Admiral Insurance Companyv.Heath Holdings USA, Inc.

United States District Court, N.D. Texas, Dallas DivisionMay 21, 2004
Civil Action No. 3:03-CV-1634-G (N.D. Tex. May. 21, 2004)

Civil Action No. 3:03-CV-1634-G.

May 21, 2004


MEMORANDUM ORDER


A. JOE FISH, Chief Judge, District

Before the court is the motion of the defendants Heath Insurance Brokers, Inc., Heath Holdings USA, Inc., and Heath Insurance Brokers of Texas, LP (collectively, "Heath") to dismiss, pursuant to FED. R. CIV. P. 8, 9(b), and 12(b)(6), the first amended complaint of the plaintiff United National Specialty Insurance Company ("United"). For the following reasons, Heath's motion is granted, but with leave to United to replead its negligence claim.

I. BACKGROUND

On March 14, 2003, Senior Living Properties, LLC ("SLP") initiated an adversary proceeding in the bankruptcy court against, among others, Admiral Insurance Company, Associated International Insurance Company, Caliber One Indemnity Company ("Caliber One"), and United (collectively, the "Insurers"), alleging breach of contract and seeking declaratory judgment establishing past and future insurance coverage to SLP for personal injury claims of persons injured at SLP nursing homes. See Memorandum Order, Civil Action No. 3:03-CV-1634-G, March 12, 2004, at 2. The Insurers counterclaimed, asserting that they were entitled to rescind the insurance policies because SLP misrepresented material facts when applying for, procuring, and renewing the insurance policies. Id.

On May 23, 2003, the Insurers, including the plaintiff United, filed third-party complaints against Heath, among other defendants, alleging that Heath made certain misrepresentations and omissions and was negligent in assisting in the procurement of insurance policies by SLP from the Insurers. Id. Heath responded to United's complaint, on July 11, 2003, by filing filed a motion to dismiss United's claims against Heath. See Heath's Motion to Strike, Dismiss, or for a More Definite Statement, filed July 11, 2003. Heath then moved to withdraw the reference to the bankruptcy court of these third-party complaints. That motion was granted on September 12, 2003, thus bringing before this court the third-party action arising out of the adversary proceeding between SLP and the Insurers in the bankruptcy court.

On September 17, 2003, Chief Judge Felsenthal of the United States Bankruptcy Court for the Northern District of Texas entered a Report and Recommendation on Heath's motion to strike, to dismiss, or for a more definite statement ("Report Recommendation"). The bankruptcy court recommended that United be permitted to replead its misrepresentation claim because it was not clear whether United's misrepresentation claim was based in fraud, and thus subject to the heightened pleading requirements of FED. R. CIV. P. 9(b), or based in negligence. Id. at 14. The bankruptcy court further recommended that Heath's motion to dismiss United's negligence claim for failure to state a claim under FED. R. CIV. P. 12(b)(6) should be denied, stating "[t]he court cannot conclude that United can prove no set of facts to support its negligence claim." Id. at 9. This court adopted the Report Recommendation by its memorandum order entered on October 17, 2000.

According to the bankruptcy court:


If United's claim of "misrepresentation" is a "negligent misrepresentation" claim, then the particularity requirements of Rule 9(b) will not apply. Conversely, if United's claim is a "fraud" or "intentional misrepresentation" claim, then the particularity requirements of Rule 9(b) will apply.

Report Recommendation at 14.

