Strizic v. Northwestern Corporation et al
Filing
22
ORDER granting 5 Motion to Dismiss Def Lowney; Pl's Compl DISMISSED without prejudice as to Def Lowney; denying 12 Motion to Remand. Signed by Judge Charles C. Lovell on 3/19/2015. (MKB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
HELENA DIVISION
DANIEL STRIZIC,
CV 14–40–H–CCL
Plaintiff,
ORDER
vs.
NORTHWESTERN CORPORATION,
PEGGY LOWNEY, and STANDARD
INSURANCE COMPANY,
Defendants.
Before the Court are two motions: Defendants’ Motion to Dismiss
Defendant Peggy Lowney (Doc. 5) and Plaintiff’s Motion for Remand (Doc. 12).
Defendants removed this case to federal court, alleging that this Court has
jurisdiction under both the diversity of citizenship statute, 28 U.S.C. § 1332, and
the removal statute, 28 U.S.C. § 1441. Defendants assert that Plaintiff has
fraudulently joined a Northwestern’s employee, Lowney, as a party for the purpose
of defeating diversity jurisdiction. (Doc. 1, Notice of Removal at 3, ¶ 5.)
This breach of contract and unfair trade practices action is brought by
Daniel Strizic (“Strizic”), who is a former employee of Defendant Northwestern
Corporation (“Northwestern”). Strizic alleges that Northwestern breached its
contract with him by denying his claim for short-term disability payments.
Northwestern’s disability income plan is self-funded and administered by
Defendant Standard Insurance Company (“Standard”). Strizic alleges in the
Complaint that “Defendant Peggy Lowney is the Director of Compensation and
Benefits at Northwestern’s operations in Montana, and is a citizen and resident of
Montana.” (Doc. 1-1, Compl. at 2, ¶4.) Strizic further alleges that Defendant
Lowney (“Lowney”) acted as agent of Northwestern and provided “inaccurate
information” to Standard because “she desired to prevent Strizic from obtaining
disability benefits.” (Doc. 1-1, Compl. at 3, ¶8.) The unfair trade practices claim
alleges that the Defendants
“misrepresented pertinent facts and policy provisions relating to
coverages at issue, failed to conduct a reasonable investigation before
denying Strizic’s claim and neglected to attempt in good faith to settle
Strizic’s claim promptly, fairly, and equitably when liability was
clear.”
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(Doc. 1-1, Compl. at 4, ¶ 18.)
Although Strizic’s short-term disability benefits (had they been paid) were
apparently worth $50,079.58, see Doc. 1-1, Compl. at 3, ¶8, neither Defendants
nor Plaintiff have addressed whether Defendants have demonstrated that the
$75,000 amount in controversy requirement is met in this case. See Abrego
Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006) (defendant’s burden
to establish diversity jurisdiction). Strizic’s Complaint seeks the benefits owed to
him under the short-term disability income plan, prejudgment interest on all
overdue payments, consequential economic damages, general damages, punitive
damages, and attorneys’ fees and costs. (Doc. 1-1, Compl. at 5.) Defendants aver
that there is more than $75,000 in dispute. (Doc. 1, Notice of Removal at 3, ¶5.)
A court may allow discovery regarding the amount in controversy, see Abrego
Abrego, 443 F.3d at 691, but in that event the court must remain cognizant of the
potential for loss of subject matter jurisdiction.
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Motion to Dismiss
Defendants assert that Plaintiff fails to state a claim against Lowney upon
which relief can be granted. Under Rule 12(b)(6), Fed.R.Civ.P., the Court accepts
all well-pleaded facts as true, but conclusory allegations and unwarranted
inferences are insufficient to defeat a motion to dismiss for failure to state a claim.
National Association for the Advancement of Psychoanalysis v. California Board
of Psychology, 228 F.3d 1043, 1049 (9th Cir. 2000), cert. denied 532 U.S. 972
(2001). Plaintiff’s Complaint must contain ‘a short and plain statement of the
claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S.
