Southern Commodities Llc et al v. Continental Western Insurance Company et al

Motion to Dismiss for Failure to State a Claim

W.D. Tex.February 24, 2017

DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 1 2514761v.1 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS DEL RIO DIVISION SOUTHERN COMMODITIES, LLC, Plaintiff, v. CONTINENTAL WESTERN INSURANCE COMPANY, MARK MASSEY AND ALEXANDER INSURANCE AGENCY, Defendants. § § § § § § § § § § § CIVIL ACTION NO. 2:17-cv-00011-AM-VRG DEFENDANT MARK MASSEY’S MOTION TO DISMISS AND BRIEF IN SUPPORT TO THE HONORABLE UNITED STATES DISTRICT COURT: Defendant Mark Massey (“Massey”) files this Motion to Dismiss Pursuant to Federal Rules of Civil Procedure 8, 9 and 12(b)(6) because Plaintiff has failed to state a claim against Massey upon which relief can be granted. I. BACKGROUND Plaintiff submitted a claim under a policy of insurance issued by Defendant Continental Western Insurance Company (“CWIC”) for loss resulting from damage to Plaintiff’s commercial property. See Doc. 2 at 5. Defendant Massey is an independent adjuster assigned to inspect Plaintiff’s claim. See id. at 6. Plaintiff alleges Massey “inspected the subject property on or about August 14, 2014.” Id. Plaintiff asserts Massey produced a report as to the damages on September 18, 2014. Id. Plaintiff further contends that while Massey “recognized some of the extensive damages to the structures situated on Plaintiff’s property, he nevertheless improperly adjusted the Plaintiff’s claim because he failed to recognize the extensive damages to Plaintiff’s office building and its warehouse building.” Id. Plaintiff goes on to complain, in a conclusory Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 1 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 2 2514761v.1 fashion, that Massey “conducted a substandard inspection . . . which failed to include many of Plaintiff’s damages.” Id. at 6-7. Plaintiff contends Massey’s estimate did not allow adequate funds to cover repairs to restore Plaintiff’s office and warehouse. Id. at 7. Plaintiff further asserts, without any specificity, that Massey “misrepresented the cause of, scope of, and cost to repair the damages to Plaintiff’s Property, as well as the amount of and insurance coverage for Plaintiff’s claim/loss under Plaintiff’s insurance policy.” Id. Plaintiff has sued Massey for violations of Chapters 541 and 542 of the Texas Insurance Code, DTPA violations, and common law bad faith. See Doc. 2. Plaintiff’s pleading is, however, conclusory and fails to assert actionable facts to state a valid claim against Massey. As such, Plaintiff’s claims against Massey should be dismissed. II. ARGUMENTS AND AUTHORITIES In order to establish a reasonable basis for the Court to predict that Plaintiff may be able to recover against Massey, Plaintiff’s pleading must identify a cause of action recognized under state law and allege facts that support the cause of action. See Larroquette v. Cardinal Health 200, Inc., 466 F.3d 373, 376 (5th Cir. 2006). Bare legal conclusions that are unsupported by any factual underpinnings do not state a viable claim. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”). The court is not under an obligation to accept as true allegations contained in a complaint that amount to legal conclusions. Id. at 1949-50. Plaintiff’s pleading must do more than merely make allegations that are consistent with actionable conduct, but must be sufficient to allow a court to infer Plaintiff’s alleged right to relief is plausible. Id. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the alleged misconduct.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 2 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 3 2514761v.1 A. Plaintiff’s assertion that Massey violated Chapter 542 of the Texas Insurance Code fails to state a claim. Plaintiff contends that Massey’s “acts, omissions, failures and conduct . . . violate Section [sic] 542 of the Texas Insurance Code.” Doc. 2 at 12. Presumably, Plaintiff intends to invoke Subchapter B of Chapter 542 of the Texas Insurance Code -- the Texas Unfair Claim Settlement Practices Act, Prompt Payment of Claims. See Tex. Ins. Code §§ 542.051-542.061. This statutory scheme, however, only applies to the conduct of an insurer, not an adjuster such as Massey. See Tex. Ins. Code. §§ 542.052, 542.060; Messersmith v. Nationwide Mut. Fire Ins. Co., 10 F. Supp. 3d 721, 723 (N.D. Tex. 2014) (holding that adjuster could not be held liable under § 542.060(a) because adjuster is not an insurer). Therefore, Plaintiff has no viable claim against Massey under Chapter 542 of the Texas Insurance Code and this claim should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). B. Plaintiff fails to state a claim upon which relief can be granted against Defendant Masssey for violations of the Texas Deceptive Trade Practices Act or Chapter 541 of the Texas Insurance Code. Plaintiff asserts a claim against Massey for alleged violations of the DTPA and Chapter 541 of the Texas Insurance Code. See Doc. 2 at 9, 12-15. However, Plaintiff fails to state a claim upon which relief may be granted for such statutory violations. First, all such claims against Massey are barred by limitations. Second, Plaintiff’s pleading is merely a parroting of the statutes and fails to allege facts that would support a violation. Third, Plaintiff fails to allege conduct actionable under the DTPA. Fourth, the pleading fails to allege actionable conduct for which an adjuster, as opposed to a carrier, can be held liable. For the reasons discussed below, Plaintiff’s statutory claims should be dismissed for failure to state a claim. 