Moore & Moore Trucking, LLC v. Beard et al
Filing
23
ORDER & REASONS granting 9 Motion to Dismiss for Failure to State a Claim & denying 12 Motion to Remand to State Court. Signed by Judge Martin L.C. Feldman on 3/6/2013. (caa, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MOORE & MOORE TRUCKING, LLC
D/B/A J.L. MOORE CONSTRUCTION
CIVIL ACTION
v.
NO. 12-3037
RAY BEARD ET AL.
SECTION F
ORDER AND REASONS
Before the Court are two motions: (1) plaintiff’s motion to
remand, and (2) defendants’ motion to dismiss.
Because the
motions focus on similar issues, the Court considers them
together.
For the reasons that follow, the plaintiff’s motion to
remand is DENIED, and the defendants’ motion to dismiss is
GRANTED.
Background
This case arises out of the removal of debris from property
that was damaged by Hurricane Katrina.
On February 25, 2011, Moore & Moore Trucking, LLC, d/b/a
J.L. Moore Construction, entered into a contract with Stephen D.
Edgett to remove a concrete slab from property located at 8429
Hermitage Drive in Chalmette, Louisiana.
Based on this contract,
J.L. Moore was to be paid by the funds Mr. Edgett would receive
through a claim for Increased Cost of Compliance under his
Standard Flood Insurance Policy, which is part of the National
Flood Insurance Program operated by the Federal Emergency
1
Management Agency.
The contract also authorized J.L. Moore to
act on Mr. Edgett’s behalf in handling the ICC claim.
As
required, J.L. Moore obtained, and sent to the NFIP, all the
necessary documentation and permits to proceed with the
demolition in compliance with an ICC claim.1
According to NFIP protocol, the NFIP would assign an
adjuster to assess the damage, confirm that the damage met the
requirements for making an ICC claim, and provide the property
owner with an ICC Proof of Loss form.
Ray Beard, an adjuster
hired by and working for Southern Adjusters, LLC, was assigned to
Mr. Edgett’s property.
On April 27, 2011, Mr. Beard told J.L.
Moore that the ICC requirements had been met, the ICC claim would
be paid, and demolition could proceed.
Based on this approval,
J.L. Moore began to demolish and remove the concrete slab.
After
the demolition job was completed on May 16, 2011, all the
mandatory paperwork was sent to the adjuster and the NFIP.
On June 15, 2011, FEMA denied Mr. Edgett’s ICC claim,
stating that Mr. Edgett had been paid the program maximum of
$250,000.
reason.
FEMA subsequently denied his appeal for the same
As a result, Mr. Edgett did not receive ICC funds and,
therefore, was unable to forward any payment to J.L. Moore
pursuant to the contract.
1
J.L. Moore applied for and obtained the following permits from
St. Bernard Parish: Substantial Damage Determination Permit,
Slab Removal Permit, and Elevation Certificate.
2
On November 15, 2012, J.L. Moore sued Ray Beard, Southern
Adjusters, and an unknown insurance company in the 34th Judicial
District Court for the Parish of St. Bernard, alleging claims of
negligence, detrimental reliance, vicarious liability, and breach
of contract under state law.
less than $50,000.
J.L. Moore seeks damages that total
On December 27, 2012, defendants removed the
case to this Court, stating that the Court has original
jurisdiction over the case pursuant to 42 U.S.C. § 4072 or 28
U.S.C. § 1337.
In the alternative, defendants assert federal
question jurisdiction pursuant to 28 U.S.C. § 1331 and 44 C.F.R.
pt. 61, App. A(1), Arts. VII(R), IX.
To the extent that any
claim is not subject to federal jurisdiction, defendants submit
that the Court has supplemental jurisdiction over such claim
under 28 U.S.C. § 1367.
Plaintiff now moves to remand this case to state court,
alleging that the case involves claims of state law only.