662, 677-78, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007)).
Fraudulent joinder occurs when “the plaintiff fails to state a cause of action against
a resident defendant, and the failure is obvious according to the settled rules of the
state.” Hamilton Materials v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir.
2007) (citation omitted). A court may ignore the presence of a fraudulently joined
defendant for purposes of determining diversity jurisdiction. See Morris v.
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Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001).
Strizic had no contract with Lowney. Strizic fails to make any specific
allegation of unfair trade practices against Lowney. Plaintiff’s punitive damages
claim is not a stand-alone claim against Lowney.
As to Count I (Breach of Contract), there is no privity of contract as is
required for a breach of contract claim. Turner v. Kerin & Associates, 283 Mont.
117, 127, 938 P.2d 1368, 1374-75 (Mont. 1997). As to Count II (Unfair Trade
Practices), Plaintiff does not allege that Lowney is a claims adjuster as was the
case in O’Fallon v. Farmers Ins. Exchange, 260 Mont. 233, 244-45, 859 P.2d
1008, 1015 (Mont. 1993), or Soanes v. Carolina Cas. Ins. Co., 2010 WL 5607045
(D. Mont. 2010) (involving corporate insurance adjuster). As against an
individual, it must be pled that the unfair trade practices violation is done “with
such frequency as to indicate a general business practice....” § 33-18-201 (2013);
cf. § 33-18-242(2) (2013); see also O’Fallon, 859 P.2d at 1014-15. There is no
allegation that Lowney’s acts were of such frequency as to indicate a general
business practice. A single instance of alleged wrongdoing by Lowney is
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insufficient to support an inference that her conduct was “of such frequency as to
indicate general business practice....” Id. Such an inference could reasonably be
inferred as to a corporation in the business of insurance or claims adjusting, see
Soanes, but not as to an individual employee of Northwestern acting within the
scope of her employment, for that would constitute evidence against Northwestern
itself.
As stated by Defendants in their opening brief, “a corporation’s employees
under Montana law are not personally liable for acts taken on behalf of the
corporation. Sherner v. National Loss Control Services Corp., 329 Mont. 247
¶ 25, 124 P.3d 150 ¶ 25 (Mont. 2005) (citation omitted).” (Doc. 18, Def.’s Brief
in Supp. at 4.) There is no allegation in the Complaint that would provide facts to
support any exception to the corporate shield. For example, there is no allegation
or fact from which the Court could infer that Lowney acted independently outside
the scope of her employment. Neither is there any allegation or fact from which
the Court could infer that Lowney acted for her own pecuniary benefit and against
the best interest of the corporation. See Kuhns v. Scott, 259 Mont. 68, 74-75, 853
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P.2d 1200, 1204 (Mont. 1993).
In a similar case, a court of this District held that an employee of a title
company could not be sued for claims of negligence, tortious interference, civil
conspiracy, and punitive damages:
Plaintiffs plead that Ms. Smith acted as an employee of American
Title. Plaintiffs do not allege that Ms. Smith acted in any way other
than as an escrow officer of American Title nor did the Plaintiffs
allege that she acted for her personal benefit, or on or for her own
behalf.
Flagstone Development, LLC v. Joyner, 2010 WL 1780093, *1 (D. Mont. 2010)
(relying on Montana Code Ann. § 28-10-620 and Crane Creek Ranch, Inc. v.
Cresap, 103 P.3d 535, ¶13, (Mont. 2004); Bottrell v. American Bank, 773 P.2d
694 (Mont. 1989); and Phillips v. Montana Educ. Ass’n, 610 P.2d 154 (Mont.
1980)).
In opposing the motion to dismiss, Plaintiff’s counsel informs the Court that
Strizic may amend the Complaint to allege a negligence claim against Lowney.