1. Plaintiff’s claims for violations of the Texas Deceptive Trade Practices Act or Chapter 541 of the Texas Insurance Code are barred by limitations. The statute of limitations for a DTPA claim is two years from the date on which the false, Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 3 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 4 2514761v.1 misleading, or deceptive act or practice occurred. See Tex. Bus. & Comm. Code § 17.565. Similarly, claims under Chapter 541 of the Texas Insurance Code must be brought within two years of the date of the unfair method of competition or unfair or deceptive act or practice occurred. See Tex. Ins. Code § 541.162. The only factual assertions regarding Massey found in Plaintiff’s pleading are that Massey inspected Plaintiff’s property on or about August 14, 2014, produced a report on September 18, 2014, and accompanied an engineer who re-inspected on or about March 30, 2015. Doc. 2 at 6-8. Plaintiff further contends that Massey “did not produce any type of report or conclusions as to the damages until September 18, 2014.” Id. at 6. Plaintiff asserts Massey’s inspection, as evidence by this report, was “substandard” and failed to include many of Plaintiff’s damages. Id. at 6-7. Plaintiff asserts it had knowledge of Massey’s “substandard investigation” on or before October 24, 2014. Id. at 7. Plaintiff did not file suit, however, until January 23, 2017. See id. at 3. As such, Plaintiff’s actions against Massey for violations of the DTPA and Chapter 541 of the Texas Insurance Code are barred by limitations and should be dismissed for failing to state a claim upon which relief can be granted. 2. Plaintiff fails to allege the requisite facts to support a claim for violations of the Texas Deceptive Trade Practices Act or Chapter 541 of the Texas Insurance Code. In addition to being barred by limitations, Plaintiff fails to allege facts that would otherwise support claims under the DTPA or Chapter 541 of the Texas Insurance Code. In order to establish a reasonable basis upon which the Court may predict that Plaintiff can recover against Massey for violations of the Texas Insurance Code or the Texas Deceptive Trade Practices Act, Plaintiff’s pleading must do more than allege violations in conclusory terms. Iqbal, 129 S. Ct. at 1950. Parroting the statutory language without attempting to connect specific conduct of the defendant to such violations is conclusory and fails to state a claim. See DTND Sierra Invs. LLC v. Bank of Am., N.A., 871 F. Supp. 2d 567 (W.D. Tex. 2012). Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 4 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 5 2514761v.1 Plaintiff’s pleading merely tracks the statutory language with conclusory allegations that Massey violated the statutes. See Doc. 2 at 9, 12-15. To state a claim for which relief may be granted, Plaintiff must allege facts that support the cause of action. See Larroquette v. Cardinal Health 200, Inc., 466 F.3d 373, 376 (5th Cir. 2006). Bare legal conclusions that are unsupported by any factual underpinnings do not state a viable claim. See Iqbal, 129 S.Ct. at 1950 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”). The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Id. at 1949-50. To allege a plausible right to relief, the facts pleaded must suggest liability; allegations that are merely consistent with unlawful conduct are insufficient. Twombly, 550 U.S. at 566-69 (2007). Plaintiffs’ pleading fails to comply with the requirements of Rule 8 that the pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Moreover, “[c]laims alleging violations of the Texas Insurance Code and the DTPA . . . are subject to the requirements of Rule 9(b).” Frith v. Guardian Life Ins. Co. of Am., 9 F. Supp. 2d 734, 742 (S.D. Tex. 1998); see also Bige, Inc. v. Penn-America Ins. Co., 2015 U.S. Dist. LEXIS 119357, *9-10, 2015 WL 5227726 (W.D. Tex. Sept. 8, 2015) (“Texas district courts, however, consistently apply Rule 9(b)’s requirements to claims under the Texas Insurance Code and DTPA.”) (collecting cases). Compliance with Rule 9(b) “requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724, modified on other grounds, 355 F.3d 356 (5th Cir. 2003). That is, Rule 9(b)’s particularity requirement “requires ‘the who, what, when, where, and how’ be laid out.” Benchmark Elecs., 343 F.3d at 724. Plaintiff’s pleading fails to provide these requisite factual Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 5 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 6 2514761v.1 specifics to support Plaintiff’s claims for violations of the Texas Insurance Code and DTPA and therefore fails to state a claim upon which relief can be granted under either statute. 