Daily v. The Rawlings Company LLC et al
MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 1/15/2016. (AVC)
2016 Jan-15 PM 03:51
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
JOHN KEITH DAILY, on behalf of )
the class of persons described herein, )
THE RAWLINGS COMPANY,
LLC, et al.,
Case No.: 2:15-CV-1138-VEH
This civil action was commenced on July 7, 2015, by the filing of a “Class
Action Complaint,” by the named plaintiff, John Keith Daily, against “The Rawlings
Company, LLC” (“Rawlings”) and “Aetna Life Insurance Company” (“Aetna”).1
Against both Rawlings and Aetna, the complaint alleges the Alabama state law claim
for “Interference with Business/Contractual Relations” (Count One). Against
Rawlings alone, the complaint alleges a violation of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1601, et seq. (Count Two), and an Alabama
To date, no motion to certify a class has been filed.
state law claim for the “Unauthorized Practice of Law” (Count Three).2 All counts
arise out of the settlement of Daily’s personal injury claim against a third party, and
the attempts by Rawlings and Aetna to enforce Aetna’s subrogation interest.
The case comes before the court on Rawlings and Aetna’s Motion to Dismiss
(doc. 24), Rawlings and Aetna’s “Motion for a Discovery Stay Pending Their Motion
to Dismiss” (doc. 43), and Daily’s “Corrected Motion to Amend Complaint” (doc.
45). For the reasons stated herein, the motion to dismiss will be GRANTED and this
case will be DISMISSED. The motion to amend will be DENIED as futile, and the
motion to stay will be DENIED as moot.
THE MOTION TO AMEND (DOC. 45)
The Eleventh Circuit Court of Appeals has noted:
“Although ‘[l]eave to amend shall be freely given when justice so
requires,’ a motion to amend may be denied on ‘numerous grounds' such
as ‘undue delay, undue prejudice to the defendants, and futility of the
amendment.’ ” Brewer–Giorgio v. Producers Video, Inc., 216 F.3d
1281, 1284 (11th Cir.2000) (quoting Abramson v. Gonzalez, 949 F.2d
1567, 1581 (11th Cir.1992)).
Maynard v. Bd. of Regents of Div. of Universities of Florida Dep't of Educ. ex rel.
Univ. of S. Florida, 342 F.3d 1281, 1287 (11th Cir. 2003). The only argument made
by the defendants in opposition to the motion to amend is that, because none of the
Count Four of the complaint alleges no cause of action. Instead, Count Four is a
“Claim for Injunctive and Declaratory Relief.”
factual allegations will change with the amendment,3 the amendment would be futile,
as the complaint will be still be dismissed for failure to state a claim upon which
relief may be granted. In support of that argument, the defendants incorporate their
briefs in support of their motions to dismiss. (Docs. 24, 37).
The court has examined the proposed “First Amended Class Action Complaint”
(hereinafter the “amended complaint”). Indeed, except for a few word changes which
are not relevant to this motion, the “facts” pled in the amended complaint are identical
to those pled in the original complaint. Accordingly, the court will defer ruling on the
motion to amend until after it examines the arguments in support of the motion to
THE MOTION TO DISMISS (DOC. 24)
Standard of Review
A Rule 12(b)(6) motion attacks the legal sufficiency of the complaint. See Fed.
The plaintiff agrees with this contention. As noted by the plaintiff:
The only change in the First Amended Class Action Complaint is that the class
definition has been changed to include separate classes against [d]efendants
Rawlings Company, LLC, (“Rawlings”) and Aetna Life Insurance Company,
(“Aetna”), reflecting that the causes of action asserted against Rawlings affect a
class broader than only those who are covered by Aetna, or are participants in a
health benefit plan administered by Aetna.
(Doc. 45 at 2; see also, doc. 49 at 2 (Plaintiff’s Reply to Opposition to Motion to Amend
Complaint) (“The only change is the breadth of the class definition.”)).
R. Civ. P. 12(b)(6) (“[A] party may assert the following defenses by motion: (6)
failure to state a claim upon which relief can be granted[.]”). The Federal Rules of
Civil Procedure require only that the complaint provide “‘a short and plain statement
of the claim’ that will give the defendant fair notice of what the plaintiff’s claim is
and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99,
103, 2 L. Ed. 2d 80 (1957) (footnote omitted) (quoting Fed. R. Civ. P. 8(a)(2)),
abrogated by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955,
1965, 167 L. Ed. 2d 929 (2007); see also Fed. R. Civ. P. 8(a) (setting forth general
pleading requirements for a complaint including providing “a short and plain
statement of the claim showing that the pleader is entitled to relief”).
While a plaintiff must provide the grounds of his entitlement to relief, Rule 8
does not mandate the inclusion of “detailed factual allegations” within a complaint.
Twombly, 550 U.S. at 555, 127 S. Ct. at 1964 (quoting Conley, 355 U.S. at 47, 78 S.
Ct. at 103). However, at the same time, “it demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). “[O]nce a claim has been
stated adequately, it may be supported by showing any set of facts consistent with the
allegations in the complaint.” Twombly, 550 U.S. at 563, 127 S. Ct. at 1969.
“[A] court considering a motion to dismiss can choose to begin by identifying
pleadings that, because they are no more than conclusions, are not entitled to the
assumption of truth.” Iqbal, 556 U.S. at 679, 129 S. Ct. at 1950. “While legal
conclusions can provide the framework of a complaint, they must be supported by
factual allegations.” Id. “When there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly give rise to
an entitlement to relief.” Id. (emphasis added). “Under Twombly’s construction of
Rule 8 . . . [a plaintiff’s] complaint [must] ‘nudge [any] claims’ . . . ‘across the line
from conceivable to plausible.’ Ibid.” Iqbal, 556 U.S. at 680, 129 S. Ct. at 1950-51.
A claim is plausible on its face “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949. “The plausibility
standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at
556, 127 S. Ct. at 1965).
The factual allegations in the proposed amended complaint read:
On the evening of September 16, 2014, Daily was traveling on
Greensport Road at the intersection of Peaceful Valley Road in St. Clair
County, Alabama, when Samantha Kelley pulled out in front of him,
causing a collision in which the [p]laintiff was injured and incurred
At the time, plaintiff Daily had a health insurance policy through
his employer, Total Safety U.S., Inc’s, benefits plan [(“the Plan”)].
Aetna administered those health benefits, and paid Mr. Daily’s medical
Samantha Kelley, at the time of the accident, was insured by
Nationwide Insurance Company.
Shortly after the date of the collision, Counsel for Mr. Daily made
a demand on Nationwide for its $100,000.00 policy limits on the
automobile policy covering Ms. Kelley. In addition, counsel for Mr.
Daily made demands on behalf of his client pursuant to the
uninsured/underinsured coverage Daily had with State Farm Mutual
Automobile Insurance Company (“State Farm”), and Allstate Property
and Casualty Company (“Allstate”).
10. Beginning in October, counsel for Mr. Daily attempted to
negotiate settlements with Nationwide, State Farm, and Allstate. All
applicable medical records and expenses were sent to the three insurers,
and Mr. Daily’s counsel received copies of the applicable policies so
that he could verify coverages and policy limits.
11. On October 14, 2014, counsel for Mr. Daily received notice from
Aetna of [the Plan’s] subrogation claim on Mr. Daily’s tort recovery in
the amount of $3,445.87.
12. On or about November 21, 2014, counsel for Mr. Daily received
an updated lien from Rawlings, stating a subrogation demand on behalf
of Aetna for $25,382.36.
13. Rawlings was acting on behalf of Aetna, [the Plan’s]
administrator, and Aetna and Rawlings will be referred to collectively
sometimes herein as Aetna/Rawlings.
14. The subrogation claims that Aetna hired Rawlings to collect are
those of [the Plan]. There is no question that those claims, or debts, do
not belong to Rawlings.
15. The Rawlings Company, LLC, is not a law firm, and is not
authorized to practice law in Alabama. Despite this fact, Rawlings,
through non-lawyers holding the title “Recovery Analyst” sends
correspondence to . . . beneficiaries with tort claims like Mr. Daily
including legal arguments that Aetna is entitled to assert its subrogation
claims directly, and that Aetna/Rawlings does not have to pay any of the
costs of collection. . . .
16. In addition to sending the above-referenced correspondence, those
“Recovery Analysts” assert legal claims on behalf of Rawlings’ clients,
and negotiate the settlement of subrogation claims. Neither Rawlings or
its employees performing these functions are licensed to practice law in
17. On November 24, 2014, counsel for Mr. Daily sent
Aetna/Rawlings’s notice of its $25,382.36 subrogation interest to
Nationwide, and accepted Nationwide’s offer to settle the case against
its insured Kelley for the $100,000.00 Nationwide policy limits.
18. In a letter dated November 24, 2014, but not received until at least
the next day, counsel for Mr. Daily received another updated lien
amount. Aetna/Rawlings now stated its subrogation interest as
19. At the same time, counsel for Mr. Daily continued to provide all
information requested by Allstate and State Farm in an attempt to
resolve the matter with those carriers.
20. On December 1, 2014, counsel for Mr. Daily received a letter
from Allstate agreeing to waive its subrogation interest, and advising
him to accept the Nationwide offer.
21. On December 15, 2014, counsel for Mr. Daily received an offer
from State Farm of its $25,000.00 policy limits, contingent upon being
provided a copy of the written Nationwide offer to settle for its
$100,000.00 policy limits, and the Nationwide declarations page from
its policy with Ms. Kelley. Those documents were provided to State
Farm the next day, and the agreement was formalized in a writing.
22. Unbeknownst to counsel for Mr. Daily at the time, Rawlings, per
its custom and practice, had been in communication with Nationwide,
Allstate, and State Farm, demanding that Aetna’s lien amount be paid
directly to it before the insurers completed their settlements with Mr.
23. None of these payments have been made, and the settlements have
not been completed.
24. The monies have not been sent to counsel for Daily because
Aetna/Rawlings has interfered with the contracts to settle the case
between Mr. Daily, through counsel, and Ms. Kelley/Nationwide/ State
25. In fact, Nationwide, through counsel, has advised counsel for
Daily that it cannot send the funds pursuant to the agreement to settle
the case because Rawlings has told counsel for Nationwide that it will
sue Nationwide if it does so.
26. State Farm has not paid its monies pursuant to its agreement.
Allstate has dragged its feet, asking for superfluous information, and
providing other excuses to delay. The truth of the matter is that it too,
has been advised by Rawlings that suit will be instituted for the Aetna
subrogation amount if the funds are not paid directly to Rawlings.
27. Rawlings has made its demands directly upon the insurers despite
the fact that it has no contractual or other relationship with either
tortfeasor Kelley, her insurer Nationwide, or Mr. Daily’s
uninsured/underinsured carriers Allstate and State Farm.