On November 10, 2003, United filed an amended complaint. See generally Plaintiff United National Specialty Insurance Company's First Amended Complaint as to Heath Defendants ("Amended Complaint"). The Amended Complaint, in a section styled "Misrepresentation to Caliber One," provides detailed allegations to support the assertion that Heath misrepresented certain facts to Caliber One, which issued the "underlying insurance" policy (the "Caliber One Policy") to SLP (and others), purportedly in reliance on Heath's alleged misrepresentations. See id. ¶¶ 21-46. United asserts that it issued its own policy to SLP, "bas[ing] its underwriting decisions, in part, on Caliber One's decision to write the [Caliber One Policy]." See id. ¶ 22; see also United Insurance Policy No. CU 050129 (the "United Policy"). attached to Heath's Supplemental Appendix in Support of Motion to Dismiss United National Specialty Insurance Company's First Amended Complaint and Memorandum in Support as Exhibit A. The Amended Complaint, in a section styled "Misrepresentations to United," alleges that "[h]ad SLP, Heath, and/or Claire Odell" not made the alleged misrepresentations, "United would have declined to issue the United Policy." Amended Complaint ¶ 54; see also id. ¶ 52. Claire Odell, an insurance brokerage firm, allegedly provided information and written proposals to United in connection with United's underwriting decision. See id. ¶¶ 15, 47, 49.

Clair Odell Group, LLC, Mellon Insurance Agency, and/or Clair Odell Insurance Agency, LLC, will be collectively referred to as "Clair Odell." See Amended Complaint ¶ 15.

United, in its Amended Complaint, also alleges that Heath "negligently carried out its responsibilities and obligations as a broker on this transaction." See id. ¶ 58. United does not, however, allege that Heath was a broker in any transaction directly involving United and SLP, although Heath purportedly was a broker in the transaction involving Caliber One and SLP. See id. ¶¶ 26-46. In fact, the United Policy identifies Doran Excess Underwriters, Inc. as the producer for the United Policy. See United Policy at 1.

On December 9, 2003, Heath filed the instant motion to dismiss United's fraud and negligent misrepresentation claims under FED. R. CIV. P. 8, 9(b), and 12(b)(6), and to dismiss United's negligence claim under Rule 12(b)(6). See generally Heath's Motion to Dismiss United National Specialty Insurance Company's First Amended Complaint and Memorandum in Support ("Motion"); see also, generally, Plaintiff United National Specialty Insurance Company's Response to Heath's Motion to Dismiss United's First Amended Complaint and Brief in Support ("Response"); Heath's Reply in Support of Its Motion to Dismiss United's Amended Complaint ("Reply").

II. ANALYSIS A. The Legal Standards 1. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." There are two primary principles that guide the court's determination of whether dismissal under Rule 12(b)(6) should be granted. First, a motion under Rule 12(b)(6) should be granted only if it appears beyond doubt that the plaintiff could prove no set of facts in support of its claims that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Thompson v. Goetzmann, 337 F.3d 489, 495 (5th Cir. 2003); see also Southern Christian Leadership Conference v. Supreme Court of the State of Louisiana, 252 F.3d 781, 786 (5th Cir.) (motions to dismiss for failure to state a claim are viewed with disfavor and are rarely granted), cert. denied, 534 U.S. 995 (2001). Second, the court must accept all well-pleaded facts as true and view them in the light most favorable to the nonmovant. See Calhoun v. Hargrove, 312 F.3d 730, 733 (5th Cir. 2002); Brown v. Nationsbank Corporation, 188 F.3d 579, 585-86 (5th Cir. 1999), cert. denied, 530 U.S. 1274 (2000).

2. Rule 8

Federal Rule of Civil Procedure 8(a) requires a "short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a). A complaint will be deemed inadequate under Rule 8(a) only if it fails to: (1) provide notice of the circumstances which give rise to the claim, or (2) set forth sufficient information to outline the elements of the claim or permit inferences to be drawn that these elements exist. General Star Indemnity Company v. Vesta Fire Insurance Corporation, 173 F.3d 946, 950 (5th Cir. 1999). Furthermore, when a plaintiff's claims are based in fraud, Rule 8 must be read in conjunction with the particularity standard in Rule 9(b). See Corwin v. Marney, Orton Investments, 788 F.2d 1063, 1068 n. 4 (5th Cir. 1986), cert. denied, 488 U.S. 924 (1988); Frith v. Guardian Life Insurance Company of America, 9 F. Supp.2d 734, 742 (S.D. Tex. 1998).