3. The conduct alleged by Plaintiff will not support a claim for violations of the Texas Deceptive Trade Practices Act against Massey. As noted above, Plaintiff’s factual assertions regarding Massey are that his inspection and report of Plaintiff’s damages were “substandard” because he failed to include many of Plaintiff’s damages. Doc. 2 at 6-7. However, a DTPA action will not lie for a claim based on the rendition of “a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill.” Tex. Bus. & Comm. Code § 17.49(c). A professional service is one that consists of acts particular to the individual’s specialized vocation. Nast v. State Farm Fire & Cas. Co., 82 S.W.3d 114, 122 (Tex. App.--San Antonio 2002, no pet.). The gravamen of Plaintiff’s complaint against Massey is Massey’s exercise of judgment in forming his opinion regarding Plaintiff’s damages. As such, Plaintiff does not state a claim under the DTPA for which relief may be granted. 4. The conduct alleged by Plaintiff will not support a claim for violations of Chapter 541 of the Texas Insurance Code against Massey. Plaintiff asserts Massey violated §541.060(a)(1), (a)(2)(A), (a)(3), (a)(4), and (a)(7). Doc. 2 at 9, 15. Although an adjuster is a “person” against whom an action for certain violations of Chapter 541 of the Texas Insurance Code may lie, for an adjuster to be liable for violations of the Texas Insurance Code as an individual, the adjuster must have committed some act that is prohibited by statute, not just be connect to an insurance company’s denial of coverage. See Messersmith, 10 F. Supp. 3d at 724. Plaintiff fails to allege conduct by Massey individually that violates the statute. Plaintiff pleads that “Defendants are guilty of . . . [m]isrepresenting to Plaintiff pertinent facts or policy provisions relating to the coverage at issue.” Doc. 2 at 15. Such conduct is Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 6 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 7 2514761v.1 prohibited by Tex. Ins. Code § 541.060(a)(1). To be actionable, “[t]he misrepresentation must be about the details of a policy, not the facts giving rise to a claim for coverage.” Messersmith, 10 F. Supp. 3d at 724. As noted above, Plaintiff fails to allege any facts that would support such a violation. Plaintiff contends Massey violated § 541.060(a)(2)(A). Doc. 2 at 9, 15. This subsection makes failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear an unfair or deceptive act or practice in the business of insurance. Tex. Ins. Code § 541.060(a)(2)(A). However, Plaintiff’s pleading acknowledges it was Defendant CWIC who purportedly failed to attempt to settle its claim in a fair manner. See Doc. 2 at 9; see also Doc. 2 at 21-28 (the September 18, 2014 letter of CWIC adjuster Eric Wilson (attached to Plaintiff’s pleading as Exhibit A) that details CWIC’s coverage decision). Plaintiff nowhere alleges that Massey had authority to settle claims. As such, Plaintiff fails to state a claim against Massey for violating § 541.060(a)(2)(A). See Montoya v. State Farm Mut. Auto. Ins. Co., 2016 U.S. Dist. LEXIS 141322, *12 (W.D. Tex. Oct. 12, 2016) (“This Court has previously dismissed claims against adjusters for violations of § 541.060(a)(2) when a defendant-adjuster does not have the authority to settle.”) (citing McClelland v. Chubb Lloyd's Ins. Co. of Texas, No. 5:16-cv-108, 2016 U.S. Dist. LEXIS 136087 (W.D. Tex. September 30, 2016); Messersmith, 10 F. Supp. 3d at 724; Lopez v. United Prop. & Cas. Ins. Co., No. 3:16-0089, 2016 U.S. Dist. LEXIS 89634 (S.D. Tex July 11, 2016) (‘The majority of federal courts that have addressed [Tex. Ins. Code § 541.060(a)(2)] have found that this section applies only to insurers, and that it does not apply to adjusters.”)). Plaintiff next alleges Massey “failed to affirm or deny coverage of Plaintiff’s claim within a reasonable time” in violation of Tex. Ins. Code § 541.060(a)(4). See Doc. 2 at 9, 15. Like the previous provisions, an adjuster cannot be liable under § 541.060(a)(4) because only insurers have Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 7 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 8 2514761v.1 the authority to affirm or deny coverage. See McClelland, 2016 U.S. Dist. LEXIS 136087, *8; One Way Invs., Inc. v. Century Sur. Co., 2014 U.S. Dist. LEXIS 171357, *11 (N.D. Tex. Dec. 11, 2014). As such, Plaintiff fails to state a viable claim against Massey under this provision. Plaintiff further asserts Massey violated Tex. Ins. Code § 541.060(a)(7). See Doc. 2 at 9, 15. This provision prohibits “refusing to pay a claim without conducting a reasonable investigation with respect to the claim.” Tex. Ins. Code § 541.060(a)(7). While Plaintiff alleges, in conclusory fashion, that Massey’s investigation was not reasonable, Plaintiff also acknowledges that it was Defendant CWIC - not Massey - who “refused to fully compensate Plaintiff.” See Doc. 2 at 9. Plaintiff fails to plead that Massey refused to pay Plaintiff’s claim and thus again fails to state a valid claim against Massey. Finally, Plaintiff makes a wholly conclusory allegation that “Defendants are guilty of . . . [f]ailing to provide promptly to a policyholder a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for the denial of a claim or for the offer of a company’s settlement.” Doc. 2 at 15. Such conduct is prohibited by Tex. Ins. Code § 541.060(a)(3). As before, this section does not apply to adjusters “because, just as adjusters do not have the authority to affirm or deny coverage, they have ‘no obligation to provide a policyholder a reasonable explanation of the basis in the policy for the insurer’s denial of a claim, or offer of a compromise settlement of a claim.’” McClelland, 2016 U.S. Dist. LEXIS 136087, *9 (citing Mainali Corp. v. Covington Specialty Ins. Co., No. 3:15-CV-1087-D, 2015 U.S. Dist. LEXIS 115191, 2015 WL 5098047, at *4 (N.D. Tex. Aug. 31, 2015)). Accordingly, Plaintiff fails to state a cause of action against Massey for violation of this statute. C. Plaintiff fails to state a claim for breach of the duty of good faith and fair dealing against Massey because Plaintiff fails to allege facts sufficient to establish a “special relationship” between Plaintiff and Massey. Plaintiff asserts, “Defendants have breached their common law duty of good faith and fair Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 8 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 9 2514761v.1 dealing.” Doc. 2 at 16. The Texas Supreme Court has held that an insurance carrier owes an insured a nondelegable duty of good faith and fair dealing due to the nature of the relationship between these two parties to the insurance policy contract. Natividaad v. Alexsis Inc., 875 S.W. 2d 695, 697-98 (Tex. 1994). The Fifth Circuit recognized, under Texas law, “the existence of a contract, giving rise to a special relationship, is a necessary element of the duty of good faith and fair dealing.” Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 262 (5th Cir. 1995) (internal quotations omitted). Because insurance adjusters are typically not parties to insurance policy contracts, adjusters do not typically owe a duty of good faith and fair dealing to the insured. Zimmerman v. Travelers Lloyds of Tex. Ins. Co., 2015 U.S. Dist. LEXIS 84305, at *8 (W.D. Tex. June 30, 2015). The “special relationship” is a product of the contractual relationship between an insurer and the insured. Plaintiff does not allege Massey is a party to the insurance contract between Plaintiff and Defendant CWIC. No privity of contract exists between Plaintiff and Massey, so there is no special relationship between them and no duty owed to Plaintiff by Massey. Therefore, Plaintiff has no reasonable basis for a claim for a breach of duty of good faith and fair dealing against Massey and Plaintiff’s claim should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). III. CONCLUSION Each of the claims Plaintiff asserts against Defendant Massey suffers from a fatal defect: Either the claim is not cognizable in law or Plaintiff has failed to plead sufficient facts supporting essential elements of the claim. Accordingly, this Court should dismiss Plaintiff’s claims against Massey pursuant to Federal Rules of Civil Procedure 12(b)(6). Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 9 of 10 DEFENDANT MARK MASSEY’S MOTION TO DISMISS Page 10 2514761v.1 IV. PRAYER Wherefore, premises considered, Defendant Massey respectfully requests dismissal of Plaintiff’s claims against him and for any such other further relief to which he is justly entitled. Respectfully submitted, /s/ Jennifer G. Martin JENNIFER G. MARTIN Texas State Bar No. 00794233 Email: jennifer.martin@wilsonelser.com WILSON ELSER MOSKOWITZ EDELMAN & DICKER, LLP Bank of America Plaza 901 Main Street, Suite 4800 Dallas, Texas 75202-3758 (214) 698-8000 Phone (214) 698-1101 Facsimile ATTORNEY FOR DEFENDANT MARK MASSEY CERTIFICATE OF SERVICE I hereby certify that on the 24 th day of February, 2017, I electronically transmitted the attached document to the Clerk of the Court using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: Humberto G. Garcia Humberto G. Garcia, PLLC 1350 North Loop 1604 East, Suite 104 San Antonio, Texas 78232 W. Lee Calhoun Shelly Enyart Calhoun Law Firm, PLLC 1350 North Loop 1604 East, Suite 104 San Antonio, Texas 78232 Stewart Schmella McCormick, Lanza & McNeel, L.L.P. 4950 Bissonnet Bellaire, TX 77401 /s/Jennifer G. Martin JENNIFER G. MARTIN Case 2:17-cv-00011-AM-VRG Document 8 Filed 02/24/17 Page 10 of 10