United States District Court, E.D. Louisiana
ORDER AND REASONS
the Court is Defendant Merchants Bonding Company's
(“Defendant Merchants”) “Motion to Dismiss
for Failure to State a Claim” (Rec. Doc. 6), Plaintiff
Frischhertz Electric Company's (“Plaintiff”)
Response in Opposition (Rec. Doc. 8), and Defendant
Merchant's Reply (Rec. Doc. 14). For the reasons
discussed below, IT IS ORDERED that the
Motion to Dismiss (Rec. Doc. 6) is hereby
DENIED insofar as it seeks to dismiss Counts
2, 6, 7, 8 and 9 of Plaintiff's Complaint.
IS FURTHER ORDERED that the Motion to Dismiss is
GRANTED insofar as it seeks to
DISMISS Counts 3, 4, and 5 of
AND PROCEDURAL HISTORY
case originates from a September 2016 consult between
Plaintiff and Eustis Insurance, Inc. (“Eustis”).
Rec. Docs. 1 and 6. The purpose of the consult was for the
possibility of Eustis submitting a surety-bond application on
behalf of Plaintiff. Rec. Doc. 1 at 2. On account of the
consult, Plaintiff alleges that it shared with Eustis,
“sensitive confidential and proprietary financial
documentation” that included “detailed financial
statements, asset and liability statements, revenue and
expense statements, cash flow statements and tax related
data” (hereinafter the “Frischhertz
Documentation”). Id. Thereafter, Eustis
submitted the Frischhertz Documentation to Defendant
Merchants in a surety application made on Plaintiff's
behalf. Rec. Docs. 1 and 6-5. According to Plaintiff's
Complaint, “at all times Frischhertz [Plaintiff] was
under the understanding and belief that the financial
documentation provided to Eustis Insurance would remain
confidential and proprietary.” Rec. Doc. 1 at 2.
alleges that between October 9, 2016 and October 12, 2016,
Defendant Merchants disseminated confidential and proprietary
information contained in the Frischhertz Documentation as
part of a training session conducted by Defendant Merchants
in Des Moines, Iowa (the “Training”). Rec. Doc. 1
at 3. The Training session allegedly included
“approximately 50 trainees with over 25 different
surety companies, agencies, reinsurers and outside
alleges that shortly after receiving notice of Defendant
Merchants' use of Plaintiff's information, Plaintiff
sent Defendant Merchants a demand letter. Rec. Doc. 8-1. On
November 15, 2017, Defendant Merchants responded saying that
it would investigate the matter. Rec. Doc. 8-2. On November
30, 2017, Plaintiff filed a complaint containing nine (9)
causes of action against Defendant Merchants for the
above-mentioned dissemination of the Frischhertz
Documentation. Rec. Doc. 1. Plaintiff alleges: 1)
negligence/breach of privacy; 2) violation of Louisiana
Unfair Trade Practices and Consumer Protection Law
(“LUPTA”); 3) negligent misrepresentation; 4)
negligent hiring; 5) breach of duty of reasonable care,
diligence, and judgment under Iowa law; 6) misappropriation
under the Iowa Uniform Trade Secrets Act; 7) misappropriation
under the Texas Uniform Trade Secrets Act; 8) violation of
the Texas Deceptive Trade practices Act; and 9) breach of
contract. Overall, Plaintiff's Complaint alleges
Defendant Merchants' publishing of confidential and
proprietary information has caused damages to its reputation,
including being ostracized in the bonding/surety market, and
a potential inability to obtain surety bonds from other
suppliers in the industry. Defendant Merchants' instant
motion seeks to dismiss eight of the nine causes of action in
the Complaint filed by Plaintiff. Rec. Doc. 6.
12(b)(6) of the Federal Rules of Civil Procedure allows a
party to move for dismissal of a complaint for failure to
state a claim upon which relief can be granted. When
reviewing a motion to dismiss, courts must accept all
well-pleaded facts as true and view them in the light most
favorable to the non-moving party. Baker v. Putnal,
75 F.3d 190, 196 (5th Cir. 1996). However, “[f]actual
allegations must be enough to raise a right to relief above
the speculative level.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). “To survive a
motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief
that is plausible on its face.” Gonzales v.
Kay, 577 F.3d 600, 603 (5th Cir. 2009)(quoting
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949
(2009))(internal quotation marks omitted). The Supreme Court
in Iqbal explained that Twombly promulgated
a “two-pronged approach” to determine whether a
complaint states a plausible claim for relief.
Iqbal, 129 S.Ct. at 1950. First, courts must
identify those pleadings that, “because they are no
more than conclusions, are not entitled to the assumption of
truth.” Id. Legal conclusions “must be
supported by factual allegations.” Id.