28. What Aetna has is an equitable lien known as a subrogation claim
to Daily’s tort recovery. That claim is founded on the contract between
Aetna and Daily. Aetna/Rawlings has no right or privilege to interfere
with the legal contract between Daily and tortfeasor Kelley and her
insurers, or Mr. Daily and his uninsured/underinsured carriers Allstate
and State Farm. Without a tort action and recovery by Daily, Aetna has
nothing to subrogate to.
29. [The Plan has] the right to subrogate to any tort recovery [Daily]
obtains. However, the Plan language states only [that] it may make a
claim and take appropriate action to assert its subrogation claim. What
Aetna/Rawlings’ actions fail to recognize [sic] is that they have no
subrogation claim until such time Mr. Daily makes a recovery.
30. Not only has Rawlings/Aetna interfered with Daily’s contractual
relationships with Nationwide, Allstate, and State Farm, but they want
Daily to collect its subrogation interest for it without paying for the
attorney Daily must hire to collect for his tort claim that creates the fund
from which Rawlings/Aetna can collect its subrogation interest in the
first place. Rawlings essentially asserts that it is entitled to free
31. Rawlings is not entitled to free collection services for its
subrogation claim through the use of Daily’s attorney. First, without
Daily’s efforts to collect on his tort claim, Aetna’s subrogation claim
does not exist. Second, under Alabama law, if Rawlings wants to
participate in the funds created by Daily through his tort claim by
subrogating to that fund, it must pay its share of the expenses, including
attorneys’ fees, in creating that fund.
32. As a result of Rawlings/Aetna’s interference, Daily does not have
the $125,000.00 in settlement funds that he has contracted for, or what
funds he would have had as the result of his insurance policy with
(Doc. 45-1 at 2-8) (footnotes omitted).
As noted by the defendants in their initial brief, the Plan at issue in this case
– The Plan holds a right of subrogation or reimbursement which extends
to any insurance recovery from tortfeasors who may cause Daily injury.
– Immediately upon paying or providing any benefit under the Plan, the
Plan shall be subrogated to (stand in the place of) all rights of recovery.
– The Plan may assert a claim or sue in Daily’s name and take
appropriate action to assert subrogation, with or without his consent.
– If Daily receives any payment as a result of an injury for which the
Plan has paid benefits, he must reimburse the Plan for all amounts paid.
– The Plan[’]s Claims Administrator has sole authority and discretion
to resolve all disputes regarding subrogation and reimbursement under
– The Plan recovery rights are a first priority claim to be repaid before
Daily receives any recovery for damages. The Plan is not required to pay
any court costs or attorney fees to any attorney Daily hires.
– Finally, by accepting benefits under the Plan, Daily agreed to
cooperate fully with the Plan’s efforts to recover benefits paid.
(Doc. 24 at 7) (citing doc. 24-2 at 66-67).4 The Plan also provides that the beneficiary
The Eleventh Circuit has noted:
“[A] document attached to a motion to dismiss may be considered by the court
without converting the motion into one for summary judgment only if the attached
document is: (1) central to the plaintiff's claim; and (2) undisputed. See Harris v.
Ivax Corp., 182 F.3d 799, 802 n. 2 (11th Cir.1999). “Undisputed” in this context
means that the authenticity of the document is not challenged. See, e.g., Beddall v.
State Street Bank and Trust Co., 137 F.3d 12, 16–17 (1st Cir.1998); GFF Corp. v.
Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.1997); Branch
v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994).
Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002). The Plan documents are certainly
central to the plaintiff’s claims in this case, and the authenticity of said documents, which are
attached to the motion to dismiss, has not been disputed by the plaintiff. Accordingly the Plan
documents will be considered by the court without converting the motion to a motion for
of the Plan “[g]enerally [is] required to complete all appeal processes of the Plan
before being able to obtain External Review or bring an action in litigation.” (Doc.
24-2 at 72).
“The law is clear in this circuit that plaintiffs in ERISA actions
must exhaust available administrative remedies before suing in federal
court.” Bickley v. Caremark RX, Inc., 461 F.3d 1325, 1328 (11th
Cir.2006) (quoting Counts v. Am. Gen. Life & Accident Ins. Co., 111
F.3d 105, 108 (11th Cir.1997)) (internal quotation marks omitted).
Lanfear v. Home Depot, Inc., 536 F.3d 1217, 1223-24 (11th Cir. 2008). “Th[e]
exhaustion requirement applies equally to claims for benefits and claims for
violations of ERISA itself.” Lanfear, 536 F.3d at 1224. Although the instant action
is not a claim for benefits under the Plan, and alleges no statutory violation of ERISA,
the motion, nonetheless, argues that all of the plaintiff’s claims, against both
defendants, fail because he should have, and did not, exhaust his administrative
remedies under the Plan prior to bringing this action. (Doc. 24 at 11-14; doc. 37 at 56). There is unpublished authority in the Eleventh Circuit which holds that this is a
“jurisdictional defense.” Herman v. Hartford Life & Acc. Ins. Co., 508 F. App'x 923,
926 (11th Cir. 2013); contra Paese v. Hartford Life & Acc. Ins. Co., 449 F.3d 435,
446 (2d Cir. 2006) (a failure to exhaust ERISA administrative remedies is not
jurisdictional, but is an affirmative defense); Metro. Life Ins. Co. v. Price, 501 F.3d
271, 280 (3d Cir. 2007) (exhaustion requirement is a nonjurisdictional affirmative
defense); Crowell v. Shell Oil Co., 541 F.3d 295, 309 (5th Cir. 2008) (“Other circuits
have expressly held that ERISA exhaustion is not jurisdictional, and we agree.”).
Accordingly, despite this court’s holdings in the remainder of this opinion, this issue
must be addressed.
The defendants’ argument is based on the following language in the plan:
“Generally, you are required to complete all appeal processes of the Plan before being
able to obtain External Review or bring an action in litigation.” (Doc. 24-2 at 72).
They also note that, as to the portion of the plan concerning “Subrogation and Right
of Recovery,” the plan provides that
[i]n the event that any claim is made that any part of this subrogation
and right of recovery provision is ambiguous or questions arise
concerning the meaning or intent of any of its terms, the Claims
Administrator for the plan shall have the sole authority and discretion to
resolve all disputes regarding the interpretation of this provision.
(Doc. 24-2 at 67). The defendants argue that, to the extent that Daily is arguing that
the plan does not authorize their conduct, that is “[a] dispute regarding the
interpretation” of the subrogation and right of recovery provisions in the plan. (Doc.
24 at 12). In response, the plaintiff argues that the exhaustion requirement does not
apply because the plaintiff “does not assert an ERISA claim for benefits, nor are the
claims premised on an ERISA statutory violation.” (Doc. 36 at 10).
In their initial brief, the defendants cite two cases in support of their argument:
Springer v. Wal-Mart Associates' Grp. Health Plan, 908 F.2d 897, 898 (11th Cir.
1990), and Bickley v. Caremark Rx, Inc., 461 F.3d 1325 (11th Cir. 2006). Both are
distinguishable on their facts.5
Defendant Wal–Mart Associates' Group Health Plan (“Wal–Mart”)
appeal[ed] from the district court's judgment awarding $20,181.79 in
medical benefits to plaintiff Ethelene Springer under Wal–Mart's
ERISA-governed employee health benefit plan (“the Plan”).
Springer ha[d] been an employee of Wal–Mart Stores since April 20,
1987. Springer, her husband Larry, and her young daughter Shalana
[were] “participants” in the Plan, Springer as an “eligible associate,” and
In Mason v. Cont'l Grp., Inc., 763 F.2d 1219, 1227 (11th Cir. 1985), the Eleventh
Compelling considerations exist for plaintiffs to exhaust administrative remedies
prior to instituting a lawsuit. Administrative claim-resolution procedures reduce
the number of frivolous lawsuits under ERISA, minimize the cost of dispute
resolution, enhance the plan's trustees' ability to carry out their fiduciary duties
expertly and efficiently by preventing premature judicial intervention in the
decisionmaking process, and allow prior fully considered actions by pension plan
trustees to assist courts if the dispute is eventually litigated. . . . In addition,
imposing an exhaustion requirement in the ERISA context appears to be
consistent with the intent of Congress that pension plans provide intrafund review
Mason, 763 F.2d at 1227 (citations omitted). The defendants make no argument that imposing
the requirement under the circumstances of this case would further any of these “compelling
considerations.” Accordingly, the court will examine only the applicability of the cases cited.
Larry and Shalana as “eligible dependents.” The Plan is self-insured and
is funded by premiums from Wal–Mart Stores employees and matching
contributions from Wal–Mart Stores. On November 7, 1987, the
Springers were injured in an automobile accident caused by the drunk
driver of the other car, Jerry Thigpen, who was uninsured. Springer's car
was insured by State Farm Insurance Company (“State Farm”), under a
policy which included uninsured motorist and medical payments
coverage. Following the accident, Springer sued Thigpen for damages,
sued State Farm for refusal to pay under its policy, and filed claims for
medical expenses under the Plan on behalf of herself, Larry, and
Shalana. The Springers' medical expenses totalled $35,181.79.
In response to Springer's claims, Wal–Mart, on December 28,
1987 (as to Larry's expenses), January 14, 1988 (as to Springer's
expenses), and February 4, 1988 (as to Shalana's expenses), sent
Springer explanatory letters with accompanying “reimbursement
agreements” stating that, in accordance with the Plan, Springer's claims
could not be processed, nor any benefits awarded, until and unless
Springer completed, signed, and returned the enclosed agreements. The
reimbursement agreements essentially would have given Wal–Mart the
right to seek reimbursement for benefits paid by suing in Springer's
name, joining in any lawsuit of Springer's against any third party
regarding the accident, or sharing in any settlement agreement received
by Springer. Springer refused to sign or return the agreements. Although
the Plan, to which Springer had access, provides for a mandatory
internal appeals process prior to bringing any lawsuit, Springer did not
seek internal administrative review of Wal–Mart's refusal to proceed
further with her claims. On April 7, 1988, she brought the present
lawsuit against Wal–Mart, seeking payment for the medical expenses.
Following an advisory jury trial, the district court entered judgment for
Springer on June 6, 1989.
Springer, 908 F.2d at 898-99. The Eleventh Circuit held that the exhaustion
requirement applied to the claims against Wal-Mart, writing “it is no longer open to
serious dispute that plaintiffs in ordinary breach-of-contract ERISA actions must
normally exhaust available administrative remedies.” Id. at 900.
The defendants contend that Springer stands for the proposition that “[t]he
exhaustion requirement applies to cases alleging statutory violation of ERISA and
cases asserting common law claims based upon the employee benefit plan.” (Doc. 24
at 12). However, in Springer, the common law claim was for breach of contract for
denial of benefits under the plan. In the instant case there is no such claim. The
plaintiffs’ health benefits have already been paid.