Defendants oppose remand, and move the Court to dismiss
plaintiff’s claims for failure to state a claim upon which relief
can be granted.
I. Legal Standards
A.
Although the plaintiff challenges removal in this case, the
removing defendant carries the burden of showing the propriety of
this Court's removal jurisdiction.
3
See Manguno v. Prudential
Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); see
also Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir.
1993).
Remand is proper if at any time the Court lacks subject
matter jurisdiction.
28 U.S.C. § 1447 (2006).
Any ambiguities
are resolved in favor of remand, Butler v. Polk, 592 F.2d 1293,
1296 (5th Cir. 1979), as the removal statute should be strictly
construed.
Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278
(5th Cir. 2007); see also Shamrock Oil & Gas Corp. v. Sheets, 313
U.S. 100 (1941).
B.
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted.
Such a motion is
rarely granted because it is viewed with disfavor.
See Lowrey v.
Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting
Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc.,
677 F.2d 1045, 1050 (5th Cir. 1982)).
In considering a Rule
12(b)(6) motion, the Court “accepts ‘all well-pleaded facts as
true, viewing them in the light most favorable to the
plaintiff.’”
See Martin K. Eby Constr. Co. v. Dall. Area Rapid
Transit, 369 F.3d 464 (5th Cir. 2004) (quoting Jones v.
Greninger, 188 F.3d 322, 324 (5th Cir. 1999)).
But, in deciding
whether dismissal is warranted, the Court will not accept
conclusory allegations in the complaint as true.
4
Kaiser, 677
F.2d at 1050.
Indeed, the Court must first identify allegations
that are conclusory and, thus, not entitled to the assumption of
truth.
Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).
A
corollary: legal conclusions “must be supported by factual
allegations.” Id. at 678.
Assuming the veracity of the well-
pleaded factual allegations, the Court must then determine
“whether they plausibly give rise to an entitlement to relief.”
Id. at 679.
“‘To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.’” Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009)(quoting Iqbal, 556 U.S. at 678)(internal
quotation marks omitted).
“Factual allegations must be enough to
raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true
(even if doubtful in fact).”
Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (citations and footnote omitted). “A claim
has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S.
at 678 (“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.”).
This is a “context-specific
task that requires the reviewing court to draw on its judicial
5
experience and common sense.” Id. at 679.
“Where a complaint
pleads facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and
plausibility of entitlement to relief.”
Id. at 678 (internal
quotations omitted) (citing Twombly, 550 U.S. at 557).
“[A]
plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’”, thus, “requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do.”
Twombly, 550 U.S. at 555
(alteration in original) (citation omitted).
In deciding a motion to dismiss, the Court may consider
documents that are essentially “part of the pleadings.”
That is,
any documents attached to or incorporated in the plaintiff’s
complaint that are central to the plaintiff’s claim for relief.
Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th
Cir. 2004) (citing Collins v. Morgan Stanley Dean Witter, 224
F.3d 496, 498-99 (5th Cir. 2000)).
Also, the Court is permitted
to consider matters of public record and other matters subject to
judicial notice without converting a motion to dismiss into one
for summary judgment.
See United States ex rel. Willard v.
Humana Health Plan of Tex. Inc.,
336 F.3d 375, 379 (5th Cir.
2003).
II. Discussion
Both of these motions involve the question of whether a
6
demolition company that was authorized to handle a NFIP ICC claim
on behalf of the insured, may assert various state law claims
against an independent insurance adjuster for conduct that
occurred during the course of the ICC claim adjustment.
The
Court finds that plaintiff’s state law claims are preempted by
federal law, making remand inappropriate and dismissal necessary.
A.
Congress established the NFIP through the National Flood
Insurance Act of 1968.
See 42 U.S.C. § 40001.
Under the NFIP,
the director of FEMA has the authority to use private insurance
companies, referred to as Write-Your-Own companies, to help
administer the program.
