Keller et al v. FCOA, LLC
Filing
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ORDER granting 41 Motion for Judgment on the Pleadings; denying 45 Motion for Leave to File Amended Complaint. Case is dismissed in its entirety. Signed by Honorable Susan O. Hickey on January 8, 2016. (mll)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
TEXARKANA DIVISION
WILLIAM KELLER, DEBRA KELLER,
and PEGGY BYRGE, individually and on
behalf of all others similarly situated
v.
PLAINTIFFS
Case No. 4:14-cv-04002
FCOA, LLC d/b/a FOREMOST
INSURANCE COMPANY
DEFENDANT
ORDER
Before the Court is Defendant’s Motion for Judgment on the Pleadings, (ECF No. 41), Plaintiffs’
response in opposition (ECF No. 46), and Defendants’ reply. (ECF No. 47). The Court has also
considered Plaintiffs’ Motion for Leave to File Amended Complaint. (ECF No. 45). Defendant has
responded in opposition to this motion. (ECF No. 49). For the reasons stated herein, Plaintiffs’ Motion
for Leave to File an Amended Complaint should be DENIED, and Defendant’s Motion for Judgment
on the Pleadings should be GRANTED.
I. Background
Defendant seeks dismissal of Plaintiff Peggy Byrge’s claims. The named Plaintiff Peggy Byrge
(“Byrge”), was under a homeowner’s insurance policy issued by the Defendant Foremost Insurance
Company (“Foremost”). Byrge suffered a covered loss to her insured property on March 4, 2008. On
April 12, 2008, Foremost estimated the cost to repair the property at $2,145.92, a total that included
the cost of labor and materials. Foremost paid the Byrge the “actual cash value” of their loss, which
was $1,002.36 after subtracting depreciation and the amount of the deductible. The depreciated
amount included both the cost of labor and materials. Byrge, in her Complaint, argues that Arkansas
law prohibits an insurance company from depreciating the cost of labor. Therefore, by depreciating
this cost, Byrge claims that Foremost (1) breached its contract and (2) was unjustly enriched.
II. Motion for Judgment on the Pleadings
A. Standard
For a Motion for Judgment on the Pleadings, the Court applies the same legal standard as it
does for a Motion to Dismiss under Rule 12(b)(6). To survive a Rule 12(b)(6) motion, a complaint
need only state factual allegations sufficient to raise a right to relief “above the speculative level” that
is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In deciding a Rule
12(b)(6) motion, courts are required to accept all of the complaint’s well-pled allegations as true and
resolve all inferences in the plaintiff’s favor. Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928,
933 n.4 (8th Cir. 2012).
B. Discussion
The Court will assess Defendant’s Motion for Judgment on the Pleadings using its Complaint
as originally filed in state court in Miller County, Arkansas.1 Defendant has requested the Court
dismiss this claim pursuant to Federal Rule of Civil Procedure 12(c). Specifically, Defendant asserts
that Plaintiff’s breach of contract claim is barred as a matter of law by the applicable five-year
limitations period, and Plaintiff’s unjust enrichment claim is barred as a matter of law by the applicable
three-year limitations period. Defendant asserts that these holdings are consistent with rulings recently
issued by this Court in other labor depreciation cases containing identical fraudulent concealment
allegations.
Under Arkansas law, a breach of contract claim arising out of a written contract is subject to
1
The Court finds that an amendment to the Complaint to plead more specific allegations of fraud would be futile, as
discussed, infra.
2
a five-year statute of limitations. Ark. Code. Ann. § 16-56-111(b); Chalmers v. Toyota Motor Sales,
USA Inc., 935 S.W.2d 258, 261 (Ark. 1996). Unjust enrichment carries a three-year statute of
limitations. Ark. Code. Ann. § 16-56-105. These statutes begin running on the date the breach or
injury occurs, not when it is discovered, unless the limitations period is tolled. Chalmers, 326 Ark.
at 901. Both breach of contract and unjust enrichment, as alleged by the Plaintiff, would have occurred
at the time Foremost allegedly required the Plaintiff to pay more than what she should have paid in
accordance with the contract, which was in April 2008. Because more than five years passed from that
time until this action was filed in November 2013, both the breach of contract and unjust enrichment
claims should normally be dismissed due to the running of the limitations period for such claims.
However, the applicable statutes of limitations may be tolled on the basis of fraudulent
concealment. Once it is clear from the face of the complaint that an action is barred by an applicable
statute of limitations, the burden shifts to the Plaintiff to prove that the limitation period was in fact
tolled. Summerhill v. Terminix, Inc., 637 F.3d 877, 880-81 (8th Cir. 2011) (citing Paine v. Jefferson
Nat’l Life Ins. Co., 594 F.3d 989, 992 (8th Cir. 2010) (applying Arkansas law)). In order to toll a
limitation period on the basis of fraudulent concealment, there must be: “(1) a positive act of fraud (2)
that is actively concealed, and (3) is not discoverable by reasonable diligence.” Paine, 594 F.3d at 992
(quotation omitted).