In Bickley, the plaintiff alleged that prescription drug benefits under his
employer’s plan were administered by Caremark, which “buys drugs from
manufacturers, sells drugs to retail pharmacies, operates a service where Plan
members can fill their prescriptions by mail, and negotiates prescription drug prices
with manufacturers and retail pharmacies.” Bickley, 461 F.3d at 1327. The court
Bickley filed this class action suit against Caremark on behalf of
the Plan pursuant to section 502(a)(2) and (a)(3) of ERISA. Because of
its management of the prescription drug benefits, Bickley alleges that
Caremark is a fiduciary to the Plan. Bickley also alleges that Caremark
breached its fiduciary duties, in violation of ERISA section 409, by
enriching itself “through undisclosed discounts, rebates, coupons and
other forms of compensation from drug companies and pharmacies.”
Bickley further alleges that Caremark creates undisclosed pricing
“spreads” between the discounted price it pays to retail pharmacies and
drug manufacturers and the discounted price it contracts to be
reimbursed by the Plan. Bickley alleges that Caremark receives
undisclosed discounts, rebates, and soft dollars from drug manufacturers
in exchange for favoring that drug manufacturer's drug over another in
its standardized formulary and drug switching programs. Bickley asserts
that Caremark failed to disclose these practices and retention of these
profits, and that Caremark evades the government's best pricing statute,
the Omnibus Budget and Reconciliation Act, by conspiring with drug
manufacturers. Bickley sought declaratory and injunctive relief,
attorneys' fees and costs, and an accounting for all Plan assets and
profits Caremark retained for its own benefits.
Bickley, 461 F.3d at 1327-28. On appeal, the plaintiff argued “that the district court
should have excused his failure to exhaust the administrative remedies because . . .
the administrative scheme set out in the Plan was limited solely to a claim for
benefits.” Id. at 1329. The Eleventh Circuit disagreed, writing:
Although the Plan's administrative scheme related to “claims,” the Plan
also provided that “[i]f you have questions about your plan, you should
contact the Plan Administrator [which] has the exclusive responsibility
and complete discretionary authority to control the operation and
administration of the Plan, with all power necessary to ... resolve all
interpretive, equitable and other questions that shall arise in the
operation and administration of this Plan.” . . . Thus, as the district court
properly held, “[t]aking all the provisions as a part of an integrated
Agreement and viewing the same provisions in the light of ERISA's
integrated statutory scheme, ... Bickley and other Plan members do have
an administrative remedy.” . . . According to the Plan, the Plan
Administrator . . . or the Plan Benefits Claim Processor, can receive and
review claims such as Bickley's and respond. In fact, not only can [the
Administrator] respond to such claims, it has the duty to consider the
pursuit of breach of fiduciary duty claims on behalf of the Plan.
Id. at 1329-30 (internal citations omitted).
The defendants insist that “at the core” the plaintiff’s claims in the instant case
are “about what [d]efendants are or are not allowed to do under the Plan.” (Doc. 37
at 5). It appears that the defendants are arguing that Bickley stands for the proposition
that every time an ERISA administrator is sued for anything, as long as their defense
is based on some right provided to them by the Plan, the action is automatically
converted to an ERISA claim, and the plaintiff must have exhausted administrative
remedies before filing suit. This court does not read that case so broadly. “Th[e]
exhaustion requirement applies equally to claims for benefits and claims for
violations of ERISA itself.” Lanfear, 536 F.3d at 1224. The instant case presents
Also, in Bickley, the suit was for a statutory violation of ERISA, brought
against the plan administrator, for enriching itself through the way it operated the
plan, at the expense of benefits to the plan’s participants. The plan in that case
provided for a method to resolve the very issue (breach of fiduciary duty) which
related to the statutory ERISA claim. Certainly, in this case, whether the plan allows
the defendants to engage in the conduct alleged is an issue. However, it does not arise
in the context of a claim for benefits or a claim of a statutory violation causing injury
to the plan as a whole. For that reason, Bickley is distinguishable.
In their reply brief, the defendants cite to several of the cases first cited by the
plaintiff on this issue, and argue that those cases actually support their position. As
shown below, they do not.
In La Ley Recovery Sys.-OB, Inc. v. United Healthcare Ins. Co., No.
14-CV-23802-UU, 2014 WL 7525703 (S.D. Fla. Dec. 12, 2014) the plaintiff asserted
that the health insurer had “failed to make payment for the services provided by [his
doctor] in the amount that was billed.” La Ley, 2014 WL 7525703, at *1. The issue
in La Ley was whether the plaintiff’s state law claims were completely preempted by
ERISA. The court noted that, in order to answer this question, it would have to
determine: (1) whether the plaintiff could have brought its claim under ERISA's civil
enforcement provision, § 502(a); and (2) whether no other legal duty supports the
plaintiff's claim. La Ley, 2014 WL 7525703, at *2. As to the second prong, the court
“If a party is suing under obligations created by the plan itself,
instead of under obligations independent of the plan and the plan
member, the alleged obligations implicate legal duties which are not
entirely independent of ERISA, and thus are subject to complete
preemption.” [Gables Ins. Recovery v. United Healthcare Ins. Co., 39
F. Supp. 3d 1377, *7 (S.D. Fla. 2013)] (internal quotations and citations
omitted).“[A]ny determination of benefits under the terms of a
plan—i.e., what is ‘medically necessary’ or a ‘Covered Service’—does
fall within ERISA .” Lone Star OB/GYN Assocs. v. Aetna Health Inc.,
579 F.3d 525, 531 (5th Cir.2009).“If the right to payment derives from
the ERISA benefit plan as opposed to another independent obligation,
the resolution of a right to payment dispute requires an interpretation of
the plan.... Thus, any determination of benefits under the terms of an
ERISA plan, even regarding a seeming independent breach of oral or
implied contract based on verification of those benefits, falls under
ERISA and is a legal duty dependent on, not independent of, the ERISA
plan.”Gables Ins. Recovery, 2013 WL 9576688, at *7 (internal citations
Despite Plaintiff's allegations, its claims are based on interpreting
the ERISA plan and determining whether Dr. Blanco's services fall
within the plan's coverage. See D.E. 1–2 ¶¶ 7, 25 (“This action arises out
of Defendant's breach of its common law duties under the applicable
health insurance contract ... Dr. Olivio Blanco, Jr., rendered health care
services that were reasonable and medically necessary and otherwise in
furtherance and for the benefit of the patient/insured.”). As such, both
prongs of [the test] are met, and Plaintiff's Complaint is subject to
complete preemption by ERISA. Plaintiff's Motion to Remand must
therefore be denied because federal jurisdiction exists.
Id. at *4.
First, unlike La Ley, the issue in the instant case is not preemption. Further, the
plaintiff in the instant case is not a party “suing under obligations created by the plan
itself, instead of under obligations independent of the plan and the plan member.” The
instant case is not about the “right to payment,” or the “determination of benefits
under the terms of an ERISA plan.” It is only whether the Plan provides a defense6
to the alleged breach of obligations imposed by Alabama common law.
The defendants also cite In re Managed Care Litig., 595 F. Supp. 2d 1349,
1356 (S.D. Fla. 2009), which, like La Ley, deals with issues relating to benefits. As
noted by the court:
Specifically, as noted below, the issue involves determining whether the
defendants’ alleged interference was “justified”–“an affirmative defense to be
pleaded and proved by the defendant.” Gross v. Lowder Realty Better Homes &
Gardens, 494 So. 2d 590, 600 (Ala. 1986) overruled on other grounds by White
Sands Grp., L.L.C. v. PRS II, LLC, 32 So. 3d 5 (Ala. 2009).
Plaintiffs allege to have provided dental services as “out of
network” providers to members of health plans administered by
WellPoint and governed by ERISA. These services were performed
pursuant to the terms and conditions of the subscriber agreements.
Under these agreements, WellPoint was obligated to pay its subscribers
or their “out of network” providers the actual amount these providers
charged for their services, assuming the annual deductible was met,
minus any applicable co-payment amount paid by the subscriber.
According to Plaintiffs, the only instance in which WellPoint was
excused from paying the actual amount charged by the “out of network”
provider was where it demonstrated, using a valid data, that the treating
dentist's actual charges “exceed[ed] the customary and reasonable
allowance” for the particular procedure in question. Plaintiffs further
allege that WellPoint used and continues to use a flawed and inadequate
database developed by Health Insurance Association of America
(“HIAA” or “Ingenix”) in making its benefits calculation for “out of
network” providers under all of its administered plans.
In their three-count Class Action Complaint, Plaintiffs allege that
(1) WellPoint violated ERISA by underpaying its subscriber-patients for
the services rendered by the “out of network” dentists, and (2)
WellPoint's statements to its subscribers regarding the excessive costs
of “out of network” services constituted trade libel and tortious
interference with contractual relations on the Plaintiff class under state
law. Plaintiffs seek monetary damages as well as injunctive and
In re Managed Care Litig., 595 F. Supp. 2d at 1351-52. The language in In re
Managed Care Litig., cited by the defendants in this case in their reply brief, related
to whether certain counts sufficiently “relate[d] to” ERISA plans to trigger
preemption. Regarding only that issue, the court wrote:
Section 514(a) provides that ERISA “shall supercede any and all State
laws insofar as they may now or hereafter relate to any employee benefit
plan” covered by the statute. 29 U.S.C. § 1144(a). The provision serves
as a federal defense to a plaintiff's state law clams when those claims
relate to an employee benefit plan governed by ERISA. The key in
determining the scope of Section 514 preemption is the meaning of
“relate to.” A state law having a “connection with or reference to” an
ERISA-governed plan is preempted by ERISA Section 514(a).
California Division of Labor Standards Enforcement v. Dillingham
Constr., 519 U.S. 316, 322, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997). If
a state law “does not affect the structure, administration, or the type of
benefits provided by an ERISA plan, the mere fact that the [law] has
some economic impact on the plan does not require that the [law] to be
invalidated.” Shaw, 463 U.S. at 100, 103 S.Ct. 2890. The Eleventh
Circuit finds that “[a] party's state law claim ‘relates to’ an ERISA
benefit plan for purposes of ERISA preemption whenever the alleged
conduct at issue is intertwined with the refusal to pay benefits.” Garren
v. John Hancock Mutual Life Ins. Co., 114 F.3d 186, 187 (11th
Cir.1997). Thus, “where state law claims of fraud and misrepresentation
are based upon the failure of a covered plan to pay benefits,” the state
law claims have nexus with an ERISA plan and its benefits system.
[Variety Children's Hosp., Inc. v. Century Med. Health Plan, Inc., 57
F.3d 1040, 1042 (11th Cir. 1995).]