FEMA, or the WYO companies, directly
issue federally underwritten SFIPs to the public, and may hire
subcontractors or insurance adjustment organizations to
investigate and adjust claims made under a SFIP.
§§ 62.21, 62.23.
See 44 C.F.R.
The NFIP provides that WYO companies and
adjusters have no authority to alter, vary, or waive any SFIP
provision.
See 44 C.F.R. § 61.13(d).
In addition, the NFIP
states that an insurance adjuster hired to investigate an
insured’s claim is not authorized to approve or disapprove claims
or to tell the insured whether the NFIP will ultimately approve
the claim.
See 44 C.F.R. pt. 61, App. A(1), Art. VII(J)(7),(8).
Regarding lawsuits against FEMA and WYO companies, Section
4072 of the NFIP provides:
7
[T]he claimant, within one year after the date of mailing
of notice of disallowance or partial disallowance by the
Administrator, may institute an action against the
Administrator on such claim in the United States district
court for the district in which the insured property . .
. shall have been situated, and original exclusive
jurisdiction is hereby conferred upon such court to hear
and determine such action without regard to the amount in
controversy.
42 U.S.C. § 4072 (emphasis added).
Further, and more
specifically, FEMA amended the SFIP in 2000 to include Article
IX, which states:
This policy and all disputes arising from the
handling of any claim under the policy are governed
exclusively by the flood insurance regulations issued by
FEMA, the National Flood Insurance Act . . . and Federal
common law.
44 C.F.R. pt. 61, App. A(1), Art. IX (emphasis added) (citation
omitted).
B.
The defendants removed this case on the basis of the
original jurisdiction of this Court and federal question.2
First, defendants contend that this Court has original exclusive
jurisdiction pursuant to 42 U.S.C. § 4072; therefore, plaintiff’s
2
In the notice of removal, the defendants also submit that this
Court has original jurisdiction under 28 U.S.C. § 1337 and
supplemental jurisdiction under 28 U.S.C. § 1367. Because the
Court finds that federal jurisdiction exists under 42 U.S.C. §
4072 and 28 U.S.C. § 1331, the Court does not need to consider
the basis for removal arising from any act of Congress regulating
commerce under 28 U.S.C. § 1337, or supplemental jurisdiction;
both of which the defendants fail to address in their submissions
to the Court.
8
state law claims are preempted and federal jurisdiction exists.
The Court agrees.
Based on 42 U.S.C. § 4072 and related federal regulations,
the Fifth Circuit has expressly held that federal law preempts
state law claims that arise from the handling and disposition of
SFIP claims by a WYO insurance company.
See Campo v. Allstate
Ins. Co., 562 F.3d 751 (5th Cir. 2009) (“Federal law preempts
‘state law tort claims arising from claims handling by a WYO.’”
(quoting Wright v. Allstate Ins. Co., 415 F.3d 384, 390 (5th Cir.
2005))); Gallup v. Omaha Prop. & Cas. Ins. Co., 434 F.3d 341,
344-45 (5th Cir. 2005) (“[S]tate law claims arising from the
handling by a WYO are preempted by the National Flood Insurance
Act [and] it necessarily follows that the Act gives FEMA
authority to promulgate regulations to that effect.”).
Although
the Fifth Circuit has not directly addressed whether this
preemption extends to claims brought against adjusters involved
in the claims-handling process, many courts within the Fifth
Circuit have held that it does, especially in light of FEMA’s
addition of Article IX to the SFIP that provides that federal law
applies to “all disputes arising from the handling of any claim
under the policy.”