3. Rule 9(b)

Under Federal Rule of Civil Procedure 9(b), a plaintiff must state with particularity the circumstances establishing a claim of fraud. FED. R. CIV. P. 9(b). What constitutes particularity will "necessarily differ with the facts of each case." Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir. 1992). At a minimum, courts require the plaintiff to specifically state the time, place, and contents of the alleged false representation, as well as the identity of the person making the alleged misrepresentation and what that person obtained thereby. See Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5th Cir.) (citing Tuchman v. DSC Communications Corporation, 14 F.3d 1061, 1068 (5th Cir. 1994)), cert. denied, 522 U.S. 966 (1997); United States ex rel. Doe v. Dow Chemical Company, 343 F.3d 325, 328 (5th Cir. 2003) ("At a minimum, Rule 9(b) requires that a plaintiff set forth the `who, what, when, where, and how' of the alleged fraud.") (citation omitted). "Anything less fails to provide defendants with adequate notice of the nature and grounds of the claim." Hart v. Bayer Corporation, 199 F.3d 239, 247 n. 6 (5th Cir. 2000) (citing Tuchman, 14 F.3d at 1067). Dismissal of a fraud claim for failure to plead the claim with particularity under Rule 9(b) is treated as a dismissal for failure to state a claim under Rule 12(b)(6). See Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1017 (5th Cir. 1996).

Rule 9(b) provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Id.

B. United's Misrepresentation Claims 1. Fraud

To state a cause of action for fraud under Texas law, United must allege sufficient facts to show: (1) Heath made a material representation that was false; (2) it knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth; (3) it intended to induce United to act upon the representation; and (4) United actually and justifiably relied upon the representation and thereby suffered injury. Ernst Young, L.L.P. v. Pacific Mutual Life Insurance Company, 51 S.W.3d 573, 577 (Tex. 2001); see also Norman v. Apache Corporation, 19 F.3d 1017, 1022 (5th Cir. 1994).

Heath contends that United has not alleged sufficient, particular facts to support a claim of fraud. See Motion at 7 (alleging failure to satisfy FED. R. CIV. P. 8 and 9) and 10 (alleging failure to state a claim under FED. R. CIV. P. 12(b)(6)). Specifically, Heath argues: (a) that United does not allege a single, direct misrepresentation by Heath to United, and (b) that United's indirect misrepresentation allegations fail to show that Heath possessed intent to induce reliance from United, or that any alleged misrepresentations actually reached and influenced United. See id. at 7-8; see also Heath's Reply at 4-9. The court agrees.

Heath also asserts that United improperly "uses innuendo and group pleading" to establish a misrepresentation claim. Motion at 8.

United has failed to allege the "who, what, when, where, and how" of a single misrepresentation by Heath to United. See Motion at 7. United maintains that "SLP . . ., Heath and/or Clair Odell" made misrepresentations, see Amended Complaint ¶¶ 52, 54, and generally avers that "Heath misrepresented facts to United." See id. ¶ 60. Nowhere in its amended complaint, however, does United specify the contents, time and/or place of any such misrepresentation by Heath, or state to whom at United the statement was made. United does not allege that Heath ever even communicated with or provided documents or information to United. The only alleged direct representations made by Heath were purportedly made to Caliber One — not United. See id. ¶¶ 22-46. Moreover, group pleading against SLP, Heath, and/or Clair Odell is clearly inadequate to state a claim for fraud. See Unimobil 84, Inc. v. Spurney, 797 F.2d 214, 217 (5th Cir. 1986); Zuckerman v. Foxmeyer Health Corp., 4 F. Supp.2d 618, 622 (N.D. Tex. 1998) ("[T]he plaintiff is obligated to distinguish among those they sue and enlighten each defendant as to his or her part in the alleged fraud.") (citations and internal quotation marks omitted).