In re Managed Care Litig., 595 F. Supp. at 1355. In re Managed Care Litig. is
distinguishable because, in the instant case, the conduct at issue in the instant case is
not “intertwined with the refusal to pay benefits.”7
The defendants’ reply brief also cites Mason v. Cont'l Grp., Inc., 763 F.2d 1219, 1222
(11th Cir. 1985) as “affirming this Court’s application of ERISA exhaustion to common law
claims including fraud.” (Doc. 37 at 6). Actually, the portion of that case cited by the defendants
affirms that “[w]hen employees asserting an arbitrable grievance have not attempted to utilize the
dispute resolution machinery available to them under the agreement, their independent suit
against the employer must be dismissed.” Mason, 763 F.2d at 1222; see also, id. at 1223 (“[The
arbitration agreement] clearly supports the district court's decision that plaintiffs were required to
submit to arbitration the question of whether the definition of “grievance” included a complaint
concerning alleged misrepresentations made by Continental Can with regard to the closing of
Plant No. 411. Having agreed to such a broad arbitration clause, plaintiffs are bound to submit
arguably extrinsic claims, such as fraud, to the grievance and arbitration process.”). Elsewhere,
Mason does address exhaustion under ERISA, but only in the context of whether the exhaustion
Further, and as the plaintiff argues, “[e]ven if the exhaustion [requirement]
applied to these non-ERISA claims, the defense is only available to Aetna, [n]ot
Rawlings. . . . Because Rawlings is not a party identified in the plan, and has no role
in administering the plan, it cannot avail itself of the exhaustion defense.” (Doc. 36
at 12) (emphasis omitted). The defendants do not respond to this argument in their
The plaintiff was not required to exhaust his administrative remedies before
filing suit. Having made that determination, the court will now address the
substantive arguments for dismissal.
Interference with Business/Contractual Relations (Count One)
In Count One, the plaintiff alleges:
41. Plaintiff had a business and/or contractual relationship with
tortfeasor Kelley, and her insurer Nationwide, and with his
uninsured/underinsured carriers Allstate and State Farm. That business
relationship resulted in a contract to settle his personal injury cause of
action and his claim for uninsured/underinsured insurance benefits in the
case of State Farm, and a relationship with Allstate that would have led
to a settlement contract with it, but for Rawlings[’s] interference.
requirement should only be applied to applications for or denials of benefits under the plan, or
also to claims involving violations of ERISA's statutory provisions. Id. at 1225. As noted by the
court: “The question is whether plaintiffs' claims for breach of defendants' fiduciary duties and
fraudulent use of the pension plan, claims grounded in statutory provisions of ERISA, should
have been brought first through the plan's appeals procedure.” Id. at 1226. The court held that
“plaintiffs must exhaust their remedies under the pension plan agreement before they may bring
their ERISA claims in federal court.” Id. at 1227. As noted above, this holding is now clearly
established law. Mason is distinguishable from the instant case, as the instant case is not a claim
for a violation of ERISA’s statutory provisions.
42. Aetna/Rawlings knew about these relationships, but were
strangers to them. Aetna/Rawlings had only a contractual subrogation
claim against Daily’s recovery in tort.
43. Aetna/Rawlings interfered with the business relationship and
contract between Daily and Nationwide/Allstate/State Farm by
threatening to sue if insurers did not satisfy Aetna’s complete
subrogation interest directly.
44. This has resulted in damage to [p]laintiff in that he does not have
the monies that he contracted for from the tortfeasor or her insurer
Nationwide, or [p]laintiff’s uninsured/underinsured carrier State Farm,
nor could he pursue a similar settlement with Allstate.
45. Not only has Rawlings/Aetna interfered with Daily’s contracts
and business relations, it has been done in a fashion that overstates the
amounts that may be claimed under any circumstance. Rawlings/Aetna
has sought to collect the entire subrogated amount, without accounting
for the payment of the expenses and fees necessary to create the fund to
which it claims to be subrogated to.
(Doc. 45-1 at 12-13).
In analyzing this claim, it is important to clarify:
Tortious interference with a contractual relationship and tortious
interference with a business relationship are “separate and distinct” torts.
White Sands Group, L.L.C. v. PRS II, LLC, 998 So.2d 1042, 1054
(Ala.2008) (“White Sands I”) (citation and internal quotation marks
omitted). A legal significance of that separation is that “the absence of
a valid contract is not fatal to [a] claim of tortious interference with a
business relationship.” Id. . . .
The elements of a cause of action for tortious interference with a
business relationship . . . are: “(1) the existence of a protectible business
relationship; (2) of which the defendant knew; (3) to which the
defendant was a stranger; (4) with which the defendant intentionally
interfered; and (5) damage.” White Sands Group, L.L.C. v. PRS II, LLC,
32 So.3d 5, 14 (Ala.2009) (“White Sands II ”). Tortious interference
with contractual relations, on the other hand, differs as to the first
element above because “[a] claim of tortious interference with a
contractual relationship presupposes the existence of an enforceable
contract.” [White Sands I, 998 So. 2d at 1054]. Otherwise, the elements
of both torts overlap. See generally Gross v. Lowder Realty Better
Homes & Gardens, 494 So.2d 590, 597 (Ala.1986) (pronouncing a rule
“broad enough to encompass both interference with business relations
and interference with contractual relations”), overruled on other grounds
in White Sands II, 32 So.3d at 14.
Hope For Families & Cmty. Serv., Inc. v. Warren, 721 F. Supp. 2d 1079, 1177 (M.D.
Ala. 2010). The defendants argue that Count One fails because the amended
complaint: 1) fails to allege “wrongful conduct” on the part of the defendants; 2) does
not establish that the defendants are strangers to the contracts/relationships at issue;
and 3) fails to set out “cognizable damages.”
Rawlings Is Aetna’s Agent and the Two Will be Treated as One
for the Purpose of Resolving this Motion
Count One treats Rawlings and Aetna as one entity. (See doc. 45-1 at 12-13)
(“Aetna/Rawlings knew;” “Aetna/Rawlings interfered;” etc.). However, when arguing
this count in its opposition brief, the plaintiff states that the two entities should be
treated differently. (See doc. 36 at 25) (“Rawlings is not a participant in any business
relationship between Daily and the tortfeasor/Nationwide or his insurance carriers;”
“It is important to note that separate interference claims have been brought against
Rawlings and Aetna. While Aetna at least has a singular contractual agreement with
Daily, Rawlings does not even have that.”).
The amended complaint alleges that “Rawlings was acting on behalf of Aetna,
[the Plan] administrator, and Aetna and Rawlings will be referred to collectively
sometimes herein as Aetna/Rawlings.” (Doc. 45-1 at 4). Based on these allegations,
whatever interference that occurred in this case was done by Rawlings as an agent for
Aetna. The Alabama Supreme Court has stated that “the alleged interferer is not a
stranger to the contract and thus not liable for tortious interference where the alleged
interferer was the agent for one of the parties . . . and all the purported acts of
interference were done within the scope of the interferer's duties as agent.” Waddell
& Reed, Inc. v. United Inv'rs Life Ins. Co., 875 So. 2d 1143, 1154 (Ala. 2003), as
modified on denial of reh'g (Sept. 5, 2003) (discussing contracts of insurance and
underwriters as agents) (internal citations and quotations omitted).
Based on this language, the court deems it appropriate to treat the two
defendants as one for purposes of deciding liability on this count. However Rawlings
may have interfered, it did so only through authority given it by its principal, Aetna.
Conversely, Aetna is liable for whatever interference Rawlings did as its agent.
On the Face of the Complaint, No Wrongful Conduct Is Alleged
This Issue Arises as Part of the Defendants’ Defense of
The defendants first argue that “[this] tort arises only in the context of wrongful
conduct” and that the alleged threat to sue was not wrongful. (Doc. 24 at 15).
However, as part of the plaintiff’s prima facie case, the plaintiff is not required to
prove that the defendant’s conduct was “wrongful” or “improper.” The nature of the
defendants’ “interference” only becomes an issue when determining whether a
defendant’s interference is “justified”–“an affirmative defense to be pleaded and
proved by the defendant.” Gross v. Lowder Realty Better Homes & Gardens, 494 So.
2d 590, 600 (Ala. 1986) overruled on other grounds by White Sands Grp., L.L.C. v.
PRS II, LLC, 32 So. 3d 5 (Ala. 2009).8 Still, “the existence of an affirmative defense
may be clear from the face of the pleadings, in which case a Rule 12(b)(6) dismissal
is appropriate.” Singleton v. Dep't of Corr., 277 F. App'x 921, 923 (11th Cir. 2008);
see also, Haddad v. Dudek, 784 F. Supp. 2d 1308, 1324 (M.D. Fla. 2011) (citing
Concordia v. Bendekovic, 693 F.2d 1073, 1075 (11th Cir.1982) (“[a] party may raise
an affirmative defense . . . in a Rule 12(b)(6) motion, where the existence of the
defense can be judged on the face of the complaint.”); Stephens v. State Farm Fire
and Cas. Co., No. 1:03–CV–3094–JTC, 2004 WL 5546250, at *1 (N.D. Ga. June 23,
Although Gross was overruled by White Sands II, the latter decision affirmed the above
quoted principles, stating:
[W]e consider it now to be well settled that the absence of justification is no part
of a plaintiff's prima facie case in proving wrongful interference with a business or
contractual relationship. Justification is an affirmative defense to be pleaded and
proved by the defendant.
White Sands II, 32 So. 3d at 12.
2004), aff'd, 149 Fed.Appx. 908 (11th Cir.2005).9
The Fact that the Defendants’ Conduct Was Justified
Appears on the Face of the Pleadings
In Gross, the Alabama Supreme Court explained:
Whether a defendant's interference is justified depends upon a balancing
of the importance of the objective of the interference against the
importance of the interest interfered with, taking into account the
surrounding circumstances. Restatement (Second) of Torts § 767 (1979),
and Comments. The restatement utilizes the term “improper” to describe
actionable conduct by a defendant. Non-justification is synonymous
with “improper”. If a defendant's interference is unjustified under the
circumstances of the case, it is improper. The converse is also true.
Section 767 of the Restatement lists, and the Comments explain, several
items that we consider to be among the important factors to consider in
determining whether a defendant's interference is justified:
(a) the nature of the actor's conduct,
(b) the actor's motive,
(c) the interests of the other with which the actor's conduct
(d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the
actor and the contractual interests of the other,
The phrase “on the face of the pleadings” is not limited to only the literal pleadings.
The motion is still a Rule 12(b)(6) motion, which allows the court to also consider documents
central to the plaintiff's claim which are also undisputed–i.e. the Plan. Horsley, 304 F.3d at
1134. Although the court has found no case directly on point, it sees no reason to ignore the
general rule simply because the motion is based on a defense. Accordingly, when the court uses
the phrase “on the face of the pleadings,” it should be understood to also be referencing the Plan.
(f) the proximity or remoteness of the actor's conduct to the
(g) the relations between the parties.