See, e.g, Windes v. Haeuser Ins. Agency,
Inc., No. 06-5320, 2007 WL 316998, at *2 (E.D. La. Jan. 30, 2007)
(“[Defendant] argues that federal law establishes the duties of
adjusters on such claims and establishes what is to be done
9
regarding adjusting flood claims . . . . [T]he state law claims
are preempted because the claims involve the handling of the
flood insurance claim.”); Bartolome v. United States, 04-3898,
2006 WL 2247326, at *2 (S.D. Tex. Aug. 4, 2006) (“Because the
Court finds that the FEMA regulation preempts the entire field of
state tort regulation arising from the handling of NFIP policies,
including claims against adjusters, [p]laintiffs’ state law tort
and contract claims against [defendant] are preempted and must be
dismissed.”); see also Sutor v. Fed. Emergency Mgmt. Agency,
Nos. 06-1371, 07-2477, 2009 WL 2004375, at *4-5 (E.D. Pa. July 9,
2009) (dismissing claims against the independent adjustment
companies, and aligning itself with Fifth Circuit precedent,
which provides that federal law preempts all disputes arising
from the handling of SFIP claims); Dubose v. State Farm Ins. Co.,
No. 06-0619, 2007 WL 4463561, at *2 (S.D. Ala. Dec. 14, 2007)
(“Plaintiffs’ state law claims arise solely by virtue of
[defendant’s] conduct [d]uring the course of adjusting the claim.
. . . As such, these claims are preempted by Federal law and due
to be dismissed.” (citation omitted)); Moffett v. Computer
Sciences Corp., 457 F. Supp. 2d 571, 580 (D. Md. 2006) (same).
As one court has soundly observed:
Article IX [of the SFIP] preempts “all disputes arising
from the handling of any claim” under the SFIP. It is
not limited to suits against WYO carriers. . . . [T]his
outcome would work directly against one of the principal
ends of preemption:
uniformity of decisions.
As
Plaintiffs would have it, they can pursue adjustment
10
fraud claims against independent adjusters, but if claims
are brought against FEMA or WYO carriers for the very
same conduct, they are preempted.
Moffett, 457 F. Supp. 2d at 583 n.19.
Considering the Fifth
Circuit precedent that expressly holds that federal law preempts
all state law claims against WYO insurance companies, and the
case law progeny that extends preemption to claims against
adjusters, the Court finds the plaintiff’s claims are preempted
in this case if they arise from the handling of a claim under the
NFIP.
Therefore, the Court must determine whether the
plaintiff’s claims arise from the claims-handling process.
The plaintiff asserts that it is not disputing the way the
ICC claim was handled or the terms of the SFIP.
Instead, the
plaintiff is alleging that defendants (as the independent
adjuster) were negligent in advising plaintiff to proceed with
the demolition, and that the adjuster’s approval constituted an
oral contract that was breached when the ICC claim was denied.
While the plaintiff’s submissions to the Court ignore the fact
that the adjuster’s assessment of the property is a necessary and
integral part of the claims-handling process, the plaintiff’s
original petition suggests otherwise.
The petition states:
On February 25, 2011, Stephen D. Edgett[] contracted with
J.L. Moore Construction to remove the remaining concrete
slab from the property located at 8429 Hermitage Dr.,
Chalmette, LA, 70043. . . .
. . . .
. . . Per the contract, J.L. Moore Construction was
authorized to act on Stephen D. Edgett’s behalf in
handling the ICC claim.
11
. . . .
On April 19, 2011, J.L. Moore Construction faxed the
elevation certificate from St. Bernard Parish; the Slab
Removal Permit; the ICC Slab Removal Agreement, and the
Substantial Damage Determination to the NFIP to have an
adjuster assigned to the file to determine if the ICC
claim was valid and if the demolition would be approved
pursuant to NFIP and ICC claims processing.
. . . .
Pursuant to NFIP protocol, NFIP would assign an
adjuster to the NFIP file, which would assess the direct
physical damages. The adjuster would then confirm that
the damage of the property meets the requirements for
making an ICC claim . . . .
. . . .
. . . Mr. Ray Beard, an adjuster hired by and working for
Southern Adjusters, LLC, was assigned to file no.
RL00008251, in relation to property located at 8429
Hermitage Dr., in Chalmette LA, 70043.
. . . .
