Young v. Liberty Mutual Group Incorporated et al

Filing 34

ORDER that Defendant Mike Dumas's Motion to Dismiss (Doc. 5 ) is granted. Signed by Senior Judge James A Teilborg on 3/6/2013.(KMG)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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No. CV-12-2302-PHX-JAT

Dawn Young,
Plaintiff,

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v.

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ORDER

Liberty Mutual Group, Inc.; et al.,

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Defendants.

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Pending before the Court is Defendant Mike Dumas’s Motion to Dismiss

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Plaintiff’s Complaint against him pursuant to Federal Rule of Civil Procedure 12(b)(6).

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(Doc. 5).

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I.

Background

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Plaintiff Dawn Young suffered an on-the-job injury and filed a claim with

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Defendant Liberty Mutual Group, Inc. (“Liberty Mutual”) for worker’s compensation

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benefits. Defendant Mike Dumas handled Ms. Young’s worker’s compensation claim as

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Liberty Mutual’s claims adjuster. Although she eventually received at least some of the

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compensation to which she was entitled, Ms. Young experienced a great deal of difficulty

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working with Liberty Mutual.

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Ms. Young brought this action in Arizona state court alleging a breach of the duty

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of good faith and fair dealing that resulted in wrongfully denied and unreasonably

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delayed benefit payments. (Doc. 1-1). She named Liberty Mutual and Mike Dumas as

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defendants, as well as several fictitious John Does and XYZ Corporations. (Id. at 2). Mr.

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Dumas removed the action to this Court based on diversity of the parties. (Doc. 1).

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The Complaint alleges three claims for relief. The first claim is alleged only

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against Liberty Mutual for breach of the duty of good faith and fair dealing. (Doc. 1-1 at

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8–10). The second claim is alleged only against Mr. Dumas for aiding and abetting

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Liberty Mutual’s breach of the duty of good faith and fair dealing. (Id. at 10–11). The

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third claim1 alleges both Defendants are liable for punitive damages. (Id. at 11–12). The

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Complaint alleges Liberty Mutual is vicariously liable for the acts of its employees or

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agents such as Mr. Dumas, and that Liberty Mutual is directly liable for a breach of the

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duty of good faith and fair dealing. (Id. at 3–4). As for Mr. Dumas, the Complaint

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alleges only that he is “personally liable for his own acts and omissions insofar as he

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aided and abetted Defendant LIBERTY MUTUAL in its violations of the Arizona

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Worker’ [sic] Compensation Act and the duties of good faith and fair dealing owed to

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Ms. Young.” (Id. at 4). The only factual allegations in the Complaint are that an

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adequate investigation was not conducted and that Ms. Young’s claims for payment were

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delayed and denied without any reasonable basis. (Id. at 6–7).

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Mr. Dumas filed the present Rule 12(b)(6) Motion to Dismiss. (Doc. 5). Mr.

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Dumas argues he should be dismissed from this lawsuit because his actions are the sole

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basis for Plaintiff’s claims against Liberty Mutual, and he took those actions as Liberty

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Mutual’s agent. Even if Liberty Mutual breached its duty of good faith and fair dealing

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via Mr. Dumas’s actions, he argues, one actor performing one set of actions cannot

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simultaneously form the basis for both primary and secondary liability. In other words,

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Mr. Dumas argues one cannot aid and abet one’s self.

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II.

Federal Pleading Requirements

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The Court may dismiss a complaint for failure to state a claim under Federal Rule

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of Civil Procedure 12(b)(6) for two reasons: (1) lack of a cognizable legal theory; or

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In the Complaint, the three claims are labeled “First Claim,” “Second Claim,”
and “Fourth Claim.” (Doc. 1-1 at 8, 10, 11). Because there are only three claims, the
Court will refer to the claim labeled “Fourth Claim” as the third claim.
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(2) insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police

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Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To survive a 12(b)(6) motion for failure to

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state a claim, a complaint must meet the requirements of Federal Rule of Civil Procedure

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8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the claim showing that the

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pleader is entitled to relief,” so that the defendant has “fair notice of what the . . . claim is

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and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555

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(2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).

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Although a complaint attacked for failure to state a claim does not need detailed

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factual allegations, the pleader’s obligation to provide the grounds for relief requires

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“more than labels and conclusions, and a formulaic recitation of the elements of a cause

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of action will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). Rule

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8(a)(2) “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief.

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Without some factual allegation in the complaint, it is hard to see how a claimant could

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satisfy the requirement of providing not only ‘fair notice’ of the nature of the claim, but

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also ‘grounds’ on which the claim rests.” Id. (citing 5 C. Wright & A. Miller, Federal

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Practice and Procedure §1202, pp. 94, 95 (3d ed. 2004)). Thus, Rule 8’s pleading

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standard demands more than “an unadorned, the-defendant-unlawfully-harmed-me

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accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at

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555).

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In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the

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facts alleged in the complaint in the light most favorable to the drafter of the complaint

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and the Court must accept all well-pleaded factual allegations as true. See Shwarz v.