Restatement (Second) of Torts § 767 (1979).
Gross, 494 So. 2d at 597, n.3. White Sands II confirmed that, in Alabama, the
consideration of these factors is appropriate. White Sands II, 32 So. 3d at 12 (“‘nature
of the actor's conduct,’ . . . is one of the factors to be considered in determining
whether the interference is justified as stated in Gross.”).
Not only has Alabama adopted the approach set out by the Restatement, it has
also adopted the comments attached thereto. The White Sands II court approvingly
cited not only the above quoted language from Gross and the Restatement, it also
referenced and quoted comment c to section 767. Id. at 12-14. Although not all of
comment c of the Restatement is quoted in White Sands II (that court quoted only the
portion relevant to that case), it is clear to this court that the Alabama Supreme Court
has adopted, and would look to, all of comment c, and the other comments to the
Restatement, for guidance on this issue. Accordingly, this court will do so also.10
In this case, the amended complaint alleges that the alleged interference came
in the form of threats to sue. An analysis of the factors set out in the Restatement
reveals that, under the circumstances of this case, that conduct was justified.
No party contends that the comments are inapplicable.
The Nature of the Defendants’ Conduct
The plaintiff alleged that the defendants interfered with the settlement
agreements by “threatening to sue [the insurers] if [the] insurers did not satisfy
Aetna’s complete subrogation interest directly.” (Doc. 45-1 at 12). Comment c to the
Restatement discusses “the nature of the actor’s conduct,” and addresses such threats.
Prosecution of civil suits. In a very early instance of liability for
intentional interference, the means of inducement employed were threats
of “mayhem and suits,” and both types of threats were deemed tortious.
Litigation and the threat of litigation are powerful weapons. When
wrongfully instituted, litigation entails harmful consequences to the
public interest in judicial administration as well as to the actor's
adversaries. The use of these weapons of inducement is ordinarily
wrongful if the actor has no belief in the merit of the litigation or if,
though having some belief in its merit, he nevertheless institutes or
threatens to institute the litigation in bad faith, intending only to harass
the third parties and not to bring his claim to definitive adjudication.
(See §§ 674- 681B). A typical example of this situation is the case in
which the actor threatens the other's prospective customers with suit for
the infringement of his patent and either does not believe in the merit of
his claim or is determined not to risk an unfavorable judgment and to
rely for protection upon the force of his threats and harassment.
Restatement § 767 cmt. c.
In the instant case, the Plan is clear that Aetna may “pursue any claims that
[Daily] may have in order to recover the benefits paid by the [P]lan.” (Doc. 24-2 at
66). The Plan also expressly states that “[t]he [P]lan may assert a claim or file suit in
[Daily’s] name and take appropriate action to assert its subrogation claim, with or
without [Daily’s] consent.” (Doc. 24-2 at 66). Accordingly, it appears that the
defendants were only threatening to do what the Plan gave them authority to do.
Regardless, even if the defendants did not have the authority to sue under the Plan,
there are no facts alleged which show that the defendants knew that any threatened
litigation would have no merit.11 Further, no facts are pled showing that the
defendants threatened “to institute the litigation in bad faith,” or that they intended
“only to harass the third parties and not to bring [the] claim to definitive
adjudication.” This factor (“the nature of the defendant’s conduct”) weighs in favor
of the defendants.
The Defendants’ Motive12
The comments to the Restatement in part provide that
the injured party must show that the interference with his contractual
relations was either desired by the actor or known by him to be a
substantially certain result of his conduct. Intent alone, however, may
not be sufficient to make the interference improper, especially when it
is supplied by the actor's knowledge that the interference was a
As the defendants note, just because the plaintiff disagrees with the defendants’ rights
under the Plan, that does not mean that a threat of litigation is “wrongful” or “improper.” (See,
doc. 24 at 16; doc. 37 at 10).
Although the nature of the defendant’s conduct is “a chief factor in determining
whether the conduct is improper or not,” see, Restatement § 767 cmt. c., the court must also
consider the other factors set out in the Restatement, i.e. the actor's motive, the interests of the
other with which the actor's conduct interferes, the interests sought to be advanced by the actor,
the social interests in protecting the freedom of action of the actor and the contractual interests of
the other, the proximity or remoteness of the actor's conduct to the interference and the relations
between the parties.” Id. The parties have not argued these other factors.
necessary consequence of his conduct rather than by his desire to bring
it about. In determining whether the interference is improper, it may
become very important to ascertain whether the actor was motivated, in
whole or in part, by a desire to interfere with the other's contractual
relations. If this was the sole motive the interference is almost certain to
be held improper. A motive to injure another or to vent one's ill will on
him serves no socially useful purpose.
Restatement § 767 cmt. d. In this case, no facts are pled that show that the defendant
intentionally interfered with the alleged settlement agreement, solely for the sake of
interfering with the plaintiff’s contract, or otherwise injuring him. The defendants’
motives were not malicious–they were attempting to enforce contractual rights given
to them by the plaintiff. This factor weighs in favor of the defendants.
The Interests of the Other with Which the Actor's
Comment e provides:
Some contractual interests receive greater protection than others. Thus,
depending upon the relative significance of the other factors, the actor's
conduct in interfering with the other's prospective contractual relations
with a third party may be held to be not improper, although his
interference would be improper if it involved persuading the third party
to commit a breach of an existing contract with the other. (See, for
example, § 768). The result in the latter case is due in part to the greater
definiteness of the other's expectancy and his stronger claim to security
for it and in part to the lesser social utility of the actor's conduct. Again,
the fact that a contract violates public policy, as, for example, a contract
in unreasonable restraint of trade, or that its performance will enable the
party complaining of the interference to maintain a condition that shocks
the public conscience (see § 774), may justify an inducement of breach
that, in the absence of this fact, would be improper. Even with reference
to contracts not subject to these objections, however, it may be found to
be not improper to induce breach when the inducement is justified by the
other factors stated in this Section. (See, for example, § 770).
Restatement § 767 cmt. e (emphasis added).
There was no contract with AllState. As to any claim of interfering with that
relationship, this factor weighs in favor of the defendants.
The plaintiff claims that he had existing contracts with Nationwide and State
Farm in the form of settlement agreements. The allegations in the amended complaint
could be construed as an attempt, by the defendants, to persuade these other insurance
companies to commit a breach of their existing contracts with the plaintiff. However,
as noted in the comment, the interference “may be found to be not improper to induce
breach when the inducement is justified by the other factors stated in this Section.”
Id. As has already been noted, the Plan allows the defendants to engage in the exact
conduct described in the complaint, and the defendants did not interfere just to
interfere. Further, as will be shown below, there are other factors which also weigh
in favor of the defendants. Accordingly, despite the fact that the amended complaint
alleges interference with existing contracts, the court holds that this factor is either
neutral or weighs in favor of the defendants.
The Interests Sought to Be Advanced by the
Comment f provides in part:
Usually the actor's interest will be economic, seeking to acquire
business for himself. An interest of this type is important and will
normally prevail over a similar interest of the other if the actor does not
use wrongful means. (See § 768). If the interest of the other has been
already consolidated into the binding legal obligation of a contract,
however, that interest will normally outweigh the actor's own interest in
taking that established right from him. Of course, the interest in
gratifying one's feeling of ill will toward another carries no weight.
Some interests of the actor that do carry weight are depicted in §§ 770773.
Restatement § 767 cmt. f. In this case, as has been shown, the means employed by the
defendants was not wrongful–it was specifically allowed by the contract to which the
plaintiff (the actor alleged to have been wronged) was a party. And, as shown
previously, that interest trumps any alleged contract (or business relations) the
plaintiff may have thought he had with the other insurance companies. This factor
is either neutral or weighs in favor of the defendants.
The Social Interests in Protecting the Freedom of
Action of the Actor and the Contractual Interests
of the Other
Comment g provides:
Appraisal of the private interests of the persons involved may lead to a
stalemate unless the appraisal is enlightened by a consideration of the
social utility of these interests. Moreover, the rules stated in §§ 766766B deal with situations affecting both the existence and the plan of
competitive enterprise. The social interest in this enterprise may
frequently require the sacrifice of the claims of the individuals to
freedom from interference with their pursuit of gain. Thus it is thought
that the social interest in competition would be unduly prejudiced if one
were to be prohibited from in any manner persuading a competitor's
prospective customers not to deal with him. On the other hand, both
social and private interests concur in the determination that persuasion
only by suitable means is permissible, that predatory means like violence
and fraud are neither necessary nor desirable incidents of competition.
(See further § 768).
Restatement § 767 cmt. g.
Although the court is sensitive to the importance of protecting settlement
agreements, there is a strong policy argument for allowing the conduct which
occurred in this case. Allowing a subrogee to directly communicate with third party
insurers to negotiate its claim, when that right specifically exists in the contract the
plaintiff signs, protects and enforces a right to which all parties to the insurance
contract agreed. In Alabama, “[i]f the court determines that the terms are
unambiguous (susceptible of only one reasonable meaning), then the court will
presume that the parties intended what they stated and will enforce the contract as
written.” Homes of Legend, Inc. v. McCollough, 776 So. 2d 741, 746 (Ala. 2000).
Absent any argument from the parties that there is any ambiguous provision in the
agreement, it is not this court’s place to rewrite the contract.
Also, there are many reasons why an insurance company would require such
an agreement from its insured. Providing a mechanism for the collection, by the
subrogee, of its interest directly against third parties can help eliminate the situation
where an insurer has to seek reimbursement from its insured–a situation which could
lead to a strain on that relationship. Further, forcing a subrogee to wait until his
insured receives payment could lead to the situation where those funds are spent, or
otherwise encumbered by the subrogor, before the subrogee can be reimbursed.
Enforcing the contract as written gives all future contracting parties a measure of
certainty, so that the allocation of risk, reward, duties, and costs can be evaluated
more precisely. This ultimately leads to a savings to all parties.
Also, the benefit to allowing subrogees to participate in negotiations, by
communicating directly with insurers, can result in more streamlined, faster, and
possibly even larger, settlements. Third party insurers understand the liability
associated with not considering such interests, and are careful to consider them.
Indeed, as pled in the instant amended complaint, they were considered. (Doc. 45-1
at 5). This factor weighs in favor of the defendants.
The Relations Between the Parties
“The relation between the parties is often an important factor in determining
whether an interference is proper or improper.” Restatement § 767 cmt. i. As noted
previously, this is not the case of a competitor of the plaintiff interfering with his
right to receive any settlement proceeds from the third party insurers. Instead, as
noted, the defendants were attempting to enforce a subrogation interest given to them
by the plaintiff via the plaintiff’s contract with the defendants. Indeed, the Plan
provides that Aetna “stand[s] in the place of” the plaintiff with regards to “all rights
of recovery with respect to any claim or potential claim against any party.” (Doc. 242 at 66). Under the Plan, Daily and the defendants are the same party for purposes
of the subrogation interest. This factor weighs in favor of the defendants.