Once assigned to the file, Mr. Ray Beard received
all applicable documents and permits required to make a
determination of whether the demolition work met the
requirements for an ICC claim.
. . . .
Pursuant to NFIP and ICC requirements, once the
demolition proposal was accepted and approved by the
adjuster, Mr. Ray Beard, and all permits, elevation
certifications and substantial loss documents were sent
to the adjuster and NFIP, an ICC claim payment would be
issued to the homeowner.
. . . .
However, the homeowner, Stephen D. Edgett, did not
receive any ICC claim payment under the NFIP. . . .
. . . .
The following actions of defendant, Mr. Ray Beard,
acting in his capacity as a claims adjuster for Southern
Adjusters, LLC, constitute actions clearly below the
professional standard of care of a claims adjuster
assigned to review ICC claims through the NFIP under FEMA
. . . .
See Rec. Doc. 1-2 at 11-15 (emphasis added).
The Court finds
that the substance of the plaintiff’s petition contests the
manner in which the ICC claim was handled.
12
Plaintiff itself
notes that the claims in this case involve “the professional
standard of care of a claims adjuster assigned to review ICC
claims through the NFIP under FEMA.”
This is not defeated--as plaintiff suggests--by the fact
that (1) the plaintiff is not the insured, and (2) the defendants
are independent adjusters.
Pursuant to the contract plaintiff
entered into with Mr. Edgett (the insured), plaintiff was
“authorized to act on Stephen D. Edgett’s behalf in handling the
ICC claim” and would receive “payment of the ICC claim proceeds.”
Therefore, plaintiff stepped into the shoes of the insured for
purposes of the ICC claim; any other view of this arrangement
would effectively allow an insured to make an end-run around the
NFIP by hiring a third-party company.
Further, federal law
expressly allows for the hiring of subcontractors and independent
insurance adjustment organizations to assess the property’s
damage.
See 44 C.F.R. § 62.21.
The Court is mindful of the
Fifth Circuit’s instruction:
[U]pon removal[,] the removal court should inspect the
complaint carefully to determine whether a federal claim
is necessarily presented, even if the plaintiff has
couched his pleading exclusively in terms of state law.
. . . The reviewing court looks to the substance of the
complaint, not the labels used in it.
In re Carter, 618 F.2d 1093, 1101 (5th Cir. 1980) (citation
omitted).
The Court finds that the substance of the plaintiff’s
petition contests the manner in which the ICC claim was handled;
13
the only actions alleged to have been completed by the defendants
took place while they were adjusting the ICC claim pursuant to
the SFIP.
As a result, the claims arise from the administration
and handling of a claim under a flood policy; therefore, the
state law claims are preempted and federal jurisdiction exists
under 42 U.S.C. § 4072.
C.
Even assuming plaintiff’s claims are not preempted, this
Court has federal question jurisdiction, and dismissal is still
warranted.
Under 28 U.S.C. § 1331, “district courts shall have
original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.”
Federal
question jurisdiction exists when a well-pleaded complaint
establishes either that federal law creates the cause of action
or that the plaintiff’s right to relief necessarily depends on
resolution of a substantial question of federal law.
See Borden
v. Allstate Ins. Co., 589 F.3d 168, 172 (5th Cir. 2009).
As mentioned, federal law expressly allows the NFIP to hire
subcontractors or insurance adjustment organizations to
investigate claims under the SFIP.
See 44 C.F.R. § 62.21.
As an
adjuster hired by the NFIP, the defendants are mere agents of the
government, and must adhere to the NFIP regulations in the
administration of policy claims.
14
Federal regulations provide
that adjusters, such as the defendants, cannot waive, alter, or
amend any of the provisions of the SFIP, nor can they approve or
disapprove claims or tell the insured whether the NFIP will
approve or disapprove the claim.
See 44 C.F.R. § 61.13(d); see
also 44 C.F.R. pt. 61, App. A(1), Art, VII(J)(7)-(8).