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United States, 234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have

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to accept as true a legal conclusion couched as a factual allegation. Papasan v. Allain,

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478 U.S. 265, 286 (1986).

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III.

A Secondary Act is Required to Aid and Abet a Primary Act

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In her first claim, Plaintiff alleges Liberty Mutual breached its duty of good faith

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and fair dealing via the actions of Mr. Dumas, who was acting as Liberty Mutual’s claims
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adjuster. For purposes of this Motion, the Court accepts that allegation as true. Her

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second claim alleges that Mr. Dumas, in his individual capacity, aided and abetted

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Liberty Mutual in breaching its duty of good faith and fair dealing to Ms. Young. In

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order to state a claim against Mr. Dumas, Plaintiff must allege facts sufficient to show

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that Mr. Dumas, as an individual, met the legal elements of aiding and abetting.

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As a federal court sitting in diversity, this Court is bound to apply Arizona

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substantive law. McClaran v. Plastic Indus., 97 F.3d 347, 356 (9th Cir.1996); Kabatoff v.

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Safeco Ins. Co. of Am., 627 F.2d 207, 209 (9th Cir.1980) (citing Erie R.R. Co. v.

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Tompkins, 304 U.S. 64, 78 (1938)); Yazzie v. Olney, Levy, Kaplan & Tenner, 593 F.2d

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100, 103 n. 4 (9th Cir.1979). “Arizona recognizes aiding and abetting as embodied in

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Restatement [(Second) of Torts] § 876(b), that a person who aids and abets a tortfeasor is

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himself liable for the resulting harm to a third person.” Wells Fargo Bank v. Ariz.

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Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12,

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23 (Ariz. 2002). In order for there to be harm to a “third person,” there must be at least

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two tortfeasors. See Restatement (Second) of Torts § 876 cmt. a (1977) (“Whenever two

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or more persons commit tortious acts in concert, each becomes subject to liability for the

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acts of the others, as well as for his own acts.”); see also Gibson-Jones v. Berkel & Co.

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Contractors, Inc., 2008 WL 782568 (N.D. Cal. 2008) (“[A] single actor (as a matter of

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legal tautology) cannot aid and abet (or conspire with) itself.”).

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The Complaint alleges two “persons” are tortfeasors: Liberty Mutual and Mr.

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Dumas. The only factual allegations in the Complaint are that an adequate investigation

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was not conducted and that Ms. Young’s claims for payment were delayed and denied

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without any reasonable basis. (Doc. 1-1 at 6–7). Taken as true, these facts could amount

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to a breach of the duty of good faith and fair dealing, which is a “tortious act.” See

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Restatement (Second) of Torts § 876 cmt. a. Plaintiff explicitly alleges this tortious act

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was committed by Liberty Mutual—not by Mr. Dumas. (Doc. 1-1 at 8) (first claim for

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relief alleged only against Liberty Mutual); (Doc. 11 at 2) (“The only cause of action

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alleged against Dumas is for aiding and abetting Liberty Mutual’s breach of the duty of
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good faith and fair dealing.”). In order for Mr. Dumas and Liberty Mutual to have

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committed “tortious acts in concert,” there must be some factual allegation showing a

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separate tortious act was committed by Mr. Dumas. Because the Complaint alleges no

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such facts, Plaintiff has failed to state a claim against Mr. Dumas.

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In her Response, Plaintiff relies on Morrow v. Boston Mutual Life Insurance

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Company, CIV. 06-2635PHXSMM, 2007 WL 3287585 (D. Ariz. Nov. 5, 2007), for the

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proposition that an insurer’s agent may be held liable for aiding and abetting the insurer.

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Although Morrow supports that proposition, that proposition does not support Plaintiff’s

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claim against Mr. Dumas. The plaintiff in Morrow was receiving monthly disability

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payments from his insurer.

Id. at *1.

The Morrow plaintiff claimed his insurer

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committed the tort of bad faith by purposefully hiring a biased medical examiner as part

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of a “claim termination scheme.” Id. The Morrow plaintiff alleged the medical examiner

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committed the tort of aiding and abetting “by providing a biased and unsubstantiated

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opinion” of the plaintiff’s health. Id. at *5. Thus, in Morrow, there were two tortious

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acts alleged: (1) purposefully hiring a biased examiner in bad faith; and (2) aiding and

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abetting the bad faith by providing a biased and unsubstantiated medical opinion. Each

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act was alleged against a different defendant. Here, Plaintiff alleges only one tortious act:

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failing, in bad faith, to conduct an adequate investigation and make timely benefits

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payments.