The Proximity or Remoteness of the Actor's
Conduct to the Interference
Comment h provides:
One who induces a third person not to perform his contract with another
interferes directly with the other's contractual relation. The interference
is an immediate consequence of the conduct, and the other factors need
not play as important a role in the determination that the actor's
interference was improper. The actor's conduct need not be predatory or
independently tortious, for example, and mere knowledge that this
consequence is substantially certain to result may be sufficient.
Restatement § 767, cmt. h. The defendants’ contact with the third party insurers,
entities which were parties to the settlement agreement with the plaintiff, directly led
to those defendants not performing on those contracts. This factor is the only factor
that weighs in favor of the plaintiff.
On the whole, this court holds that the Restatement factors weigh in favor of
The Plaintiff’s Arguments in Opposition to the Defense
Are of No Merit
In his response to the motion, the plaintiff acknowledges that the Plan provides
that Aetna may “pursue any claims that [Daily] may have in order to recover the
benefits paid by the [P]lan,” but then states that this language “purports to assign
‘reimbursement’ claims . . . as to the Plan. However, Daily has no ‘reimbursement’
claim. The contractual right to be reimbursed is the [P]lan’s claim against Daily.”
(Doc. 36 at 21, n. 10). This confusing argument is factually incorrect. The quoted
language comes directly from the section of the Plan entitled “Subrogation.” It clearly
references only subrogation. “Reimbursement” has its own subsection. The
defendants have a right, under the Plan, to assert their subrogation interest in this
The plaintiff also cites Blue Cross and Blue Shield of Alabama v. Freeman, 447
So. 2d 757, 760 (Ala. Civ. App. 1987) (“Freeman”) for the proposition that the
defendants cannot make a direct subrogation claim against third parties, and that the
underlying tort claim is not assignable. Freeman stands for neither proposition. In
Freeman, the plaintiff’s health insurer, Blue Cross, intervened in the plaintiff’s
personal injury action and “demanded judgment only against the recovery by
plaintiffs up to the amount of the benefits it had paid to plaintiff.” Freeman, 447 So.
2d at 758. The trial court granted conditional summary judgment “solely in favor of
Blue Cross for the amount of $1,585.40 and against any funds recovered by plaintiffs
from defendant[, the tortfeasor].” Id. Thereafter,
Blue Cross did not appear on the date set for trial. Its counsel previously
informed other counsel and the court that in view of its previous
judgment it would not appear at trial unless requested to do so.
On [the] trial date, April 14, 1983, the matter was settled, after
negotiations between original plaintiffs and defendant, for $13,000.
Judgment in that amount was entered on April 29, 1983, in favor of
plaintiffs. On April 27, plaintiffs filed a motion to assess against the
judgment of Blue Cross a pro rata share of attorney fees and expenses
incurred in the prosecution and recovery of the judgment against
The motion was heard by the court upon affidavit and argument,
and judgment in the amount of $573.16 rendered in favor of plaintiffs'
attorney on June 27, 1983. From that order Blue Cross  appealed.
The sole issue in Freeman was whether the subrogee, Blue Cross, in having its
counsel intervene to obtain a conditional judgment on its behalf, fell within an
exception to the “common fund doctrine,” because such intervention “assist[ed] in the
prosecution or contribute[d] toward the expense of the recovery of the fund.” Id. at
759. The court held that it did not. Id. Nothing in Freeman forbids a subrogee to
proceed directly against the funds-holder if it chooses to do so. Further, the case does
not stand for, or discuss, the proposition that “the underlying tort claim is not
assignable.” (Doc. 36 at 21).
The plaintiff next argues that, under Alabama law, any “assignment” of the
plaintiff’s personal injury claim to Aetna would be “ineffectual.” (Doc. 36 at 22-23).
The Supreme Court of Alabama has noted that, as to the right to recover for a purely
personal tort, the “general rule” is that “one cannot assign a personal injury action to
another or appoint an agent or attorney-in-fact to bring a personal injury lawsuit on
his behalf.” Miller v. Jackson Hosp. & Clinic, 776 So. 2d 122, 125 (Ala. 2000) (citing
Lowe v. Fulford, 442 So.2d 29, 32 (Ala.1983) (“ ‘It is ... well settled that, in the
absence of statutory provision, rights of action for torts purely personal do not
survive, and are not assignable.’ ”) (in turn quoting Holt v. Stollenwerck, 174 Ala.
213, 215, 56 So. 912 (1911))). However, as noted by the plaintiff in two cases he
cites, subrogation is different from assignment.
First, the plaintiff quotes the following language from Alabama Farm Bureau
Mut. Cas. Ins. Co. v. Anderson, 48 Ala. App. 172, 177, 263 So. 2d 149, 154 (Civ.
App. 1972) (Anderson):13
[A] subrogation clause limited only to a portion of the proceeds of a
personal injury claim sufficient to reimburse the insurance carrier for the
indemnity paid its insured under a medical coverage provision, does not
constitute an assignment of the cause of action of the insured against the
(Doc. 36 at 22) (emphasis added) (quoting Anderson, 263 So. 2d at 154).14 Next, he
In his brief, the plaintiff incorrectly cites the title of this case as “Alabama Farm
Bureau v. Floyd.” (Doc. 36 at 22). The defendant’s name in that case is Floyd Anderson.
The plaintiff notes that the subrogation language in Anderson was indistinguishable
from that in the instant case. (Doc. 36 at 22, n. 11).
cites Ex parte State Farm Mut. Auto. Ins. Co., 118 So. 3d 699, 704 (Ala. 2012), for
the exact same proposition. (Doc. 36 at 22); see also, Alabama Farm Bureau Mut.
Cas. Ins. Co. v. Williams, 365 So. 2d 315, 317 (Ala. Civ. App. 1978) (Williams)
(“[P]olicy provisions for subrogation of the insurer to the right of the insured to
recover medical benefits from a tortfeasor after payment under the policy [are] valid
and enforceable in this state.”). Daily cites no authority for the proposition that a
subrogation clause constitutes an impermissible assignment under Alabama law.
Finally, the plaintiff argues that the subrogation clause operates to “split” the
plaintiff’s “cause of action for medical payment reimbursement . . . from the tort
claim,” in violation of Alabama law. (Doc. 36 at 23). However, the Alabama Court
of Civil Appeals has held that subrogation clauses do no such thing. Anderson, 263
So. 2d at 154 (“Nor do we consider that the subrogation clause provides for a splitting
of the cause of action, since, there being no assignment as to the cause of action, only
one action may be maintained against the tort-feasor.”).15
Because, as pled, it is clear that the defendants were justified in their actions,
there is no claim for interference. Count One will be dismissed.
The Defendants Were Not Strangers to the Plaintiff’s
Again, the plaintiff makes this argument and then cites Anderson, and the language
quoted by this court above, which directly refutes his argument.
Count One is also due to be dismissed for the additional and alternative reason
that the defendants are not strangers to the contracts or business relationships at issue.
“[A] party to a contract cannot be charged with interfering with that contract.” Ex
parte Blue Cross & Blue Shield of Alabama, 773 So. 2d 475, 480 (Ala. 2000) (citing
Bama Budweiser of Montgomery, Inc. v. Anheuser–Busch, Inc., 611 So.2d 238
(Ala.1992), and Lolley v. Howell, 504 So.2d 253 (Ala.1987)). While the plaintiff
argues that “neither Aetna [nor] Rawlings have contracts with the third party
insurers” (doc. 36 at 24), Alabama law is clear that “[o]ne is not a stranger to the
contract just because one is not a party to the contract.” Waddell, 875 So. 2d at 1154.
“[W]hen tripartite relationships exist and disputes arise between two of the three
parties, then a claim alleging interference by the third party that arises from conduct
by the third party that is appropriate under its contract with the other two parties is
not recognized.” Waddell, 875 So. 2d at 1153 (internal citations and quotations
The defendants cite Ex parte Blue Cross & Blue Shield of Alabama, and contend that
the conduct in the instant case is the same type of tripartite relationship as was present there. In
that case, Blue Cross wrote a letter to two of its own insureds who were also patients of the same
dentist. Each letter “explain[ed] to the particular patient that Blue Cross was denying payment
for certain procedures performed on the patient on the ground that the procedures were outside
the scope of [their dentist’s] license as a dentist.” Ex parte Blue Cross & Blue Shield of
Alabama, 773 So. 2d at 477. The dentist sued Blue Cross, in part, for interfering with his
contractual relations with his patients. The court wrote:
[W]hile Dr. Guthrie charged Blue Cross with interfering with his contractual
relations with his patients . . . , Blue Cross was, itself, a party to these same
The plaintiff argues that “neither Aetna [nor] Rawlings have contracts with the
third party insurers.” (Doc. 36 at 24). However, Daily ignores the fact that, in this
case, the Plan provides that Aetna (and, by extension, its agent–Rawlings) “stand[s]
in the place of” the plaintiff with regards to “all rights of recovery with respect to any
claim or potential claim against any party.” (Doc. 24-2 at 66). These entities are the
plaintiff, for purposes of any settlement, and therefore are parties to the settlement
contracts he negotiated, and business relationships in which he participated.17
contractual relations. The record establishes both explicitly and implicitly that Dr.
Guthrie and his patients contracted together in reliance on the contractual
obligation of Blue Cross to pay for dental services covered by the policy between
Blue Cross and the patients. Interdependent contractual relations existed among
Dr. Guthrie, his patients, and Blue Cross. This contractual situation invokes the
rule that a party to a contract cannot be charged with interfering with that contract.
Bama Budweiser of Montgomery, Inc. v. Anheuser–Busch, Inc., 611 So.2d 238
(Ala.1992), and Lolley v. Howell, 504 So.2d 253 (Ala.1987). While the rights and
duties between different sets of parties to a multiparty contract may differ and the
respective interests of the parties may compete, the performance of one of the
duties or the pursuit of one of the competing interests cannot be validly branded as
Id. at 480. The instant case does not present the same type of “interdependent” contracts that
were at issue in Ex Parte Blue Cross. In Ex Parte Blue Cross “Dr. Guthrie and his patients
contracted together in reliance on the contractual obligation of Blue Cross to pay for dental
services.” Id. It was the contract for dental services which allegedly had been interfered with,
and which had been dependant on Blue Cross’s agreement with the patient. In the instant case,
Daily has a contract with the Aetna, and, by extension, Rawlings. But Daily’s settlement
discussions with the third party insurers (the relationships that are alleged to have been interfered
with) were not “dependent” on any obligation on the part of Aetna or Rawlings.
Even if they did not stand in the place of the plaintiff, “[a] person with a direct
economic interest in the contract is not a stranger to the contract.” Waddell, 875 So. 2d at 1157.