In its response, United relies exclusively upon the theory of "indirect misrepresentation" to support its fraud claim. See Response at 5-7. Citing Ameristar Jet Charter, Inc. v. Signal Composites, Inc., No. 3-98-CV-1360-M, 2001 WL 1172184 (N.D. Tex. Sept. 28, 2001), and Ernst Young, 51 S.W.3d 573, United correctly argues that, under Texas law, a direct misrepresentation is not required. See Response at 5. "Texas does not require that there be privity between the alleged target of the fraud and the fraudfeasor." Great Plains Trust Company v. Morgan Stanley Dean Witter Company, 313 F.3d 305, 323 (5th Cir. 2002). According to the Texas Supreme Court in Ernst Young, "[Texas] fraud jurisprudence [focuses] . . . on whether the misrepresentation was intended to reach a third person and induce reliance." 51 S.W.3d at 578. A misrepresentation made through an intermediary is actionable if it is intended to influence the conduct of a third person. Id.

The cases cited by United defeat its indirect misrepresentation claim, however, because United fails to make two crucial allegations: (1) that Heath intended that United receive and rely upon Heath's representations, and (2) that United actually received and relied upon information provided by Heath.

An indirect misrepresentation claim can be maintained where the defendant intended, or had "reason to expect," that the third-party would receive and rely upon the misrepresentation. See Ernst Young, 51 S.W.3d at 578 (citing with approval RESTATEMENT (SECOND) OF TORTS § 531 (1977)); see also Great Plains Trust, 313 F.3d at 323. For liability to arise on this basis, however, the Ernst Young Court emphasized that the defendant must intend the statement to "influence [the] third person's conduct." 51 S.W.3d at 578; see also Ameristar, 2001 WL 1172184 at *4 (finding that a defendant must have intended that the information reach and influence the plaintiff's conduct). Establishing the intent or reason-to-expect standard "requires a degree a certainty that goes beyond mere foreseeability," Ernst Young, 51 S.W.3d at 579-80, and a showing that the defendant has "information that would lead a reasonable man to conclude that there is an especial likelihood that it reach those persons and will influence their conduct." Id. at 581; see also Great Plains Trust, 313 F.3d at 323; Mid States Development, L.L.C. v. Fidelity National Title Insurance Co., Inc., No. 3-99-CV-1966-M, 2001 WL 1172215 at *4 (N.D. Tex. Sept. 28, 2001).

In the instant case, the facts alleged by United do not permit the court to infer that Heath intended, or had reason to expect, that United would receive and rely upon any representation made to Caliber One. United asserts that it is a foreseeable third-party because Heath knew that third-party "excess insurance policies would . . . be obtained" and that the excess insurer would rely upon the information provided by Heath to Caliber One. See Response at 7. This conclusory, unsupported assertion is unpersuasive. See United States ex rel. Willard v. Humana Health Plan of Texas Inc., 336 F.3d 375, 379 (5th Cir. 2003) ("[C]onclusory allegations . . . will not suffice to prevent a motion to dismiss, and neither will unwarranted deductions of fact.") (internal citations and quotations omitted). United has not alleged a single fact to suggest that Heath knew, or had reason to expect, that excess policies would be obtained by Caliber One, much less that those policies would be based upon information that Heath provided Caliber One. See Melder v. Morris, 27 F.3d 1097, 1102 (5th Cir. 1994) (finding that a mere allegation that the defendant had the requisite fraudulent intent will not satisfy Rule 9(b)); Willard, 336 F.3d at 384-85 (finding that to adequately plead fraudulent intent, the plaintiff must set forth specific facts that support an inference of fraud) (citing Tuchman, 14 F.3d at 1068).