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Plaintiff additionally relies on Warner v. Southwest Desert Images, LLC, 180 P.3d

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986 (Ariz. Ct. App. 2008), for the proposition that an agent is not excused from

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responsibility for a tort merely because he is acting on behalf of his employer. Again,

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that proposition does not support Plaintiff’s claim against Mr. Dumas. In Warner, a pest

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control company’s employee sprayed chemicals that caused injury to the plaintiff. Id. at

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991. On summary judgment, the trial court found the employee was negligent and the

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pest control company was vicariously liable under respondeat superior. Id. The issue of

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damages went to trial. Before the end of the trial, the trial court entered a directed verdict

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in favor of the employee on the basis that the company was clearly liable for the
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employee’s actions. Id. at 991–92. The Arizona Court of Appeals reversed the trial

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court’s directed verdict against the employee, holding that respondeat superior liability is

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joint and several. Id. at 992; see Ariz. Rev. Stat. § 12-2506(D)(2); Restatement (Third) of

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Agency § 7.01 (2006). Unlike respondeat superior, which is a theory of vicarious

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liability, aiding and abetting is a theory of secondary liability. The Warner plaintiff

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claimed both the employer and the employee were liable for the employee’s negligence.

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Plaintiff here claims only Liberty Mutual is liable for breach of the duty of good faith and

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fair dealing. Plaintiff’s separate aiding and abetting claim against Mr. Dumas requires

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Plaintiff to allege Mr. Dumas took separate action “in concert” with the actions giving

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rise to Plaintiff’s claim against Liberty Mutual. Plaintiff alleges no such action.

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Finally, Plaintiff alleges Liberty Mutual has a “non-delegable duty of good faith

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and fair dealing,” (Doc. 1-1 at 3–4), and suggests that “under Arizona law it is unlikely

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that Dumas could commit violations of the duty of good faith and fair dealing.” (Doc. 11

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at 3) (emphasis in original). It is true that, under Arizona law, an insurance carrier may

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not “escape liability” by delegating its duty of good faith and fair dealing to another.

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Walter v. Simmons, 818 P.2d 214, 223 (Ariz. Ct. App. 1991). However, it does not

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follow that Mr. Dumas must have committed the separate tort of aiding and abetting

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merely because he was the agent through which Liberty Mutual breached its duty.

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Indeed, Plaintiff argues that “[w]ithout Dumas’s inadequate investigation and his refusal

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to make the required payments, Liberty Mutual would not have” committed a tort against

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Plaintiff. (Doc. 11 at 4). Thus, under Arizona law, Mr. Dumas and Liberty Mutual were

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acting as a single legal entity. See, e.g., Perry v. Apache Junction Elementary Sch. Dist.

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No. 43 Bd. of Trustees, 514 P.2d 514, 517 (Ariz. Ct. App. 1973) (“[A]gents and

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employees of a corporation cannot conspire with their corporate principal or employer

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when acting in their official capacities on behalf of the corporation and not as individuals

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for their individual advantage.”). Accordingly, because Plaintiff has failed to allege Mr.

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Dumas took any actions in his individual capacity “in concert” with the actions giving

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rise to Plaintiff’s claim against Liberty Mutual, her aiding and abetting claim against Mr.
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Dumas will be dismissed.

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Alternatively, Plaintiff has failed to allege facts sufficient to satisfy the elements

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of aiding and abetting. In Arizona, “a person who aids and abets a tortfeasor is himself

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liable for the resulting harm to a third person” when three elements are met: (1) the

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primary tortfeasor commits a tort that causes injury to the plaintiff; (2) the defendant

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knows that the primary tortfeasor’s conduct constitutes a breach of duty; and (3) the

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defendant substantially assists or encourages the primary tortfeasor in the achievement of

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the breach. Wells Fargo, 38 P.3d at 23. Because Plaintiff’s claim for breach of the duty

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of good faith and fair dealing is based entirely on Mr. Dumas’s conduct—not Liberty

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Mutual’s—Mr. Dumas could not have known that the primary tortfeasor’s conduct

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constituted a breach of duty. Mr. Dumas could not have known about conduct that did

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not exist.

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IV.

Punitive Damages Require an Underlying Tort

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Plaintiff alleges Liberty Mutual and Mr. Dumas are liable for punitive damages.

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(Doc. 1-1 at 11–12). Mr. Dumas argues that he cannot be liable for punitive damages if,

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as the Court has found, Plaintiff has not adequately alleged a tort against him. (Doc. 5 at

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6–7). Plaintiff does not dispute this contention.

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In Arizona, “before a jury may award punitive damages there must be evidence of

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an ‘evil mind’ and aggravated and outrageous conduct.” Linthicum v. Nationwide Life

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Ins. Co., 723 P.2d 675, 680 (Ariz. 1986).

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“‘something more’ than the conduct necessary to establish the tort.” Rawlings v.

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Apodaca, 726 P.2d 565, 577 (Ariz. 1986). Here, the only “conduct” alleged is against

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Liberty Mutual. Mr. Dumas cannot be liable for punitive damages unless he committed

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an underlying tort. Because Plaintiff has not adequately alleged a tort against Mr.

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Dumas, her claim for punitive damages against him must be dismissed as well.

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V.

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Conclusion

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Punitive damages require evidence of

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Based on the foregoing,

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IT IS ORDERED that Defendant Mike Dumas’s Motion to Dismiss (Doc. 5) is

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granted.
Dated this 6th day of March, 2013.

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