The defendants’ subrogation interest provides them with a very real and direct economic interest
in the settlement negotiations, and, of course, in the settlements themselves. The same rationale
applies to any alleged interference with business relations. See, Tom's Foods, Inc. v. Carn, 896
The plaintiff also argues that the only legitimate interest the defendants have
is a lien on whatever the plaintiff recovers, less the costs of that recovery. (Doc. 36
at 26-28). Under the Plan, that is simply not the case. The Plan allows the defendants
to “assert a claim or file suit in [Daily’s] name and take appropriate action to assert
its subrogation claims, with or without [Daily’s] consent.” (Doc. 24-2 at 66). Again,
the defendants are Daily for the purposes of their subrogation interest in any
settlement. Further, based on this language, the defendants need not wait for Daily to
recover anything before protecting their interest.18
Importantly, the plaintiff cites no case (and this court has not found such a
case) from any jurisdiction, where a subrogee has been held liable for intentional
interference under similar circumstances. The defendants are not strangers to the
So. 2d 443, 454 (Ala. 2004) (“[a] defendant is a party in interest to a [business or contractual]
relationship if the defendant has any beneficial or economic interest in, or control over, that
relationship.”) (internal citations and quotes omitted).
Also, it strains credulity to argue, as the plaintiff does, that “Aetna/Rawlings are not
essential to the settlement of Daily’s tort claim. They have no role in that dispute or its
settlement.” (Doc. 36 at 25). It is common knowledge that subrogation interests are always a
factor which are taken into account in negotiating settlements. Indeed, the amended complaint
states that the claim with Nationwide was not settled until after that entity received confirmation
of the amount of Aetna’s interest. (Doc. 45-1 at 5). It also notes that “[o]n December 1, 2014,
counsel for Mr. Daily received a letter from Allstate agreeing to waive its subrogation interest,
and advising him to accept the Nationwide offer.” (Doc. 45-1 at 5) (emphasis added).
The plaintiff cites Ex Parte State Farm Mutual, 118 So. 3d 699 (Ala. 2012), for the
proposition that “tort settlement proceeds constitute a common fund.” (Doc. 36 at 27). From
this, he argues that the defendants must pay a pro-rata share of the attorney’s fees earned in the
creation of the settlement. Whatever the merits of this argument, it has no application to
whether or not the defendants had some economic interest in the settlement.
The Fair Debt Collection Practices Act Claim (Count Two)
Count Two alleges:
Rawlings is a “debt collector” under 15 U.S.C. §1692 a(6).
48. The obligation that Rawlings has attempted to collect
Aetna’s subrogation interest is a debt pursuant to 15 U.S.C. §1692 a(5).
49. Rawlings attempted to collect Aetna’s subrogation interest
after a settlement had been reached, but before the proceeds from
Nationwide, Allstate, and State Farm has been paid to Daily, through his
attorney. As such, those collection efforts were an attempt, by debt
collector, to collect a debt, subject to all of the protections of the
FDCPA. Rawlings’ actions in attempting to collect this debt violate the
FDCPA in the following specifics:
Rawlings’ communications with Nationwide, Allstate, and
State Farm violated 15 U.S.C. §1692c in that they are
communications with a third party about the debt without
the consent of the debtor.
To the extent Rawlings communicated after a settlement
had been consummated, but before monies could be paid,
Rawlings failed to notify Mr. Daily in its initial
communication through counsel, that its contacts were an
attempt to collect a debt.
50. Rawlings’ communications with Nationwide, Allstate, and
State Farm are not merely technical violations of the FDCPA, but have
real practical, detrimental consequences on tort victims like Mr. Daily.
By asserting, wrongly, that Aetna has any right to recover any money
In light of this court’s holdings as to the defendants’ defense, and whether the
defendants were “strangers” to the contract, it will not address the defendants’ argument (nor the
plaintiff’s response at doc. 36 pp. 28-32) that the plaintiff has not alleged “cognizable damages.”
directly from tortfeasors and their insurance companies, Rawlings
wrongfully alleges that the insurance companies or tortfeasors will be
subject to liability if they pay monies directly to Aetna insureds. And it
knows better, or should know better. The fact of the matter is that
Rawlings has no cause of action against tortfeasors or their insurance
companies directly, and its insistence changes the leverage of a
negotiation between the tort victim and subrogation claimant, taking
leverage away from the tortfeasor who, without this misrepresentation
of the law, would be free to tell Rawlings that if it does not reduce its
lien to an acceptable amount, the tort victim will not pursue an otherwise
valid action, leaving Rawlings with no tort recovery to subrogate to.
Instead, tortfeasors’ insurance companies will not settle cases unless
Rawlings’ demands are met, meaning tort victims like Daily have no
contested claim that is the fulcrum to a negotiation with Aetna/Rawlings
to reduce its demand.
(Doc. 45-1 at 13-15).
The section cited by the plaintiff (15 U.S.C. § 1692c) sets out certain
requirements that a “debt collector” must follow prior to collecting a “debt.” 15
U.S.C. § 1692c. Rawlings argues that the subrogation interest it sought to collect is
not a “debt” within the meaning of the statute, and that, even if it is, Rawlings is not
a “debt collector.”
The Subrogation Interest in This Case Is a “Debt.”
The defendants urge the court to apply the Eleventh Circuit’s holding in
Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367, 1371 (11th Cir. 1998), which
addressed subrogation in a slightly different context than the instant case. In
Hawthorne was involved in an accident, allegedly resulting from her
negligence. Liberty Mutual Insurance Company (“Liberty Mutual”)
insured the other party to the accident, who was damaged in the amount
of $2,020.18. After paying its insured's claim, Liberty Mutual then
provided Mac Adjustment with subrogation rights to the $2,020.18 it
claimed Hawthorne owed. On June 5, 1996, Mac Adjustment sent
Hawthorne a letter requesting payment of the subrogation claim incurred
by Liberty Mutual.
Hawthorne, 140 F.3d at 1369. The letter sent by Mac Adjustment was the basis for
Hawthorne’s FDCPA claim. In finding that there was no FDCPA claim, the Eleventh
The FDCPA defines “debt,” . . . as “any obligation or alleged obligation
of a consumer to pay money arising out of a transaction in which the
money, property, insurance, or services which are the subject of the
transaction are primarily for personal, family, or household purposes,
whether or not such obligation has been reduced to a judgment.” 15
U.S.C. § 1692a(5).
By the plain terms of the statute, not all obligations to pay are
considered “debts” subject to the FDCPA. See Bass v. Stolper,
Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1324 (7th
Cir.1997). Rather, the FDCPA may be triggered only when an obligation
to pay arises out of a specified “transaction.” Although the statute does
not define the term “transaction,” we do not find it ambiguous. A
fundamental canon of statutory construction directs us to interpret words
according to their ordinary meaning. See Anderson v. Singletary, 111
F.3d 801, 804 (11th Cir.1997) (citing Perrin v. United States, 444 U.S.
37, 42, 100 S.Ct. 311, 314, 62 L.Ed.2d 199 (1979)). The ordinary
meaning of “transaction” necessarily implies some type of business
dealing between parties. See Webster's New Collegiate Dictionary 1230
(1979) (defining “transaction” as “a business deal”); Bass, 111 F.3d at
1325 (citing Webster's New World Dictionary 1509 (2d ed. 1986)). In
other words, when we speak of “transactions,” we refer to consensual or
contractual arrangements, not damage obligations thrust upon one as a
result of no more than her own negligence. See Bass, 111 F.3d at 1326
(“[T]he FDCPA limits its reach to those obligations to pay arising from
consensual transactions, where parties negotiate or contract for
consumer-related goods or services.”). While we do not hold that every
consensual or business dealing constitutes a “transaction” triggering
application of the FDCPA (such a holding would be contrary to the plain
language of the statute limiting applicability to specified transactions,
as well as to other portions of the statute not relevant to this analysis,
which require the existence of other conditions before the FDCPA
applies), at a minimum, a “transaction” under the FDCPA must involve
some kind of business dealing or other consensual obligation.
Hawthorne, 140 F.3d at 1371. The court went on to hold that the subrogation
interest, was an “obligation to pay . . . damages arising out of an accident [which]
does not arise out of any consensual or business dealing.” Id. Therefore it “plainly .
. . does not constitute a ‘transaction’ under the FDCPA.” Id.; see also, Schaefer v.
Seattle Serv. Bureau, Inc., No. 2:15-CV-444-FTM-38CM, 2015 WL 9031511, at *4
(M.D. Fla. Dec. 16, 2015) (Chappell, J.) (applying Hawthorne and finding no
transaction and no consumer debt in subrogation interest).
The plaintiff argues that this court should instead follow the Fifth Circuit’s
decision in Hamilton v. United Healthcare of Louisiana, Inc., 310 F.3d 385, 387 (5th
Cir. 2002) (Hamilton I), which dealt with facts more similar to the instant case. The
court explained the facts of that case as follows:
In October of 1999, Hamilton was seriously injured in a
single-vehicle automobile accident in which he was a passenger. As a
result of the accident, Hamilton required medical and other treatment.
Defendant, United Healthcare of Louisiana, Inc. (“United”), had in force
a group health plan, offered through Hamilton's father's employer,
pursuant to which Hamilton was insured as a dependent. Pursuant to that
coverage, United paid for certain of the medical and other services
necessitated by the accident, allegedly totaling in excess of $100,000. At
the time of the accident, Hamilton's father also had in effect uninsured
and/or underinsured motorist (“UM”) coverage pursuant to two polices
with State Farm Insurance Company (“State Farm”). State Farm paid
nearly $250,000 in UM benefits and $5,000 in MedPay benefits to
Hamilton pursuant to those policies. Shortly thereafter, HRI, acting
pursuant to its contract with United, began sending notices to Hamilton's
father and State Farm in an attempt to enforce subrogation rights that
United claimed to have against any of the proceeds that Hamilton might
receive from third parties, including his own insurer State Farm. State
Farm, through Hamilton's counsel, subsequently paid $57,757.06 out of
the $250,000 UM policy proceeds, to which Hamilton would have
otherwise been entitled, to HRI on behalf of United. Hamilton then
retained new counsel who attempted to recover the monies that United
had obtained from State Farm. . . . Hamilton alleged that HRI's acts
during its recovery of funds from himself and others violates the
FDCPA . . ..
Hamilton, 310 F.3d at 387-88. The Fifth Circuit, acknowledging and addressing the
Eleventh Circuit’s opinion in Hawthorne, wrote:
We cannot avoid the inescapable conclusion that the plain meaning of
“debt” encompasses the funds owed in this case. There is no question
that the obligation to pay arose out of Hamilton's transaction of
purchasing insurance. HRI is simply incorrect in its assertion that the
obligation to pay arose out of a tortious act. Hawthorne itself suggests
that Hamilton's obligations arose out of a consumer transaction for
purposes of the FDCPA. As opposed to Hawthorne, where Hawthorne's
obligations arose from tort law, Hamilton's obligations arose from a
business transaction where Hamilton contracted for personal and family
services, i.e., insurance. Moreover, the plain meaning of “arising out of”
as “stemming from” leads us to conclude that the obligation to pay arose
from the contract/transaction for insurance.