An indirect misrepresentation claim also requires reliance by the third party, i.e., that the alleged misrepresentation actually reach and influence the third person's decision. See Ernst Young, 51 S.W.3d at 580 (concluding that the third-party's "reliance must be `especially likely' and justifiable, and the transaction sued upon must be the type the defendant contemplated"). Although a misrepresentation may be presented indirectly to a plaintiff through an intermediary, reliance on that misrepresentation is required. In imposing liability for fraud, the Ernst Young Court required that a person " act in reliance upon the misrepresentation." Id. at 578 (emphasis added). The court held, citing comments in the Restatement, that the misrepresentation must " reach" the third party and " influence [its] conduct." Id. at 580 (emphasis added). Ernst Young, Great Plains Trust, and Ameristar each involved a plaintiff directly relying upon a misrepresentation from the defendant to an intermediary, i.e., the actual misrepresentation reached the plaintiff. See Ernst Young, 51 S.W.3d at 574-75 (plaintiff, in deciding to purchase a certain corporation's notes, relied on the defendant accounting firm's audit report issued to that corporation); Great Plains Trust, 313 F.3d at 322-27 (plaintiffs, in deciding whether to redeem their debentures, relied on the defendant securities firm's fairness opinion issued to one of its clients); Ameristar, 2001 WL 1172184 at *4-*5 (plaintiff, in purchasing jet engine parts, relied on the defendant's misrepresentations as to the authenticity of those parts to an intermediate reseller of those parts). To reiterate, the defendant's misrepresentation must pass through the intermediary to the plaintiff, and then influence the conduct of the plaintiff.

For semantic reasons, the court does not use the word "indirect reliance." Indeed, a misrepresentation may arrive indirectly through an intermediary; however, reliance directly upon that misrepresentation is required. Even cases using the term "indirect reliance," including Ernst Young, 51 S.W.3d at 579 n. 6, and Ameristar, 2001 WL 1172184 at *5, have required de facto reliance on the defendant's misrepresentation.

United discusses Ameristar, 2001 WL 1172184, in some detail, Response at 5-6, but that case is distinguishable from the facts of the present case. In Ameristar, the plaintiff purchased from a company named 3D Industries ("3D") combustion liners (for its jet engines) that were required by Federal Aviation Administration regulations to be produced by a General Electric ("GE") authorized manufacturer. 2001 WL 1172184 at *1. 3D had purchased the liners from Signal Composites, Inc. ("Signal"). Signal, however, misrepresented to 3D that the combustion liners were manufactured by a GE authorized manufacturer. Id. The combustion liners were, in fact, manufactured by Masbe Corporation, a Taiwanese company. Id. Signal moved for summary judgment on the plaintiff's fraud claim, arguing that it had not made any representation to the plaintiff and that the plaintiff did not directly rely on the representation made by Signal. Id. at *4. The district court rejected Signal's arguments, finding that Signal, by taking elaborate measures to make the liners look as though they were genuine GE parts, intended to induce purchasers of the combustion liners, such as the plaintiff, to rely on the misrepresentation to 3D. Id. This evidence was sufficient to support a finding that the plaintiff relied on Signal's misrepresentation. Id. at *5.

Unlike the plaintiff in Ameristar, United has not alleged any facts to support a finding of reliance on Heath's misrepresentation. There was clear evidence in Ameristar showing that Signal intended to influence the conduct not only of 3D, a reseller of jet engine parts, but also of those persons purchasing those parts from 3D. See Ameristar, 2001 WL 1172184 at *4-*5. In other words, the plaintiff in Ameristar furnished factual allegations concatenating both Ameristar and 3D with Signal's misrepresentations. United, by contrast, does not allege any facts showing a link between itself and Heath's misrepresentations. United's factual allegations only show, if anything, that Heath intended to induce Caliber One to rely on the alleged misrepresentations. United alleges no facts to support the argument that Heath intended to induce reliance by anyone but Caliber One.

