conduct. Iqbal, . 556 U.S. at 663. The factual allegations must present more than “the mere possibility of misconduct.” Id. at 678.
In evaluating a motion to dismiss, the court must accept all allegations of material fact as true and construe those allegations in the light most favorable to the non-moving party. Odom v. Microsoft Corp., 486 F.3d 541, 545 (9th Cir. 2007) (internal citations omitted). However, the court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. Pro se pleadings are held to less stringent standards than pleadings by attorneys. Haines v. Kerner, 404 U.S. 519, 520-521 (1972). That is, the court should construe pleadings by pro se plaintiffs liberally and afford the plaintiffs the benefits of any, doubt. Karim-Panahi v. Los Angeles Police Dep't, 839 F.2d 621, 623 (9th Cir. 1988) (citation omitted). A pro se litigant is entitled to notice of the deficiencies in the complaint and the opportunity to amend, unless the complaint's deficiencies cannot be cured by amendment. Id.
a. First Claim for “Property Damage/Negligence”
Plaintiffs first claim for relief against Hallmark, titled “Property Damage/Negligence, ” states
Mr. Jason Meyers of JM Construction knew or reasonably should have known that his failure to properly secure the truck load of sand - during transport - would ultimately cause damage to any vehicle traveling within its proximity. As a direct result, Plaintiffs vehicle was damaged. Defendant Hallmark's client (JM Construction) is responsible for said damage and Defendant Hallmark has excepted [sic] liability accordingly.Complaint ¶ 23.
Under Oregon law, an injured party must first secure a judgment against the insured, before the injured party can file a lawsuit against the insurer. Tashire v. State Farm Fire & Cas. Co., 363 F.2d 7, 10 (9th Cir. 1966), rev'd on other grounds, 386 U.S. 523 (1967). The Oregon Supreme Court addressed this issue, finding “insurance companies are not required to do anything concerning the plaintiff until a judgment is entered in his favor against the [insured] and remains unsatisfied for thirty days.” Hale v. Fireman's Fund Ins. Co., 209 Or. 99, 113 (1956).
Plaintiff alleges that the damage to his vehicle was caused by JM Construction. JM Construction is not a party to this action and no judgment has been entered against JM Construction finding it at fault for the alleged damage. It appears from the Complaint that Hallmark, as the insurer of JM Construction, agreed to evaluate Plaintiffs claim that JM Construction damaged his vehicle, and it offered to settle the matter on JM Construction's behalf. When Plaintiff was unsatisfied with Hallmark's settlement offer, he chose to file a lawsuit against Hallmark to recover the full amount that he believes he is owed. This is where Plaintiff skipped a very important step that is required under the law. Plaintiff must secure a judgment against JM Construction, the actual alleged tortfeasor here, before the Court can order Hallmark to do anything concerning Plaintiff's insurance claim.
Plaintiff argues that Hallmark waived its right not to be subject to a direct action when it attempted to settle Plaintiffs insurance claim. However, settlement offers are encouraged under the law and are not considered admissions of liability or waivers of any kind. See Fed.R.Evid. 408; e.g., Rhoades v. Avon Prods., 504 F.3d 1151, 1161 (9th Cir. 2007) (“Rule 408 is designed to ensure that parties may make offers during settlement negotiations without fear that those same offers will be used to establish liability should settlement efforts fail”). Hallmark's offer to settle Plaintiffs insurance claim cannot be construed by this Court as an acceptance of liability, nor does it relieve Plaintiff from having to obtain a judgment against JM Construction in order to sue Hallmark. Therefore, Plaintiffs fist claim for “Property Damage/Negligence” against Hallmark must be dismissed.
b. Second and Third Claims for “Vicarious Liability/Willful Negligence”
Plaintiffs second and third claims for relief against Hallmark are both titled “Vicarious Liability/Willful Negligence.” The two claims are very similar, except that claim two concerns Hallmark employee, “Miss Hearn, ” and claim three concerns Hallmark employee, “Miss Lesmes.” Claim two states,
Defendant Hallmark, by and through its employee Miss Hearn, willfully and knowingly: falsified facts concerning the claim to Plaintiff; refused to make a full payment on all claims without conducting a reasonable investigation based on all available information; and failed, in good faith, to promptly and equitably settle claims in which liability has become reasonably clear. Defendant Hallmark did so with the intent to cause Plaintiff unnecessary distress. As a direct result, Plaintiff was injured.Complaint ¶ 24. Plaintiff seeks $500,000 for “mental distress” caused by Hallmark.