“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Id. at 1949.
identifying the well-pleaded factual allegations, courts
“assume their veracity and then determine whether they
plausibly give rise to an entitlement of relief.”
Id. at 1950. 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 misconduct alleged.” Id. at 1949. This
is a “context-specific task that requires the reviewing
court to draw on its judicial experience and common
sense.” Id. The plaintiffs must “nudge
their claims across the line from conceivable to
plausible.” Twombly, 550 U.S. at 570. This
Court analyzes each of the eight causes of action Defendant
Merchants seeks to dismiss accordingly.
2 - Violation of Louisiana Unfair Trade Practices and
Consumer Protection Law (“LUTPA”)
alleges that Defendant Merchants' conduct in using and
disseminating the Frischhertz Documentation during the
Training, and concealment of said disclosure constitutes
deceptive and fraudulent business practices under LUTPA. Rec.
Doc. 1 at 8. Defendant Merchants' contends that as an
insurance company subject to regulation by the Iowa and
Louisiana Commissioners of Insurance it is exempt from
liability under LUTPA. Rec. Doc. 6-5 at 4-5.
or Louisiana Statute § 51:1401-1418, declares unlawful
and provides a right of action for “[u]nfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce.” La. Stat. Ann.
§ 51:1405. However, “the statute shall not apply
to actions or transactions subject to the jurisdiction of
certain state regulatory bodies or commissioners, including
the insurance commissioner.” Alarcon v. Aetna Cas.
& Sur. Co., 538 So.2d 696, 700 (La.App. 5
Cir. 1989). “A trade practice is ‘deceptive'
for purposes of LUTPA when it amounts to fraud, deceit, or
misrepresentation.” Mixon v. Iberia Surgical,
L.L.C., 956 So.2d 76, 80 (La.App. 3 Cir. 2007).
Defendant Merchants contends that as an insurer, it is exempt
from liability under LUTPA and is subject to the insurance
commissioner's regulation. Rec. Doc. 6-5 at 5.
Group Life & Health Insurance Co., the Supreme
Court was presented with the issue of whether or not certain
“pharmacy agreements” were in the “business
of insurance” within the meaning of the
McCarran-Ferguson Act. Grp. Life & Health Ins. Co. v.
Royal Drug Co., 440 U.S. 205 (1979). The Supreme Court
noted the importance of distinguishing between the business
of insurance and the business of insurers. It noted that the
statutory exemption was for “the business of
insurance.” Id. at 211. As a result, the
primary element that distinguishes the business of insurance
from other business arrangements is the involvement of any
underwriting or spreading of risk. Ultimately, the Supreme
Court held that the pharmacy agreements did not involve any
underwriting or spreading of risk, but were “merely
arrangements for the purchase of goods and services by Blue
Shield” and “thus legally indistinguishable from
countless other business arrangements that may be made by
insurance companies.” Grp. Life & Health Ins.
Co., 440 U.S. at 214-15. The Fifth Circuit considers
three factors determining whether an act is part of the
“business of insurance”: “first, whether
the practice has the effect of transferring or spreading a
policyholder's risk; second, whether the practice is an
integral part of the policy relationship between the insurer
and the insured; and third, whether the practice is limited
to entities within the insurance industry.” Wiley
v. Sec. & Exch. Comm'n, 663 Fed.Appx. 353, 359
(5th Cir. 2016).
Plaintiff's relationship with Defendant Merchants was not
within the business of insurance. While the Frischhertz
Documentation was originally provided to Defendant Merchants
by way of Eustis for the purposes of obtaining a surety,
Defendant Merchants did not ultimately obtain said surety for
Plaintiff. In fact. Defendant Merchants repeatedly denies
that Plaintiff was ever its “customer.” Rec. Doc.
6. Rather, the alleged dissemination was a decision made by
Defendant Merchants for the purposes of the Training; wholly
unrelated to any business of insurance services with
Plaintiff. The actions challenged by Plaintiff have nothing
to do with transferring or spreading a policyholder's
risk, are not an integral part of an insurance policy
relationship between Defendant Merchants and Plaintiff, and
is not limited to entities within the insurance industry.
Merchants further argues that Plaintiff's claims are
preempted under LUTPA and that Plaintiff lacks standing for
its failure to allege facts establishing an
“ascertainable loss of money or property.”
However, taking Plaintiff's allegations of loss and
damages suffered as true the Complaint sufficiently states a
claim under LUTPA at this stage of the litigation.
See Rec. Doc. 1 at 5, 9. Finally, the one year
period in La. R.S. 51:1409(E) is a peremptive period;
however, it does not begin to run until a continuing
violation ceases. CheckPoint Fluidic Sys. Int'l, Ltd.
v. Guccione, 888 F.Supp.2d 780, 792 (E.D. La. 2012)
citing Tubos de Acero de Mexico, S.A. 292 F.3d at