United's claim that it relied on Caliber One's underwriting decision is insufficient to support reliance. Highlighting its allegation that Heath made misrepresentations to Caliber One, United does not claim to have actually received or relied on Heath's statements, but instead alleges that it relied on Caliber One's "decision to write the [Caliber One] policy." Amended Complaint ¶ 22; Response at 7. United is required to plead facts that, when viewed favorably to United, permit the conclusion that Heath knew the information it provided to Caliber One was not, in fact, only for the use of writing the Caliber One Policy, and that Heath was aware of facts that would lead a reasonable person to conclude that there was an especial likelihood that that information would reach excess insurers and influence their conduct. See Great Plains Trust, 313 F.3d at 326 (rejecting the plaintiffs' conclusory factual assertions in support of their reliance claim). United has not so pleaded. Moreover, even if it is assumed that United relied on Heath's alleged misrepresentations to Caliber One, United's allegations do not adequately aver that its reliance was justifiable. It appears to the court that United had an independent obligation to weigh, using its own underwriting standards, the risk of insuring SLP.

The allegations in United's amended complaint are weaker than the allegations found inadequate in Ernst Young and Great Plains Trust. In Ernst Young, the Texas Supreme Court decided whether an accounting firm could be liable to a plaintiff for making fraudulent misrepresentations in an audit report that the plaintiff had relied on in deciding to purchase a corporation's notes. See 51 S.W.3d at 574-75. The court rejected the plaintiff's argument and supporting factual allegations that Ernst Young knew of or had reason to expect investors would rely upon the information in the audit report. See id. at 580-82. The court reasoned that it was insufficient to allege "what is commonly `known' or `expected'" in the investment community, because "even an obvious risk that a third person will rely on a misrepresentation is not enough to impose liability." Id. at 581. In Great Plains Trust, the Fifth Circuit decided whether a securities firm could be liable to a group of plaintiffs for making fraudulent misrepresentations in a fairness opinion (regarding a merger) that the plaintiffs had relied on in deciding whether to redeem their debentures. See 313 F.3d at 322-27. The court found that the plaintiffs' allegations "had to amount to more than mere assertions that defendants should have known that plaintiffs would rely on the [f]airness [o]pinion in deciding whether the redeem their debentures." Id. at 326. Unlike the plaintiffs in Ernst Young and Great Plains Trust who failed despite their factual assertions showing reliance upon information provided by the defendant, United makes no allegation showing that it actually received or relied upon information provided by Heath. Because there is no allegation that a misrepresentation actually reached United, it follows that Heath could not have made a misrepresentation that influenced United. See Marshall v. Kusch, 84 S.W.3d 781, 785 (Tex.App.-Dallas 2002, writ denied) ("[T]he supreme court [in Ernst Young] dealt only with the communication of a misrepresentation to a third party.").

Given United's failure to allege facts showing that Heath intended to induce excess insurers, such as United, to rely on any representation (let alone misrepresentation), the court concludes that United has failed to plead fraud with the degree of particularity required by Rule 9(b).

2. Negligent Misrepresentation

Where it is unclear from the pleadings whether a party's claim of misrepresentation is grounded in fraud or negligence, and the parties have not urged a separate focus on the negligent misrepresentation claims, the heightened pleading standard of Rule 9(b) applies. See Benchmark Electronics, Inc. v. J.M. Huber Corporation, 343 F.3d 719, 723 (5th Cir. 2003) (applying Rule 9(b) because plaintiff's "fraud and negligent misrepresentation claims [were] based on the same set of alleged facts"); see also Williams, 112 F.3d at 177. Here, United's fraud and negligent misrepresentation claims are based on the same set of alleged facts and generally grouped together under the heading "Misrepresentations to United." See Amended Complaint at 11. Therefore, the court applies the particularity requirements of Rule 9(b) to this negligent misrepresentation claim.

To state a cause of action for negligent misrepresentation under Texas law, United must allege facts showing: (1) Heath made a representation in the course of its business, or in a transaction in which it has a pecuniary interest; (2) Heath supplied "false information" for the guidance of others in their business; (3) Heath did not exercise reasonable care or competence in obtaining or communicating the information; and (4) United suffered pecuniary loss by justifiably relying on the representation. See Clardy Manufacturing Company v. Marine Midland Business Loans Inc., 88 F.3d 347, 357 (5th Cir. 1996) (citing Federal Land Bank Association of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991)), cert. denied, 519 U.S. 1078 (1997). United has failed to plead the fourth element: justifiable reliance.