Oregon does not recognize “willful negligence” as a theory of liability, nor does it recognize “knowingly negligence, ” as Plaintiff offers as in alternative in his response brief. The word “willful” is synonymous to the word “knowing” and both imply that the actions were performed on purpose. Such purpose would qualify the actions as intentional torts rather than" negligence. Plaintiff concedes in his response brief that “he had not met the pleadings requirements concerning an [intentional infliction of emotional distress] claim, ” but provides nothing further on the topic of whether he meant for claims two and three to be IIED claims. Pltf.'s Response at 10. Instead, Plaintiff moves on to argue that he “meets the requirements to file claims for violations of ORS 746.230, ” and that he “may also proceed with a claim for negligence per se against Defendant.” Id. at 16. ORS 746.230 prohibits unfair settlement practices and contemplates civil penalties for claims filed against an insurance company by its insured and claims filed against the insured by third parties. See Farris v. U.S. Fidelity and Guaranty Co. 284 Or. 453, 456-57 (CITE). The statute does not give rise to actions by third parties against another party's insurer. Therefore, considering all the facts presented in the Complaint and Plaintiffs prayer for “mental distress” damages, the Court will construe claims two and three as claims for intentional infliction of emotional distress (“IIED”).
To succeed on a claim for IIED, a plaintiff must show that (1) the defendant intended to inflict severe emotional distress, (2) the defendant's acts were the cause of severe emotional distress, and (2) the defendant's acts were an “extraordinary transgression of the bounds of socially tolerable conduct.” Giulio v. BV CenterCal, LLC, 815 F.Supp.2d 1162, 1180 (D. Or. 2011) citing Madani v. Kendall Ford, Inc., 312 Or 198, 203 (1991). To establish the necessary element of intent, a plaintiff must prove defendant desired to inflict severe emotional distress, and knew such distress was certain, or substantially certain, to result from the conduct at issue. Id. quoting Restatement (Second) of Torts, § 46, comment i (1965). The conduct must be “so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Id. citing Christofferson v. Church of Scientology of Portland, 57 Or.App. 203, 211 (1982). Conduct that is “merely rude, boorish, tyrannical, churlish and mean does not satisfy that standard, nor do insults, harsh or intimidating words, or rude behavior ordinarily result in liability even when intended to cause distress.” Watte v. Edgar Maeyens, Jr., MD., PC, 112 Or.App. 234, 239 (1992). The determination of whether the alleged conduct is an extraordinary transgression of the bounds of socially tolerable conduct is a question of law for the court. Giulio, 815 F.Supp.2d at 1180, citing Delaney v. Clifton, 180 Or.App. 119, 129 (2002).
Accepting all the alleged facts as true and construing the allegations in the light most favorable to Plaintiff, the Court finds that Plaintiff cannot successfully plead a claim for IIED because the behavior of the Hallmark employees do not amount to extraordinary transgressions of the bounds of socially tolerable conduct. Nor has Plaintiff alleged that he suffered severe . emotional distress because of their behavior. Plaintiffs first alleged instance of “complete frustration” was on a phone call with Ms. Hearn where she claimed she could not hear Plaintiff and Plaintiff ultimately decided to hang up. Complaint ¶ 14. Next, Plaintiff was dissatisfied with Hallmark's damage estimate for his vehicle. Complaint ¶ 16. Plaintiff then had another phone call with Ms. Hearn to express his concerns with the estimate and “Miss Hearn continued to speak over him.” Complaint ¶ 17. Ms. Hearn allegedly disregarded Plaintiffs concerns and . told him to take his vehicle to a shop to begin the repair process, and that if he was displeased, he could hire an attorney. Id., “Plaintiff thought it best not to continue with the conversation due to the argumentative nature of such, so he ended the call.” Id. Plaintiff next had a phone call with Ms. Lesmes in which she “reminded Plaintiff that Hallmark has policies regarding claims.” Plaintiff explained that “he was beyond the initial part of the claim process with respect to simply having his vehicle repaired. He conveyed to her that he had already experienced hardships regarding the claim and that he had done a significant amount of legal research concerning his lawsuit, and so he therefore expected Hallmark to compensate accordingly.” Complaint ¶ 20. Plaintiff alleges that Ms. Lesmes then accused him of “doing it for the money.” Id. Plaintiff alleges that “it was extremely frustrating” for Plaintiff to deal with inconsistencies between the policies conveyed by Ms. Lesmes that were in conflict with Ms..Hearn. Finally, Plaintiff alleges that Ms. Lesmes inquired about his vehicle's lien holder and threatened to get Plaintiff's lien holder involved in his insurance claim because “they would be overly concerned if Plaintiff were not planning on spending the money, released by Hallmark, on repairing ‘their' vehicle.” Complaint ¶ 21. While these conversations may have been frustrating to Plaintiff, they do not rise to the level of socially intolerable conduct.
