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Carter v. Youngsville II Housing LLLP

United States District Court, W.D. Louisiana, Lafayette Division

October 18, 2018

Carter
v.
Youngsville II Housing LLLP et al

          ORDER AND RULING

          CAROL B. WHITEHURST UNITED STATES MAGISTRATE JUDGE.

         Before the Court is a Motion To Dismiss (Punitive Damages) filed by filed by United Fire and Casualty Company (“United Fire”) [Rec. Doc. 163], a Memorandum in Opposition filed by Youngsville II Housing LLLP (“Youngsville”) [Rec. Doc. 168], United Fire's Reply [Rec. Doc. 173] and Youngsville's Sur-reply [Rec. Doc. 176]. For the following reasons, United Fire's motion will be denied.

         I. Background

         The background and procedural history of this action have been set forth previously and will not be repeated at length. It is sufficient to note that United Fire issued a Commercial General Liability (CGL) policy (“the Policy”) to Page Properties & Construction L.L.C. (“Page”). Page contracted with Bob Morrow Construction Company (“BMCC”), a general contractor for Youngsville, to perform roofing work at Youngsville's Somerset Apartments. Under the provisions of the subcontract between Page and BMCC, Page was required to name Youngsville and BMCC as additional insureds on the Policy. The Court has held in prior rulings on summary judgment that Alabama substantive law applies to the contracts and the allegations in the plaintiffs complaint are sufficient to find that United Fire is obligated to defend Youngsville, its additional insured under the Policy, regardless of the ultimate liability of the Insured.

         Youngsville and its CGL insurer, Ironshore Specialty Insurance Company (“Ironshore”)[1] filed a Cross-claim against United Fire on April 21, 2018, and an Amended Cross-claim on July 30, 2018. R. 43, 148. Youngsville alleges in its Amended Cross-claim: Prior to August 25, 2016, Youngsville notified United Fire of this law suit and tendered its demand and coverage position to United Fire's counsel. R. 148, ¶9. On December 12, 2016, Plaintiff filed an Amended Complaint asserting that her injuries arose from the Insured's negligence and Youngsville informed counsel for United Fire of its intent to file a Cross-claim on the insurance, defense and indemnity issues on April 12, 2017. Id. at ¶¶ 10, 11. Based on United Fire's counsel's response that “there was no contractual relationship between Youngsville and [its insured], ” Youngsville submitted United Fire's contracts with the insured by April 27, 2017. Id. at ¶¶ 11, 12. United Fire refused to defend Youngsville without any determination as to whether there was a lawful basis to do so. Id. at ¶ 14 (erroneously labeled as a second ¶ 11). Youngsville contended that United Fire breached its contract to defend it in this lawsuit, which caused and continues to cause Youngsville substantial litigation expense and monetary loss. Id. at ¶¶ 19, 20 (erroneously labeled as a second ¶¶ 16, 17). Youngsville further contended that it is entitled to punitive damages under Alabama based on United Fire's alleged breach of its duty to defend Youngsville. Id. at ¶ 18.

         United Fire filed the instant motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on September 20, 2018. R. 167. In ruling on a motion to dismiss, the court generally “must not go outside the pleadings.” Scanlan v. Texas A&M Univ., 343 F.3d 533, 536 (5th Cir.2003). However, the court may consider documents attached to a motion to dismiss that “are referred to in the plaintiffs complaint and are central to the plaintiffs claim.” Id. Here, United Fire has attached a number of exhibits to its motion. R. 163, 3-22. In addition to a copy of the Ironshore Policy, the attached documents primarily reflect billing invoices submitted by Youngsville to Ironshore for payment of defense of this action. As the Amended Cross-claim references United Fire's alleged refusal to defend Youngsville under the Policy as well as Youngsville's resulting litigation expenses and monetary loss and are, in fact, central to the Cross-claim, the Court finds these documents do not require that this motion be converted to a motion for summary judgment under Rule 56. Moreover, the Court does not rely on these documents in this ruling.

         II. Contentions of the Parties

         In its motion to dismiss, United Fire contends that the Court's ruling on Youngsville's motion for summary judgment “is not final and can be changed at any time prior to final judgment” because “the [] Court is free to reconsider and reverse its decision for any reason it deems sufficient” under Rule 54(b).[2] R. 163-2, p.1. On that basis, United Fire asserts that it does not owe any defense cost or other damages to Youngsville until a final judgment is rendered. Thus, it further asserts, Youngsville has no right to recover any costs of defense, nor any punitive damages for United Fire failing to pay defense costs. United Fire also contends that because Ironshore, Youngsville's insurer, has actually paid Youngsville's defense costs pursuant to the Ironshore policy, Ironshore is subrogated to any rights Youngsville may have against United Fire for defense costs paid to date and therefore Youngsville's claim against United Fire is unenforceable. Finally, United Fire asserts that Louisiana law applies to the claim for punitive damages and an award for punitive damages is not authorized for insurance claims under La. C.C. art. 3546.

         Youngsville argues that Ironshore's payments of defense costs to Youngsville under its policy with Youngsville is a collateral source which cannot be used by United Fire to reduce its damages or defeat its claim for breach of contract against United Fire. Youngsville further argues that it will continue to suffer monetary loss as a result of United Fire's refusal to pay defense costs pursuant to the Policy. Finally it argues that Alabama rather than Louisiana law governs its entitlement to punitive damages, and under Alabama law punitive damages are recoverable for an insurer's bad faith conduct towards its insurer.

         III. Motion To Dismiss Standard

         A Rule 12(b)(6) motion is not the proper vehicle for the resolution of factual disputes. In deciding a Rule 12(b)(6) motion to dismiss, the Court limits its review to the face of the pleadings. See Spivey, 197 F.3d 772, 774 (5th Cir. 1999).To survive a Rule 12(b)(6) motion to dismiss, the plaintiffs must plead enough facts “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232-33 (5th Cir.2009. But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 129 S.Ct. at 1949-50.

         A legally sufficient complaint must establish more than a “sheer possibility” that plaintiffs' claim is true. Iqbal, 129 S.Ct. at 1949-50. It need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Twombly, 550 U.S. at 555. In other words, the face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiffs' claim. Lormand, 565 F.3d at 255-57. If there are insufficient factual allegations to raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, Jones v. Bock, 549 U.S. 199, 215 (2007); Carbe v. Lappin, 492 F.3d 325, 328 & n. 9 (5th Cir.2007), the claim must be dismissed.

         Rule 14 provides that defenses, cross-claims, and counterclaims must be filed in accordance with Rules 12 and 13. See Fed. R. Civ. P 14(a). Under the definition of Rule 7, a third-party complaint, like an original complaint, is a pleading whose form is prescribed by Rule 8. See Fed. R. Civ. P. 7. Thus, a cross-claim is subject to the same liberal rules of construction as an original complaint. At this stage, the Court must accept as true, the allegations contained in the “complaint” before it─ the Amended Cross-claim filed by Youngsville.

         III. ...


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