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Life Church of Oak Grove, Inc. v. Guideone Mutual Insurance Co.

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

September 30, 2019





         Now before the Court is a Motion to Dismiss for Improper Claim-Splitting, or in the Alternative, a Motion for Abstention or Stay of Proceeding pursuant to Federal Rule of Civil Procedure 12(b)(6) [Record Document 5] filed by Defendant GuideOne Mutual Insurance Company ("GuideOne"). Plaintiff Life Church of Oak Grove, Inc. ("Life Church") has filed an opposition. [Record Document 12]. For the reasons discussed below, GuideOne's motion is DENIED.

         I. Background

         This case arises of an insurer's agreement to settle a claim with its additional insured, to the exclusion of its named insured. Life Church renewed its insurance policy, bearing the number 1417-101 ("the Policy"), with its insurer GuideOne on March 28, 2016. Record Document 1, p. 3. Prior to the events that gave rise to this case, Life Church entered into a lease agreement with the West Carroll Parish School Board ("the School Board") to lease property in Oak Grove, Louisiana ("the Property"). Id. at 2. The Properly included an approximately 25, 000 square foot building that the School Board had agreed to let Life Church convert from an abandoned school into a church. Id. The Policy listed Life Church as the named insured and listed the School Board as an additional insured. Id. at 3.

         On March 31, 2016, the Property was completely destroyed by a fire. Id. Life Church claims that the fire was a covered loss under the Policy and that it properly submitted claims for payment under the Policy to GuideOne. Id. On July 19, 2016, after GuideOne conducted a loss appraisal, it issued a check for the Policy limit of $2, 611, 800 to "Life Church Oak Grove Inc. and West Carroll Parish School and Law Offices of Myrt T. Hales, Jr." Id. at 5. GuideOne issued checks for the same amount on two more dates, November 10, 2016, and May 31, 2017. Id. In its state court petition, Life Church explains that it could not deposit those checks because "[p]ayment received was joint with another party who now has no interest in the funds and who cannot provide an endorsement." Record Document 12-1, p. 1. According to Life Church, on March 22, 2018, GuideOne "reversed course" and entered into a settlement agreement with the School Board and the School Board's insurer, Affiliated FM Insurance Company ("Affiliated") for $1, 305, 900. Record Document 1, pp. 5-6.

         Life Church states that it was not made aware of this settlement until July 6, 2018, when information about the settlement was included in GuideOne's discovery responses in the ongoing state lawsuit. Id. at 5. Life Church alleges that GuideOne excluded it from the settlement agreement intentionally in order to avoid paying the funds due to Life Church under the Policy. Id. at 5-6. Life Church alleges that GuideOne is liable for bad faith insurance practices pursuant to Louisiana Revised Statute § 22:1973. Id. at 6. Specifically, Life Church alleges that GuideOne misrepresented pertinent facts, failed to timely pay a settlement agreement, and failed to timely pay a claim amount due, in violation of its duty of good faith and fair dealing to its insured as set forth in § 22:1973, when it entered into a settlement agreement with the School Board and Affiliated, to the exclusion of Life Church. Record Document 1, pp. 6-11. Life Church also alleges that GuideOne is liable for breach of contract for failing to pay Life Church's loss claims under the Policy. Id. at 11-12. Life Church claims that GuideOne's conduct caused it to suffer lost earnings, lost profits, loss of goodwill, increased operating costs, declining membership, declining attendance, and financial stress. Id. at 12. Life Church seeks damages for bad faith insurance practices pursuant to § 22:1973, pre- and post-judgment interest, attorney's fees, damages for lost earnings, lost profits, lost goodwill and increased operating costs, court costs, and any other relief the Court deems appropriate. Id. at 12-13.

         II. Legal Standard

         In order to survive a motion to dismiss brought under Rule 12(b)(6), a plaintiff must "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "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. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. The Court must accept as true all of the factual allegations in the complaint in determining whether a plaintiff has stated a plausible claim. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). However, a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286 (1986). If a complaint cannot meet this standard, it may be dismissed for failure to state a claim upon which relief can be granted. Iqbal, 556 U.S. at 678-79. A court does not evaluate a plaintiffs likelihood for success, but instead determines whether a plaintiff has pleaded a legally cognizable claim. U.S. ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004). A dismissal under 12(b)(6) ends the case "at the point of minimum expenditure of time and money by the parties and the court." Twombly, 550 U.S. at 558.

         III. Analysis

         In its motion to dismiss, GuideOne argues that this case should be dismissed due to improper claim-splitting or, in the alternative, that the Court should dismiss or stay this case pursuant to the Colorado River Abstention Doctrine. Record Document 5-1, pp. 3 & 5.

         A. Claim-Splitting

         1. Applicable Law

         It is well established that a plaintiff is generally required to "bring all claims arising out of a common set of facts in a single lawsuit, and federal district courts have discretion to enforce that requirement as necessary 'to avoid duplicative litigation."' Elgin v. Dept. of Treasury,567 U.S. 1, 34 (2012) (quoting Colorado River Water Conservation Dist v. United States, 424 U.S. 800, 817 (1976)) (citing Stone v. Dept of Aviation,453 F.3d 1271, 1278 (10th Cir. 2006)). "Claim-splitting occurs when a single 'cause of action9 is split by advancing one part in an initial suit and another part in a later suit. Such 'splitting' may subject the second claim to preclusion." F.D.LC v. Nelson, 19 F.3d 15 at *2 n.5 (5th Cir. 1994) (internal citations omitted). To determine what constitutes a single cause of action, the Fifth Circuit uses the transactional test, which turns upon whether the two actions are based on the same nucleus of operative facts. Eubanks v. F.D.LC,977 F.2d 166, 171 (5th Cir. 1992). ...

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