Under a claim for negligent misrepresentation, the plaintiff must prove "justifiable reliance" on the misrepresentation. Geosearch, Inc. v. Howell Petroleum Corporation, 819 F.2d 521, 526 (5th Cir. 1987) (applying Texas law). This requirement has two aspects: "the plaintiff must in fact have relied; and this reliance must have been reasonable." Id. "the justifiableness of the reliance is judged in light of the plaintiff's intelligence and experience." Scottish Heritable Trust, PLC v. Peat Marwick Main Company, 81 F.3d 606, 615 (5th Cir.), cert. denied, 519 U.S. 869 (1996).

As with its fraud claim, United has not provided any factual allegations to show that it justifiably relied on Heath's alleged misrepresentations to Caliber One. United has alleged only its reliance on Caliber One's underwriting decision and has not alleged any direct reliance on Heath. Any claim of indirect reliance by United fails for the same reasons stated above. Moreover, given United's obligation to measure the risk of insuring SLP according to its own underwriting principles — independent of Caliber One's risk assessment — United's reliance on Caliber One was not justifiable. Accordingly, United's claim of negligent misrepresentation fails to satisfy Rule 9(b) and must be dismissed under Rule 12(b)(6).

3. Dismissal with Prejudice

United's fraud and negligent misrepresentation claims are dismissed with prejudice. When the plaintiff has been given a fair opportunity to plead its case with the required factual specificity, dismissal may properly be considered. American Realty Trust, Inc. v. Bagley, No. 3:02-CV-0641-G, 2003 WL 158878 at *3 (N.D. Tex. Jan. 16, 2003). United has had two opportunities to plead its misrepresentation claims with particularity. United's amended complaint, which fails to correct the conclusory allegations of misrepresentation found lacking in the original complaint, states little with particularity and instead invites the court to make unwarranted inferences and assumptions. The court, therefore, denies United's request to replead these claims.

B. United's Negligence Claim

To state a claim for negligence under Texas law, United must plead and prove four essential elements: (1) a legal duty owed to United by Heath; (2) a breach of that duty; (3) an actual injury to United; and (4) a showing that the breach was the proximate cause of the injury. See Great Plains Trust, 313 F.3d at 314 (citing Gutierrez v. Excel Corporation, 106 F.3d 683, 687 (5th Cir. 1997)). In a negligence case, whether a legal duty exists is the threshold inquiry: where there is no duty, there can be no negligence. See Greater Houston Transportation Company v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990); Thapar v. Zezulka, 994 S.W.2d 635, 637 (Tex. 1999). Whether or not a duty exists is a question of law for the court. Texas Home Management, Inc. v. Peavy, 89 S.W.3d 30, 33 (Tex. 2002) (citing Greater Houston, 801 S.W.2d at 525). In determining the question of duty under Texas law, the court evaluates three factors: (1) the relationship between the parties; (2) the reasonable foreseeability of harm to the person injured; and (3) public policy considerations. Texas Home Management, 89 S.W.3d at 34.

Heath asserts that the facts stated in United's amended complaint fail to "allege any relationship between Heath and United, much less a relationship that would give rise to a duty." Motion at 11 (emphasis in original). Although Judge Felsenthal assumed — as alleged by United — that Heath was "a broker on a transaction in which United issued insurance policies for SLP," see Report Recommendation at 9, Heath contends the Report Recommendation was premised on "false inferences" that Heath participated in the placement of the United Policy. Heath's Reply at 2. According to Heath, United not only identifies Doran Excess Underwriters, Inc. as the producer for the United Policy, but also fails to allege that Heath was a broker for, or provided information to, United for use in underwriting or negotiating the United policy. Id. Because United has failed to satisfy the threshold inquiry that Heath owed United a duty, Heath contends, United's negligence claim must be dismissed. See Motion at 12. The court agrees.