This Court finds that the Plaintiff’s allegations of Defendant’s failure to disclose the Plaintiff’s
rights under Arkansas law is not the type of “affirmative and fraudulent act[] of concealment” required
to toll statutes of limitations in Arkansas. The “classic language on point” in Arkansas regarding fraud
sufficient to toll the statute of limitations is as follows:
No mere ignorance on the part of the plaintiff of his rights, nor the mere silence of one
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who is under no obligation to speak, will prevent the statute bar. There must be some
positive act of fraud, something so furtively planned and secretly executed as to keep
the plaintiff’s cause of action concealed or perpetrated in a way that it conceals itself.
Wilson v. GECAL, 311 Ark. 84, 841 S.W.2d 619 (1992) (citations omitted). In her Complaint,
Plaintiff asserts that she reasonably and justifiably relied on Defendant’s representations that she had
received all that she was entitled to recover under her policies. She alleges that Defendant had a duty
to disclose to her that she was entitled to recover the full cost of labor necessary to repair or replace
her property. While the Plaintiff has pled that the Defendant’s actions were dishonest, there is no
allegation in the Complaint of anything that was so “furtively planned and secretly executed” that
would prevent Plaintiff from discovering the cause of action within the limitations period because it
was “perpetrated in a way that it conceals itself.” Therefore, Plaintiff fails to sufficiently plead fraud
required to toll the statute of limitations in Arkansas.
Alternatively, Plaintiff’s allegations are insufficient to toll the statue of limitations because they
fail to allege when and how the fraud was discovered. “Fraud suspends the running of the statute of
limitations . . . until the party having the cause of action discovers the fraud or should have discovered
it by the exercise of reasonable diligence.” Martin v. Arthur, 3 S.W.3d 684, 687 (Ark. 1999)
(quotation omitted). Part of the Plaintiff’s burden is to plead that she could not, with the exercise of
reasonable diligence, have discovered the alleged unlawful conduct earlier, as well as affirmatively
plead when and how the fraud was discovered. See Summerhill, 637 F.3d at 880-81 (citing Wood v.
Carpenter, 101 U.S. 135, 140-41 (1879) (“If the plaintiff made any particular discovery, it should be
stated when it was made, what it was, how it was made, and why it was not made sooner. . . . The
circumstances of the discovery must be fully stated and proved, and the delay which has occurred must
be shown to be consistent with the requisite diligence.”)).
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Plaintiff’s conclusory allegation that “[b]ecause of Defendant’s actions, Plaintiff[] and other
Class Members could not have known they had been underpaid on their claims through the exercise
of due diligence” does not reveal why they could not discover the fraud, when it was discovered, or
the manner by which it was discovered. There is no demonstration of why the exercise of diligence
would not have revealed the fraud within the limitations period. In fact, Plaintiff alleges that it is
consistent with “longstanding legal principles[] that materials are subject to depreciation while labor
is not.” (ECF No. 3 ¶23). Additionally, by failing to allege when and how she discovered Foremost’s
alleged fraud, Plaintiff has failed to plead sufficient facts to demonstrate that fraudulent concealment
would toll the time period sufficiently to save her otherwise time-barred claims. See Summerhill, 637
F.3d at 880-81; 51 Am. Jur.2d Limitation of Actions § 184 (“One may not avoid the effect of the
statute of limitations on the ground of fraudulent concealment if he or she fails to plead or offer
evidence as to when he or she discovered the alleged fraud.”).
Accordingly, Defendant’s Motion for Judgment on the Pleadings (ECF No. 42) should be
granted.2
III. Motion for Leave to Amend
Plaintiff has requested that she be granted leave to file her First Amended Complaint to
conform her complaint to the federal pleading requirements and to address deficiencies alleged by
Defendant in its Motion for Judgment on the Pleadings by more sufficiently alleging fraud.3 Defendant
2
Defendant also requests the Court award attorney’s fees under Federal Rule of Civil Procedure 54(d)(2). They cite 28
U.S.C. § 1927. However, the Court finds that Plaintiff has not acted unreasonably such that the Court should not follow
the American Rule, that each party is responsible for his own fees and costs.
3
The Motion for Leave to Amend was filed on behalf of Plaintiff Byrge as well as Plaintiffs William Keller and Debra
Keller. Since the filing of the Motion, the Kellers’ claims have been dismissed. Accordingly, the Court will analyze this
motion with respect only to Plaintiff Byrge’s claims.
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asserts that Plaintiff’s proposed amendment would be futile, Plaintiff has been dilatory in seeking leave
to amend, and permitting an amendment at this stage would delay resolution of this matter.