For comparison, in Green v. State Farm Fire and Cas. Co., 667 F.2d 22 (9th Cir. 1982), the Ninth Circuit affirmed a jury award for outrageous conduct where the insurer's agent induced the plaintiff to make a sworn statement by telling him that the information would be used in confidence, but then delivered it to the police in connection with a criminal investigation; posed as a police officer and questioned his neighbors even though it knew police had abandoned the criminal investigation; and threatened to have him charged with arson if he continued to pursue his claim, even though it knew no such charge could be made. In Unruh v. Truck Ins. Exch, 7 Cal.3d 616 (1972), a California district court held that plaintiff had sufficiently stated a claim for intentional infliction of emotional distress where the insurer's agent misrepresented his identity to the claimant, induced her to become emotionally involved with him, and then enticed her to conduct herself in a manner beyond her normal physical capabilities while another agent filmed her, all in an effort to show her claim was without merit.
Moreover, Plaintiffs prayer for “mental distress” is impermissible without physical injury or infringement of some legally protected interest apart from the claimed distress. The general rule in Oregon is that a claimant cannot recover damages for emotional distress absent a physical injury. Paul v. Providence Health System-Oregon, 351 Or. 587, 597 (2012) (“This court consistently has rejected claims for emotional distress damages caused by a defendant's negligence, in the absence of any physical injury.”); see also Hammond v. Central Lane Communications Center, 312 Or. 17, 23 (1991) (“[W]e have not yet extended liability for ordinary negligence to solely psychic or emotional injury not accompanying any actual or . threatened physical harm or any injury to another legally protected interest.”); Lockett v. Hill, 182 Or.App. 377, 380 (2002) (generally a person cannot recover for negligent infliction of emotional distress if the person is not also physically injured, threatened with physical injury, or physically impacted by the tortious conduct). It appears that Plaintiff was at most “frustrated” and experienced “unnecessary distress” due to Hallmark's conduct.' Plaintiff has not claimed or otherwise alleged in his briefs that he suffered a physical injury, was threatened with physical injury, or was physically impacted by Hallmark's conduct.
For these reasons, claims two and three must also be dismissed for failure to state a claim upon which relief can be granted.
III. Amendment would be futile.
A pro se litigant is entitled to notice of the deficiencies in the complaint and the opportunity to amend, unless the complaint's deficiencies cannot be cured by amendment. Id., see also Cervantes v. Countrywide Home Loans, Inc,, 656 F.3d 1034, 1041 (9th Cir. 2011) (“[A]” district court may dismiss without leave where a plaintiffs proposed amendments would fail to cure the pleading deficiencies and amendment would be futile.”); Chappel v. Lab. Corp, of Am., 232 F.3d 719, 725-26 (9th Cir. 2000) (setting forth a standard of review explaining that a district court acts within its discretion to deny leave to amend a complaint if the amendment would be futile). The deficiencies in Plaintiffs Complaint cannot be cured by amendment. The Court is not aware of any claims that Plaintiff could bring against Hallmark under these facts without first suing JM Construction, the party that allegedly caused the damage to Plaintiffs vehicle. Therefore, the Court does not recommend granting Plaintiff leave to amend his Complaint.
IV. Hallmark's Motion for Attorney Fees should be denied.
Hallmark requests an award for its attorney fees pursuant to ORS 20.105 on the grounds that Plaintiffs Complaint lacks an objectively reasonable basis for asserting his claims and Hallmark was required to file a motion to dismiss and respond to a lengthy and convoluted response brief. ORS 20.105 states, “the court shall award reasonable attorney fees ... upon a finding by the court that the party willfully disobeyed a court order or that there was no objectively reasonable basis for asserting the claim, defense or ground for appeal.” However, pro se litigants are often held to a less stringent standard in most proceedings. Therefore, the • Court declines to grant Hallmark attorney fees.
RECOMMENDATION
For the reasons stated above, that the Motion for Remand (Dkt. #12) should be DENIED and the Motion to Dismiss (Dkt. #6) should be GRANTED. Amendment would not cure the deficiencies in Plaintiffs Complaint. Therefore, the Court does not recommend giving Plaintiff leave to amend. Judgment should be entered in favor of defendant.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure Rule 4(a)(1) should not be filed until entry of the district court's judgment or appealable order. The Report and Recommendation will be referred to a district judge. Objections to this Report and Recommendation, if any, are due fourteen (14) days from today's date. If objections are filed, any response to the objections is due fourteen (14) days from the date of Wrobjections. See Fed.R.Civ.P. 72, 6.