However, counsel apparently intends to wait until the case is remanded to state
court to so amend, so as to take advantage of a more lenient state pleading
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requirement (the “conceivably” standard as opposed to the federal “plausibly”
standard). However, federal pleading standards apply following removal from
state court based on diversity jurisdiction. See Vess v. Ciba-Geigy Corp. USA, 317
F.3d 1097, 1102 (9th Cir. 2003) (“The Federal Rules of Civil Procedure apply
irrespective of the source of subject matter jurisdiction, and irrespective of
whether the substantive law at issue is state or federal.”). Montana pleading
standards do not constitute substantive law. See, e.g., Sarkar v. World Savings
FSB, 2014 WL 457901 *2 n.2 (N.D. Cal. 2014) (“Plaintiff cannot credibly contend
that California’s pleading standards constitute substantive law.”) (unpublished).
Under all these circumstances, the Court finds that Defendant’s motion to dismiss
Defendant Lowney is well taken. Even under Montana’s notice-pleading standard,
see Brilz v. Metropolitan General Life Ins., 2012 MT 184, ¶ 19, 366 Mont. 78, 87,
285 P.3d 494, 500 (Mont. 2012) (approving pleading rule set forth in McKinnon v.
Western Sugar Co-Op. Corp., 225 P.3d 1221, ¶17 (Mont. 2010)), Strizic’s
Complaint fails to allege facts that would support a cause of action against
Lowney, and the failure is obvious according to Montana’s settled rules.
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Motion for Remand
Strizic’s Motion for Remand asserts that Plaintiff properly joined Lowney
as a Defendant because there is a “possibility” that an unfair trade practices claim
could be proven against Lowney. (Doc. 21 at 6.) However, a possibility of a
claim is not enough. Under the Iqbal standard, the claim must be plausible on its
face. Iqbal, 556 U.S. at 678 (quoting Twombley, 550 U.S. at 570). “The
plausibility standard . . . asks for more than a sheer possibility that a defendant has
acted unlawfully.” Id. Plaintiff must plead “factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, 129 S.Ct. at 1949. Strizic merely alleges that Lowney was doing
her job for Northwestern when she provided inaccurate information to Standard.
Strizic does not state any fact from which the Court could infer that Lowney’s acts
were outside the scope of her employment, that Lowney’s acts were of such
frequency as to indicate general business practice, or that Lowney’s acts were for
her own pecuniary benefit and against the best interests of the corporation. The
closest Plaintiff can come is an allegation that Lowney “desired to prevent Strizic
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from obtaining disability benefits.” (Doc. 1-1, Compl. at 3, ¶8.) This
unremarkable factual allegation that the employee intended the consequences of
her actions is insufficient to reasonably infer any fact that would support a
plausible claim against an employee of a corporation who is otherwise protected
from suit by Montana public policy. See Phillips, 610 P.2d at 157. “One public
policy consideration is that the officers, directors, employees and agents of a
corporation must be shielded from personal liability for acts taken on behalf of the
corporation, including the breaching of contracts in furtherance of corporate goals,
policies, and business interests.” Id.
Strizic intends to amend his Complaint to assert a negligence claim against
Lowney. It is unclear how such a claim would be feasible in light of § 28-10-620,
M.C.A., and Crane Creek Ranch, 103 P.3d at 538, ¶13; Bottrell, 773 P.2d at 70809; and Phillips, 610 P.2d at 158. However, Strizic “may well develop facts
showing that Peggy Lowney provides inaccurate information to Standard
Insurance Company to prevent employees from successfully making claims under
the short-term disability plan,” Doc. 13 at 9. Until Strizic discovers such facts,
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that claim does not yet exist. In the meantime, Defendants have demonstrated that
removal is proper, so the motion for remand must be denied.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss Defendant
Peggy Lowney (Doc. 5) is GRANTED. Plaintiff’s Complaint is DISMISSED
against Defendant Lowney, without prejudice.
IT IS FURTHER ORDERED that Plaintiff’s Motion for Remand (Doc. 12)
is DENIED.
Dated this 19th day of March, 2015.
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