Georgia-Pacific Consumer Products LP et al v. Zurich American Insurance Co. et al
ORDER denying 121 Motion to Dismiss; denying 187 Motion to Dismiss. Signed by Chief Judge William H. Steele on 4/25/2016. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
PRODUCTS LP, etc., et al.,
ZURICH AMERICAN INSURANCE
COMPANY, etc., et al.,
) CIVIL ACTION 15-0342-WS-B
This matter is before the Court on the motion of defendant National Union
Fire Insurance Company of Pittsburgh, Pa. (“National”) to dismiss. (Doc. 121).
The parties have filed briefs and exhibits in support of their respective positions,
(Docs. 121, 133, 143, 145, 152), and the motion is ripe for resolution. After
careful consideration, the Court concludes the motion is due to be denied.
According to the third amended complaint, (Doc. 182) (“the complaint”),1
the entity plaintiff (“GP”) operates a paper mill facility in Choctaw County. One
defendant (“S&S”) contracted with GP to perform work at the facility, in the
The motion to dismiss is directed toward the second amended complaint. (Doc.
85). Following the completion of briefing, the plaintiffs filed a motion for leave to file a
third amended complaint. (Doc. 155). After all defendants declined the opportunity to
object, the Court granted the motion. (Doc. 181). As National recognizes, (Doc. 143 at
5), the third amended complaint, (Doc. 182), is thus now the operative pleading. E.g.,
Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011) (“[U]nder the
Federal Rules of Civil Procedure, an amended complaint supersedes the initial complaint
and becomes the operative pleading in the case ….”) (internal quotes omitted). However,
because the third amended complaint makes no changes material to National’s motion to
dismiss, (Docs. 155, 188), its motion can and will be decided without re-briefing. (Doc.
course of which an employee of S&S was killed. S&S had agreed to obtain
insurance in favor of GP and its officers and agents (including the individual
plaintiff). National issued an excess/umbrella policy but refused to investigate the
matter or provide coverage and refused to participate in the ultimate settlement of
the underlying lawsuit.
The complaint asserts claims against National for: breach of contract
(Count One); negligence (Count Two); bad faith (Count Three); abnormal bad
faith (Count Four); and declaratory relief (Count Nine).
I. Breach of Contract.
According to the second amended complaint, (Doc. 85), the contract
between GP and S&S included a master service agreement (“MSA”), which
required S&S to obtain various insurance policies/coverages. (Id. at 6). National
asserts that the MSA at issue is one dated June 5, 2007. (Doc. 121 at 4; Doc. 1212). The plaintiffs respond that the MSA on which they sue is one dated December
1, 2008. (Doc. 133 at 4; Doc. 133-1 at 7-12). The language on which National
relies in support of its motion to dismiss appears in the June 2007 MSA but not in
the December 2008 MSA, so the question is of some consequence.
As the Court has previously explained, the second amended complaint “in
pellucid language” identifies the December 2008 MSA as the MSA on which the
plaintiffs rely. (Doc. 188 at 2). National’s misdirected focus on a different MSA
cannot support its motion to dismiss.
In its reply brief, after the plaintiffs pointed out its error, National shifts its
focus to the December 2008 MSA. (Doc. 143 at 2-5). Because the language from
the June 2007 MSA that forms the basis of National’s motion to dismiss is absent
from the December 2008 MSA, National is left to present completely new
arguments as to how the MSA negates the plaintiffs’ contract claim. “District
courts, including this one, ordinarily do not consider arguments raised for the first
time on reply.” Gross-Jones v. Mercy Medical, 874 F. Supp. 2d 1319, 1330 n.8
(S.D. Ala. 2012) (citing cases and explaining rationale). National proposes that its
tardy argument nevertheless should be considered because the second amended
complaint left National “guessing” as to which MSA the plaintiffs contended was
controlling. (Doc. 152 at 1). For reasons the Court has already expressed,
however, the second amended complaint, like its predecessors, was perfectly clear
that the December 2008 MSA is the one in issue. (Doc. 188). National was not
left to guess, and its election to ignore the December 2008 MSA was made at its
National argues that the language in the June 2007 MSA also appears in the
online terms and conditions that are part of the purchase order and thus part of the
relevant contract. (Doc. 121 at 6, 16). The plaintiffs respond that, pursuant to the
terms of the purchase order, the relevant terms and conditions are not those
appearing online but those appearing in the December 2008 MSA. (Doc. 133 at 7,
The purchase order provides that the online terms and conditions apply, but
only “[u]nless expressly subject to a written agreement signed by both Buyer and
Supplier.” (Doc. 1-1 at 4, 5). The December 2008 MSA – which apparently
addresses most if not all of the matters addressed in the online terms and
Moreover, the Court cannot consider the 2007 MSA without converting
National’s motion into one for summary judgment, which it declines to do. “[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.” Horsley v. Feldt, 304 F.3d 1125,
1134 (11th Cir. 2002) (emphasis added). “‘Undisputed’ in this context means that the
authenticity of the document is not challenged.” Id. The authenticity of a document is
challenged, inter alia, when the plaintiff disputes whether the document is the one
“referred to in his complaint.” Id. at 1135. Viewing the matter most favorably to
National, that is the situation presented here.