The Federal Rules of Civil Procedure instruct the Court to grant leave to amend freely when
justice so requires. Fed. R. Civ. P. 15(a)(2). This is a lenient standard. There is, however, no absolute
right to amend a pleading. Becker v. Univ. of Nebraska, 191 F.3d 904, 908 (8th Cir. 1999) (citing
Williams v. Little Rock Municipal Water Works, 21 F.3d 218, 224 (8th Cir. 1994)). Leave should be
denied where there are compelling reasons “such as undue delay, bad faith, or dilatory motive, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving
party, or futility of the amendment.” Id. at 907-08 (quoting Brown v. Wallace, 957 F.2d 564, 566 (8th
Cir. 1992)).
Defendant asserts that Plaintiff’s proposed amendment would be futile because (1) Plaintiff has
not alleged any facts demonstrating Byrge’s exercise of reasonable diligence, nor when and how she
learned of Defendant’s alleged fraud; and (2) Byrge’s fraudulent concealment argument depends on
the existence of a duty to speak that is not supported by Arkansas law.
Whether an amendment in this case would be futile turns on whether Plaintiff has alleged
sufficient facts in the Amended Complaint to support a claim for fraud in Arkansas which would toll
the statute of limitations period. Defendant asserts that even if Plaintiff has viable claims for breach
of contract or unjust enrichment, their proposed Amended Complaint does not cure the limitations bar
for those claims. Specifically, Defendant asserts that Plaintiff has not alleged facts demonstrating the
exercise of reasonable diligence nor has she alleged when she learned of Foremost’s alleged fraud.
The Court agrees that Plaintiffs’ proposed Amended Complaint would be futile.
In order to toll a limitation period on the basis of fraudulent concealment, Plaintiff must allege
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in the Amended Complaint facts supporting the following: “(1) a positive act of fraud (2) that is
actively concealed, and (3) is not discoverable by reasonable diligence.” Paine, 594 F.3d at 992
(quotation omitted).
To survive, Plaintiff’s Amended Complaint must allege how and when the fraud was
discovered. “Fraud suspends the running of the statute of limitations . . . until the party having the
cause of action discovers the fraud or should have discovered it by the exercise of reasonable
diligence.” Martin v. Arthur, 3 S.W.3d 684, 687 (Ark. 1999) (quotation omitted). Plaintiff must allege
facts to demonstrate that she could not, with the exercise of reasonable diligence, have discovered the
alleged unlawful conduct earlier, as well as affirmatively plead when and how the fraud was
discovered. See Summerhill, 637 F.3d at 880-81 (citing Wood v. Carpenter, 101 U.S. 135, 140-41
(1879); see also Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006) (“To satisfy the
particularity requirement of Rule 9(b), the complaint must plead such facts as the time, place, and
content of the defendant’s false representations, as well as the details of the defendant’s fraudulent acts,
including when the acts occurred, who engaged in them, and what was obtained as a result.”).
Plaintiff alleges that she was unaware that she had a claim or even the possibility of a claim
until consulting with counsel and having their estimate reviewed on July 19, 2013. She asserts that
she was incapable of discovering the fraud by the exercise of reasonable diligence before consulting
an attorney. There is no demonstration of why the exercise of diligence would not have revealed the
fraud within the limitations period. In fact, Plaintiff alleges that the information was readily available
to the insurance company. She offers no explanation as to why she waited a period of over five years
to request a copy of the documents. She has not shown the Court any facts which lead the Court to
believe that, through the exercise of reasonable diligence, that she could not have discovered the claim
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earlier. The Court agrees with Defendant that the statute of limitations is not tolled until the time
Plaintiff consulted an attorney. See Wright v. Heyne, 349 F.3d 321, 331 (6th Cir. 2003) (“We reject
Plaintiffs’ argument that the three-year limitation period is tolled until the plaintiff consults with an
attorney and learns from the attorney that he has a claim for breach of ERISA fiduciary duties” . . . “[i]f
the statute were tolled until an attorney informs the plaintiff that he or she has an ERISA claim, a
plaintiff could delay accrual of a claim simply by waiting before consulting an attorney”). Plaintiff has
failed to demonstrate both that she could not, with the exercise of reasonable diligence, have
discovered the alleged unlawful conduct earlier, and has failed to affirmatively plead facts which
demonstrate when and how the fraud was discovered.
Accordingly, the Court finds that an amendment to the Complaint would be futile and
Plaintiff’s Motion for Leave to Amend the Complaint should be denied.
IV. Conclusion
For the reasons stated herein, the Court finds that the Plaintiff’s Complaint falls outside of the
statute of limitations, and thus all claims are time-barred. Additionally, Plaintiff’s attempt to cure
through a proposed Amended Complaint would be futile. Accordingly, Defendant’s Motion for
Judgment on the Pleadings (ECF No. 41) is hereby GRANTED, Plaintiff’s Motion for Leave to
Amend (ECF No. 45) is hereby DENIED, and this case is DISMISSED in its entirety.
IT IS SO ORDERED, this 8th day of January, 2016.
/s/ Susan O. Hickey
Susan O. Hickey
United States District Judge
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