Century Surety Company v. Royston Enterprizes, LLC et al

Filing 23

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that the motion of defendant Royston Enterprizes, LLC, to strike [Doc. # 8 ] is denied. IT IS FURTHER ORDERED that the motion of plaintiff Century Surety Company to dismiss and to strike [Doc. # 13 ] is denied. Signed by District Judge Carol E. Jackson on 5/8/15. (JAB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CENTURY SURETY COMPANY,
Plaintiff,
v.
ROYSTON ENTERPRIZES, LLC, d/b/a
Rebel Motors, and ERIC B. ROYSTON,
Defendants.

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No. 4:15-CV-152 (CEJ)

MEMORANDUM AND ORDER
This matter is before the court on the motion of defendant Royston
Enterprizes, LLC, to strike, pursuant to Fed.R.Civ.P. 12(f). Also before the court is
the motion of plaintiff Century Surety Company to dismiss and to strike
counterclaims, pursuant to Fed.R.Civ.P. 12(b)(6) and Fed.R.Civ.P. 12(f). All issues
are fully briefed.
I.

Background

On September 6, 2011, defendant Eric Royston signed an application for
garage liability insurance on behalf of Rebel Motors. [Doc. #1-2]. The application
omitted coverage for uninsured and underinsured motorists. Id. at 4. Consistent
with the application, plaintiff issued a policy that excluded uninsured motorist
coverage. On October 28, 2011, Eric Royston was struck and dragged by an
uninsured motorist while allegedly trying to repossess a vehicle. Eric Royston made
a claim for coverage, which plaintiff denied.
Plaintiff alleges that, at the time the policy issued, “[t]he parties to the
insurance contract were . . . operating under a mutual mistake that the Policy could

be issued without Uninsured Motorist Coverage.” Complaint at ¶36. In Count I of
its complaint, plaintiff asks the court to reform the garage liability policy to include
its standard Missouri Uninsured Motorist Coverage Endorsement. In Counts II
through V, it seeks declarations that Eric Royston is not an insured for the purposes
of uninsured motorist coverage; that his claim does not arise from an “accident” as
defined by the Missouri Uninsured Motorist Coverage Endorsement; that the limit of
uninsured motorist coverage is $25,000; and that Eric Royston is not entitled to
stack uninsured motorist limits. Defendant Eric Royston d/b/a Rebel Motors asserts
counterclaims for vexations refusal and for reformation of the contract to include
uninsured motorist coverage and permit stacking of claims.
II.

Discussion
A.

Cross-motions to Strike

The parties dispute whether Rebel Motors is properly named as the “doing
business as” identity of Royston Enterprizes, LLC, or of Eric Royston. Defendants
move to strike Royston Enterprises as a defendant in this action, arguing that it is
not the named insured under the policy. Plaintiff moves to strike from the answer
and counterclaims all references to Eric Royston d/b/a Rebel Motors.
Courts may strike “from any pleading any insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f).
Judges enjoy liberal discretion to strike pleadings under Rule 12(f). BJC Health Sys.
v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007). Striking a party’s
pleading, however, is an extreme and disfavored measure. Stanbury Law Firm, P.A.
v. IRS, 221 F.3d 1059, 1063 (8th Cir. 2000). “A matter is immaterial or impertinent
when not relevant to the resolution of the issue at hand.” McLafferty v. Safeco Ins.
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Co. of Indiana, No. 14-564 DSD/SER, 2014 WL 2009086, at *3 (D. Minn. May 16,
2014) (citation omitted). “Material is scandalous if it generally refers to any
allegation that unnecessarily reflects on the moral character of an individual or
states anything in repulsive language that detracts from the dignity of the court.”
Id. Matters that are not “strictly relevant” to the underlying claim need not be
stricken if they provide “important context and background to [a plaintiff’s] suit” or
pertain to the object of the suit. Id. (citing Stanbury, 221 F.3d at 1063. “Matter will
not be stricken unless it clearly can have no possible bearing on the subject matter
of the litigation. . . If there is any doubt whether the matter may raise an issue,
the motion should be denied.” Id. (citation omitted).
Plaintiff asserts that, as the registered owner of the fictitious name Rebel
Motors, Royston Enterprizes is the proper defendant, and that “Eric Royston d/b/a
Rebel Motors” lacks standing to proceed. Defendants assert that the insurance
policy was issued to “Eric Royston d/b/a Rebel Motors”1 and that Royston
Enterprizes is immaterial to the dispute. The court finds that there are questions of
fact regarding the identity of the proper defendants and both motions to strike will
be denied.
B.