The facts alleged do not show that Heath owed United a duty arising from a legal or other special relationship between them. See, e.g., Muniz v. State Farm Lloyds, 974 S.W.2d 229, 235-37 (Tex.App.-San Antonio 1998, no writ) (finding that a party with no legal relationship owes no duty and cannot maintain a negligence claim); Dear v. Scottsdale Insurance Company, 947 S.W.2d 908, 916-17 (Tex.App.-Dallas 1997, writ denied) (same); Wattley v. Hartford Accident Indemnity, No. 3:99-CV-1711-BD, 1999 WL 801391 at *2 (N.D. Tex. Oct. 6, 1999) (Magistrate Judge Kaplan) (same). The alleged facts, contrary to the Report Recommendation and the court's adoption of the same, do not show that Heath was a broker for or otherwise participated in the underwriting of the United Policy. Although the amended complaint vaguely states that "Heath negligently carried out its responsibilities and obligations as a broker on this transaction," Amended Complaint ¶ 58, United does not plead that Heath was the broker on any transaction with United that would give rise to a duty. In fact, the Amended Complaint and attachments establish that Doran Excess Underwriters, Inc. — not Heath — acted as the producer for the United Policy. See United Policy at 1. The amended complaint also pleads that, in deciding to issue the United Policy, United obtained information from Clair Odell — not Heath. See Amended Complaint ¶ 49. Although Heath allegedly provided information to a different insurer, Caliber One, specifically for use in underwriting the Caliber One Policy, United's reliance on the "Caliber One's decision" to issue the Caliber One Policy, see id. ¶¶ 22, 58, does not create any duty between Heath and United.

The facts alleged fail to show that the harm to United was foreseeable to Heath. See Houston Lighting Power Company v. Brooks, 336 S.W.2d 603, 606 (Tex. 1960) ("[T]here is neither a legal nor moral obligation to guard against that which cannot be foreseen. . . .") (citation omitted). United's allegation that Heath had reason to expect that United, and other excess insurers, would rely upon information provided to Caliber One, see Response at 7, is conclusory. United asks the court to fill in the interstices left vacant by its failure to allege even one fact to support of an inference of foreseeability. Without factual allegations to the contrary, Heath simply cannot be liable to every unforeseeable "excess" insurer fishing in the stream of commercial information. Public policy encourages the flow of commercial information and limits liability to only those persons who foreseeably may be expected to rely on the information. See Cook Consultants, Inc. v. Larson, 700 S.W.2d 231, 234-35 (Tex.App.-Dallas 1985, writ ref'd n.r.e.).

Absent any factual allegations showing a legal relationship to Heath, United's tenuous foreseeability-of-harm argument cannot satisfy Rule 8 and Rule 12(b)(6). Accepting United's well-pleaded facts as true, the court concludes that United has not asserted facts to establish, or to permit the court to draw the inference, that Heath owed United a duty. Given the lack of duty, the court dismisses United's negligence claim, pursuant to FED. R. CIV. P. 12(b)(6).

III. CONCLUSION

For the foregoing reasons, Heath's motion to dismiss United's fraud and negligent misrepresentation claims under Rules 8, 9(b), and 12(b)(6) is GRANTED. This dismissal is with prejudice. However, because it appears that a more carefully drafted negligence claim might state a claim upon which relief could be granted, United is granted leave to amend its negligence claim, within fifteen days of this date, for the purpose of correcting the deficiencies in that claim. Consequently, Heath's motion to dismiss United's negligence claim is hereby GRANTED, but without prejudice to United's repleading of that claim within fifteen days.

If and when United duly amends its negligence claim, Heath may reassert its motion to dismiss if it believes the amended claim fails to cure the defects in the claim.

SO ORDERED.