Id. at 392.
Hawthorne, which is binding precedent in this circuit, does not stand for the
proposition that no subrogation interest can be a “debt.” It merely explains that a
subrogation interest is not a “debt” unless it is “a specified ‘transaction,’” which
involves “some type of business dealing between parties,” and “not damage
obligations thrust upon one as a result of no more than her own negligence.”
Hawthorne, 140 F.3d at 1371. The court holds that the funds owed in this case, like
those in Hamilton I, are owed as a result of “a specified ‘transaction,’” which
involves “some type of business dealing between parties,” and “not damage
obligations thrust upon one as a result of no more than her own negligence.” Id. at
1371. In Hawthorne, the plaintiff owed funds because he caused the underlying
accident. In this case, the plaintiff owes funds as a result of a contract to which the
plaintiff was a party. Thus, Hawthorne is distinguishable. The court holds that the
interest in this case is a “debt” under the FDCPA.
Rawlings Is Not a Debt Collector
Regardless, the plaintiff still cannot recover under this claim because Rawlings
is not a “debt collector” under the FDCPA. The term “debt collector” means "any
person who uses any instrumentality of interstate commerce or the mails in any
business the principal purpose of which is the collection of any debts, or who
regularly collects or attempts to collect, directly or indirectly, debts owed or due or
asserted to be owed or due another." 15 U.S.C. §1692a(6). However, the term does
not include “any person collecting or attempting to collect any debt owed or due or
asserted to be owed or due another to the extent such activity . . . concerns a debt
which was not in default at the time it was obtained by such person.” 15 U.S.C.
In Hamilton v. Trover Solutions, Inc. 2003 WL 21105100 (E.D. La. May 13,
2003) (Hamilton II), the Eastern District of Louisiana addressed, for a second time,
the issues which had arisen in Hamilton I, cited above. In this second opinion, the
court explained that a subrogation interest, such as that in the instant case, is “not in
default” because it is not possible for the plaintiff to be in default until he began
receiving payments from third parties. Hamilton v. Trover Sols., Inc., No. CIV.A.
01-650, 2003 WL 21105100, at *3 (E.D. La. May 13, 2003) aff'd, 104 F. App'x 942
(5th Cir. 2004)20; see also, Hamilton v. Avectus Health Care Sols., LLC, No.
5:13-CV-01967-SGC, 2015 WL 5693610, at *9 (N.D. Ala. Sept. 29, 2015)
The plaintiff refers to the Fifth Circuit’s affirmance of this case as “Hamilton II.” This
court has not cited the Fifth Circuit opinion as it adds nothing to this discussion. See Hamilton v.
Trover Sols., Inc., 104 F. App'x 942, 944 (5th Cir. 2004) (“For the reasons given by the district
court, we agree that Trover Solutions is not a ‘debt collector’ under the FDCPA. The undisputed
evidence shows that Trover Solutions obtained the responsibility to recover Hamilton's debt prior
to that debt being in default.”).
(Cornelius, M.J.) (citing Hamilton II, and holding that debt to hospital, on which
hospital had a lien against recovery from third parties, could not have been in default
under FDCPA until plaintiff received payments from the insurers); Kesselman v. The
Rawlings Co., LLC, 668 F. Supp. 2d 604, 612 (S.D.N.Y. 2009) (Jones, J.)(citing
Hamilton II, and holding that “[p]laintiffs do not allege the existence of any debt that
was in default [under the FDCPA] at the time it was obtained by the Subrogation
Agent [d]efendants. The earliest date the [p]laintiffs' debts could have been in default
was the date they first received payment from any third parties in connection with
their motor vehicle accidents.”).21
The court is persuaded by the opinions cited above. It is alleged that the
plaintiff in the instant case has recovered no payments from third parties, and so his
“debt” is not in default. The exception in Section 1692a(6)(F)(iii) applies and, in this
case, Rawlings is not a debt collector. For that reason, there is no FDCPA claim and
Count Two is due to be dismissed.22
The Unauthorized Practice of Law Claim (Count Three)
In order to state a claim for the unauthorized practice of law, the plaintiff must
There is no merit to the plaintiff’s argument that, because the defendants claim an
obligation to be paid directly from third parties, the debt is already in default. (See doc. 36 at
There is no merit to the plaintiff’s judicial estoppel argument. (Doc. 36 at 16). The
defendants’ argument regarding Counts One and Two are not inconsistent.
allege that: 1) Rawlings was not licensed to practice law in Alabama; 2) Rawlings
made representations concerning the law; and 3) the plaintiff was injured as a result
of those representations. Fogarty v. Parker, Poe, Adams & Bernstein, L.L.P., 961 So.
2d 784, 790 (Ala. 2006), as modified on denial of reh'g (Jan. 12, 2007). Rawlings
argues only that the plaintiff has failed to prove damages as a result of any alleged
representations concerning the law. (Doc. 24 at 24-26). It is correct. The only
damages alleged in the amended complaint are the plaintiff’s failure to receive the
settlement funds for which he states he contracted. However, these damages come
only from the alleged interference with those contracts by the defendants, not from
alleged legal representations made to the plaintiff.23
Further, there is no merit in the plaintiff’s argument that Rule 8 only requires
him to plead damages generally. (Doc. 36 at 15). The plaintiff cites Cochran v. Five
Points Temporaries, LLC, 907 F. Supp. 2d 1260, 1280 (N.D. Ala. 2012), for the
proposition that “a general statement of . . . damages is sufficient to prevail in a
motion to dismiss.” (Doc. 36 at 15) (quoting Cochran v. Five Points Temporaries,
The amended complaint states:
As a result of Rawlings/Aetna’s interference, Daily does not have the
$125,000.00 in settlement funds that he has contracted for, or what funds he
would have had as the result of his insurance policy with Allstate.
(Doc. 45-1 at 8) (emphasis added).
LLC, 907 F. Supp. 2d 1260, 1280 (N.D. Ala. 2012). However, when read in context,
the court was discussing pleading the Alabama state claim for “breach of contract,”
from which “general damages do not have to be specifically plead because they are
considered to flow naturally and necessarily from the alleged wrongful act.” Cochran,
907 F. Supp. 2d 1280.
In that very same case, in dealing with a separate claim, the court dismissed the
plaintiff’s claim for unlawful interference, for failing to adequately state damages. It
[A] cause of action in Alabama for unlawful interference with business
relations includes the element of damages. . . . The Alabama Supreme
Court has held that damages for unlawful interference may include
emotional distress, as long as it is “reasonably to be expected to result
from the interference.” . . . Although plaintiff states that she suffered
emotional distress as a result of defendants' Motion to Disqualify, Count
VIII is due to be dismissed because it fails to state a plausible claim. See
Speaker v. United States Dept. of Health and Human Servs. Centers for
Disease Control & Prevention, 623 F.3d 1371, 1381 (11th Cir.2010)
(“[G]iven the pleading standards announced in Twombly and Iqbal,
[plaintiff] must do more than recite these statutory elements in
conclusory fashion. Rather, [her] allegations must proffer enough factual
content to ‘raise a right to relief above the speculative level.’ ” (quoting
Twombly, 550 U.S. at 555, 127 S.Ct. 1955)). Count VIII of the Amended
Complaint states that defendants' alleged intentional interference
“further proximately caus[ed] injuries to [p]laintiff—even more
emotional distress.” (Doc. 36 ¶ 164.) This statement implies that the
claim for intentional interference is not the only complained of conduct
by defendants causing plaintiff to endure emotional distress. Indeed, the
only other mention of such damages is under plaintiff's claim for
“additional unlawful retaliation” under Title VII and § 1981, which is
also based on defendants' Motion to Disqualify: “The above-described
additional retaliatory conduct on the part of [d]efendants has injured
[p]laintiff, causing her even more emotional distress.” (Doc. 36 ¶ 159.)
Aside from these two conclusory statements, the Amended Complaint
does not allege facts reflecting that plaintiff suffered emotionally due to
defendants' Motion to Disqualify or for any other reason. The Amended
Complaint does not make any other reference to the Motion to
Disqualify except in Counts VII and VIII. Moreover, the business
relationship between plaintiff and the Frederick Firm was never severed,
a fact which further erodes the plausibility of plaintiff's claim. Plaintiff's
assertion of “even more emotional distress” does not constitute damages
reasonably expected to result from the alleged intentional interference.
Thus, Count VIII will be dismissed.
Cochran v. Five Points Temporaries, LLC, 907 F. Supp. 2d 1260, 1275 (N.D. Ala.
Like in Cochran, in the instant case “damages” flowing from the defendants’
alleged legal representation are an element of the claim for the unauthorized practice
of law. The only damages alleged in this case, the failure of settlement funds to be
paid, flow from the interference claim, not from the fact that Rawlings
representatives, who allegedly were not lawyers, engaged in the unauthorized practice
of law.24 Count Three is due to be dismissed.
The plaintiff also cites Resnick v. AvMed, Inc., 693 F.3d 1317 (11th Cir. 2012), for the
proposition that “[a]n allegation that plaintiff suffered ‘financial injury’ [is] sufficient.” (Doc. 36
at 15). Importantly, in that case, the court noted that “[p]laintiffs allege that they have become
victims of identity theft and have suffered monetary damages as a result. This constitutes an
injury in fact under the law.” Resnick, 693 F.3d at 1323. First, the court, in that passage, was
addressing whether the plaintiff therein had “standing”–not whether it sufficiently stated a claim.
Indeed, the court specifically noted: “At the pleading stage, general factual allegations of injury
resulting from the defendant's conduct may suffice to establish standing. Id.(emphasis added).
Second, Resnick is distinguishable on its facts as, in the instant case, there are no allegations of
financial injury flowing from the tort of unauthorized practice. The amended complaint in this
For the above stated reasons, Counts One, Two, and Three are due to be, and
will be, DISMISSED with prejudice. Count Four, which alleges only relief, will also
be dismissed as having no substantive basis in the absence of the other three counts.
A final order will be entered. The motion to amend will be DENIED as futile. The
motion to stay will be DENIED as moot.
DONE and ORDERED this 15th day of January, 2016.
VIRGINIA EMERSON HOPKINS
United States District Judge
case merely alleges that “[the] [p]laintiff and the class have been damaged.” (Doc. 45-1 at 18).
Such damages seem particularly unlikely in this case, as it is clear from the amended complaint
and the plaintiff’s brief that, at all relevant times, the plaintiff was represented by his own
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