Motion to Dismiss Counterclaims

The purpose of a motion to dismiss under Rule 12(b)(6) of the Federal Rules
of Civil Procedure is to test the legal sufficiency of the complaint. The factual
allegations of a complaint are assumed true and construed in favor of the plaintiff,
“even if it strikes a savvy judge that actual proof of those facts is improbable.” Bell
1

The record contains conflicting evidence regarding the identity of the named insured on the
policy. Compare Pl. Ex. A, Declarations Page dated Oct. 19, 2011 (showing named insured
as Rebel Motors) and Defs. Ex. 1, Declarations Page dated Oct. 12, 2011 (showing named
insured as Eric Royston DBA Rebel Motors).

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Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (citing Swierkiewicz v.
Sorema N.A., 534 U.S. 506, 508 n.1 (2002)); Neitzke v. Williams, 490 U.S. 319,
327 (1989) (“Rule 12(b)(6) does not countenance . . . dismissals

based on a

judge’s disbelief of a complaint’s factual allegations”); Scheuer v. Rhodes, 416 U.S.
232, 236 (1974) (a well-pleaded complaint may proceed even if it appears “that a
recovery is very remote and unlikely”). The issue is not whether the plaintiff will
ultimately prevail, but whether the plaintiff is entitled to present evidence in
support of his claim. Id. A viable complaint must include “enough facts to state a
claim to relief that is plausible on its face.” Bell Atlantic Corp., 550 U.S. at 570.
See also id. at 563 (“no set of facts” language in Conley v. Gibson, 355 U.S. 41, 4546 (1957), “has earned its retirement.”) “Factual allegations must be enough to
raise a right to relief above the speculative level.” Id. at 555.
Defendant Eric Royston d/b/a Rebel Motors seeks reformation of the policy,
alleging that “Century Surety contends that uninsured motorists’ coverage was
excluded” and that “if Century is correct, then [the] Policy should be reformed to
reflect Missouri law and afford uninsured motorists’ coverage to Counterclaim
Plaintiff.” Counterclaim at ¶¶2-3. Plaintiff argues that these allegations fail to plead
the existence of a preexisting agreement and mutual mistake. See United Postal
Sav. Ass’n v. Norbob Enters., Inc., 792 S.W.2d 898, 901 (Mo. Ct. App. 1990)
(reformation proper when instrument fails to reflect valid agreement based on
fraud, mutual mistake, or other grounds justifying equitable relief). All parties seek
reformation of the policy to include uninsured motorist coverage. The fact that they
disagree about the form that reformation should take is not a basis for dismissing
the counterclaim.
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To state a claim for vexations refusal under § 375.420, Mo.Rev.Stat., Eric
Royston d/b/a Rebel Motors must plead that (1) he had an insurance policy with
plaintiff; (2) plaintiff refused to pay his claim; and (3) the refusal was without
reasonable cause or excuse. Dhyne v. State Farm Fire & Cas. Co., 188 S.W.3d 454,
457 (Mo. 2006).

The counterclaim in this case contains all of the requisite

allegations for stating a vexatious refusal claim. However, plaintiff argues that it
cannot be liable for refusal to pay uninsured motorist coverage that was not
included in the policy. This is not an argument attacking the sufficiency of the
defendant’s pleading, but is one that goes to the merits of the counterclaim.
Further development of the facts is necessary for resolution of this claim. See
Earley v. Auto. Ins. Co. of Hartford, Conn., 144 S.W.2d 860, 863 (Mo. Ct. App.
1940) (rejecting insurer’s argument that vexatious-refusal claim could not be
brought where policy required reformation because “[t]he only effect of reforming
the policy was to make it express the actual agreement of the parties.”).
Accordingly,
IT IS HEREBY ORDERED that the motion of defendant Royston Enterprizes,
LLC, to strike [Doc. #8] is denied.
IT IS FURTHER ORDERED that the motion of plaintiff Century Surety
Company to dismiss and to strike [Doc. #13] is denied.

CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 8th day of May, 2015.

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