Even were the 2007 MSA properly before the Court, both sides present
documents beyond the complaint in an effort to show that their preferred version of the
MSA is the one actually made part of the contract. The Court cannot consider such
materials without converting National’s motion into one for summary judgment, Fed. R.
Civ. P. 12(d), which it declines to do.
conditions – appears to be signed by GP (or a related entity) and S&S. (Id. at 6-9).
Moreover, the purchase order also provides that “[t]he terms and conditions of
Georgia-Pacific’s Form 7141 shall supersede those herein and apply as the terms
and conditions of this purchase order,” (id. at 3), and the December 2008 MSA
indicates on its face that it is a Form 7141. (Id. at 6).3 The plaintiffs rely on the
quoted language. If the plaintiffs are correct and the online terms and conditions
do not apply, National’s argument cannot succeed. The parties’ arguments in
favor of their respective positions rest in part on the content of various documents
beyond the pleadings.
For reasons set forth in note 2, supra, the Court thus cannot resolve this issue
without converting National’s motion to dismiss into a motion for summary
judgment, which the Court declines to do.
II. Bad Faith.
The parties agree as to the elements of a normal bad faith claim under
Alabama law: (1) a breach of an insurance contract; (2) the intentional refusal to
pay a claim; (3) the absence of an arguable reason for the refusal; and (4) the
insurer’s knowledge of the absence of an arguable reason for the refusal. They
also agree that a claim of abnormal bad faith includes a fifth element: the
intentional failure to determine whether there is an arguable basis for the refusal.
(Doc. 121 at 21; Doc. 133 at 14). National argues the plaintiffs cannot satisfy the
first, third or fifth element. (Doc. 121 at 21-25).
National’s argument as to the first element depends on the success of its
motion to dismiss the contract claim. (Doc. 121 at 21). Because National’s
motion to dismiss that claim is due to be denied, it cannot obtain dismissal of the
bad faith claims for want of a breach of contract.
National admits that the December 2008 MSA is a Form 7141. (Doc. 143 at 9-
National’s argument as to the third element is premised upon the
applicability of the provisions of the June 2007 MSA and the online terms and
conditions. (Doc. 121 at 22). Because National has not established this premise,
neither has it negated the plaintiffs’ ability to satisfy this element of their bad faith
As to the fifth element, National argues that, pursuant to the terms of its
policy, it had no duty to investigate until and unless all underlying insurance was
exhausted by payment, which it says never occurred. (Doc. 121 at 23-25). This
argument fails for reasons stated in the Court’s order denying the substantively
identical argument of defendant Aspen Specialty Insurance Company. (Doc. 193
at 7-9). In short, the complaint alleges that National denied coverage, and that
denial triggered a duty implied by law, independent of any contractual duty, to
make the coverage decision in good faith – including, in the context of an
abnormal bad faith claim, to conduct a legally sufficient investigation and
cognitive review before denying coverage.
In a brief two sentences, National argues that “Alabama does not recognize
a separate negligence cause of action for the breach of a duty created by contract.”
(Doc. 121 at 25-26). It appears that Alabama law is a bit more nuanced than that
pronouncement would suggest, see, e.g., Morgan v. South Central Bell Telephone
Co., 466 So. 2d 107, 114 (Ala. 1985), and National’s cursory treatment of the
issue is insufficient to demonstrate as a matter of law that the plaintiffs have not
stated a claim.
Moreover, Count Two alleges in part a negligent failure to settle, (Doc. 182
at 18), and, as the plaintiffs note, (Doc. 133 at 23-24), the cases are legion that
such a cause of action exists under Alabama law.
In its reply brief, National argues the plaintiffs cannot maintain a claim for
negligent failure to settle because they were not, and cannot be, subject to
judgment (since the underlying lawsuit was concluded by settlement). (Doc. 143
at 13). No such argument appears in National’s principal brief; indeed, that brief
fails to recognize the existence of a claim for negligent failure to settle, even
though such a claim is articulated explicitly in the complaint. Because National
identifies no excuse for not asserting this argument in its principal brief, the Court
will follow its general rule of not considering arguments first raised in reply.
For the reasons set forth above, National’s motion to dismiss is denied.4
DONE and ORDERED this 25th day of April, 2016.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
For the reasons set forth above and in its previous order, (Doc. 188), National’s
motion to dismiss the third amended complaint, (Doc. 187), is also denied.
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