Because
this case concerns whether an adjuster erroneously handled an ICC
claim, the case presents a substantial question that can only be
answered by the standards and protocols promulgated by FEMA and
the NFIP.
Finding that the Court has federal question jurisdiction,
plaintiff’s claims still fail.
The Fifth Circuit has held that
even if adjusters make material misrepresentations that
contradict the NFIP, any reliance on these misstatements is
simply unreasonable as a matter of law.
See Richmond Printing
LLC v. Dir. Fed. Emergency Mgmt. Agency, 72 F. App’x 92, 97-98
(5th Cir. July 21, 2003).
Specifically, the Fifth Circuit has
noted:
The unique situation presented by the NFIP creates
additional responsibilities for the insured.
One of
those responsibilities is that, given that the insured is
doing business with the government and that the terms of
the SFIP are published in the CFR, the insured has a duty
to read and understand the terms of its SFIP.
Id. at 98.
Therefore, “those who deal with the Government are
expected to know the law and may not rely on the conduct of
government agents contrary to the law.”
15
Id. (quoting Heckler v.
Cmty. Health Servs., 467 U.S. 51, 63 (1984)).
Article III,
Coverage D(2) of the SFIP provides:
We will pay you up to $30,000 under this Coverage DIncreased Code of Compliance, which only applies to
policies building coverage (Coverage A). Our payment of
claims under Coverage D is in addition to the amount of
coverage which you selected on the application and which
appears on the Declarations Page. But the maximum you
can collect under this policy for both Coverage ABuilding Property and Coverage D-Increased Cost of
Compliance cannot exceed the maximum permitted under the
Act. We do not charge a separate deductible for a claim
under Coverage D.
44 C.F.R. pt. 61, App. A(1), Art. III (D)(2).
The maximum amount
of coverage available under Coverage A for a single family
dwelling is $250,000.
44 C.F.R. § 61.1.
Further, the SFIP
explicitly states that adjusters cannot approve or disapprove a
claim:
“We have not authorized the adjuster to approve or
disapprove claims or to tell you whether we will approve your
claim.”
44 C.F.R. pt. 61, App. A(1), Art. VII(J)(8).
The SFIP is a published federal regulation as part of the
NFIP and, therefore, any alleged reliance on the defendants’
statements that the ICC claim would be granted, fail as a matter
of law, because those who deal with the government are charged by
law with knowing the SFIP and its requirements.
As a result,
plaintiff fails to state a claim for detrimental reliance or
negligence.3
3
Plaintiff apparently concedes this point--plaintiff fails to
defend its negligence claim in its opposition paper to
16
Regarding plaintiff’s breach of contract claim, plaintiff is
correct in noting that Louisiana law recognizes oral contracts;
however, a party who demands performance of an obligation must
prove the existence of the obligation.
1831.
See La. Civ. Code art.
The NFIP (not the plaintiff) hired and appointed the
defendants to handle the property issues in question.
The
Louisiana Supreme Court has held that “[a]n agent by undertaking
a contractual obligation with his principal [here, the NFIP] does
not increase his responsibilities to third persons and cannot be
liable to such third persons by his failure to perform such
obligations.”
Brown v. Soupenne, 416 So. 2d 170, 175 (La. 1982).
Plaintiff fails to allege factual allegations to support a
finding that defendants’ “approval constitutes a verbal contract
to proceed.”
Accordingly, the plaintiff’s motion to remand is DENIED, and
the defendants’ motion to dismiss is GRANTED.
New Orleans, Louisiana, March 6, 2013
_______________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE
defendants’ motion to dismiss. Plaintiff states that 42 U.S.C. §
4081(c) provides that adjusters are liable for their own errors
or omissions. However, Section 4081(c) does not involve
adjusters or claims-handling: “The Administrator of [FEMA] shall
hold any agent or broker selling or undertaking to sell flood
insurance under this chapter harmless from any judgment for
damages . . . .”
17
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