CERVANTES V. BRIDGEFIELD CASUALTY INSURANCE COMPANY

Filing 54

MEMORANDUM OPINION AND ORDER OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE JOE L. WEBSTER on 2/11/2016; that Defendant's motion (Docket Entry 19 ) be GRANTED, and this action is hereby DISMISSED without prejudice for lack of subject matter jurisdiction. A Judgment dismissing this action will be entered contemporaneously with this Order. (Sheets, Jamie)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
JU,{,N R. CERVANTES,

Plaintiff,
V

BRIDGEFIE,LD CASUALTY
INSURANCE COMPANY,
Defendant.

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1:15CV81

MEMORÂNDUM OPINION AND ORDER
OF UNITED STATES MAGISTRATE JUDGE
This matter is befote the court on Defendant Bridgefield Casualty Insurance
Company's ("Defendant" or "Bddgefield") motion to dismiss the complaint pursuant to Rule

12þ)(1) of the Fedetal Rules of Civil Ptocedure on the basis that the North Carolina Indusuial
Commission has exclusive jutisdiction over the claims brought by PlaintiffJuan R. Cervantes

("Plaintiff' or "Cervantes'). (Docket Entry 19.) Ptaintiff filed a response opposing the
motion to dismiss. Btidgefield filed a reply. This motion has been fully bdefed, and the matter
is tipe for disposition.l Fot the reasons that follow, the coutt will grant Bddgefield's motion.

I.

BACKGROUND

Plaintiff filed this action in the Middle District of North Caroltna onJanuary 22,2015
alleging sevetal causes

of action telating to

Plaintiffs wotkers' compensation claim.
causes

I

Defendant's handling and ultimate denial of

(See generalþ

Complaint, Docket Entry

1.)

These

of action include intentional bteach of conttact with intent to cause sedous economic

By Order of Refetence, this m^tter was tefe¡red to the undersþed to conduct all ptoceedings in
this case putsuant 28 U.S.C. $ 636(c). pocket F;ntry 1,2.)

hatm, intentional unfai-t and deceptive ttade practices with intent to cause serious economic

harm, and bad faith tefusal to pay an insutance claim with intent to cause serious economic

hatm. (Id, at 9-1,4). Plaintiff seeks recovery of compensatory and punitive damages. (Id. at
17.) Defendant ûled its ,Answet denying liability and asserting several affirmrld,ve

defenses,

including lack of subject m^tter jutisdiction. pocket Entty 9.) On April 29,201,5, Defendant

filed the instant Motion to Dismiss fot lack of subject matter judsdiction undet 12þ)(1) of
the Fedetal Rules of Civil Ptocedute. (Docket Entty 19.) A headng on this issue was held on
December 9,201.5. (À4inute E.rtry dated 1,2/9/201,5.)
The facts of this action center on PlaintifPs workers'compensation claim filed with the

North Carchna Industrial Commission þutsuant to the North

Carohna Workers'

Compensation Act, N.C. Gen. Stat. S 97-1 et seq. ("The
'{.ct")) following injudes suffered

during the course of his employment. (Compl. nn

9-47

.) Plaintiff

alleges that on December

'l'9,201.3, while employed by Liverman Metal Recycling, Inc., he sustained serious injuties
to

his left foot and both legs after accidentally being run over by a Bobcat loader. (Id. n 30.)

Plaintiff then frled a claim for wotkets' compens anon against Liverman and Defendant for the

i"i"ry.

(Id.1134.) Defendant, however, denied Plaintiffs claim for workers' compensation

benefits, contending that Plaintiff was not employed by Liverman on the date of the injudes.
(Id. n 39.) Plaintiff alleges that Defendant's tefusal to p^y the wotkers' compensation claim
constitutes a bteach of the insurance contract between Liverman and Defendant, as well

as

several intentional torts for bad faith tefusal to p^y benefìts and unfair and deceptive trade

practices. (Id. nn 9-47.)

2

II.

DISCUSSION

A. Standatd of Review
Defendant seeks dismissal of PlaintifÎs complaint putsuant to Fedetal Rule of Civil
Ptocedute 12(bX1) fot lack of subject matter judsdiction. Subject matter judsdiction is both
a Constitutional and statutory tequirement which resüicts federal judicial power to a limited

set

of

cases and

controversies. Thus, "no action of the patties can confet subject matter

jutisdiction upon a fedetal court." Ins. Corþ. of Ireland u. Cornþagnie

des

Baøxins de Guinee, 456

U.S. 694, 702 (1982). W.hen a defendant taises a 1,2þ)(1) challenge to a plaintiffls claim, "[t]he

burden of establishing subject matter jurisdiction rests with the plaintiff." Demetres
Const.,

[nc.,776 F.3d 271,, 272 (4th Ck. 201,5) (citing Euans

647 (4th C1r. 2009).

"A 1,2þ)(1) motion should

be gtanted

u.

u.

East IYest

B.F. Perkin¡ Co., 1.66 F.3d 642,

if, after engaging in

any necessary

fact-finding, the court determines that the movant is entitled to judgment ùs a matter of law."
Id.

Because this is a divetsity action, this coutt, sitting

apply the law of

in Noth Carohna, is required to

Nonh Carohna. See Erie RR Cr. u. Tonpkin:,

axiomatic that in detetmining state law a federal court must look

of the

state's highest court, giving approptiate effect

Nei/, 1.60 F.3d 997 , 1,002 (4th Cir. 1998).

304 U.S. 64 (1933).

"It is

frst and foremost to the law

to all its implications."

If the state's highest court

Generali, S.p.A

u.

proves "unenlightening"

on the issue, howevet, a federal court will ordinadly defet to the state intetmediate appellate

coutt. Id. The United

States Supteme

Coun c{irects, "[w]here an intermediate appellate state

court tests its consideted judgment upon the rule of law which
for ascertaining state law which is not to be distegatded by

-l

a

it

announces, that is a datum

fedetal coutt unless it is convinced

by other persuasive data that the highest court of the state would decide otherwise." Id. (cittng
IWest u.

ATdrT,311 U.S. 223

(1,940)

("[F]edetal courts, under the docttine of Erie

(1,940));

see

also Storuer u. New

York Life Ins. C0.,311 U.S. 464, 467

. . must follow the decisions of

intetmediate state coutts in the absence of convincing evidence that the highest coutt of the
state would decide

B.

diffetently.").

Analysis

The sole issue before this Courtis whethet Plaintiffs bteach of contract and intentional

tort claims against Bddgefield, an insurance carder, fall within the exclusive jurisdiction of the

North Catolina Industrial Commission, who, "charged with administtation of the Wotkets'
Compensation Act, is better suited

.

to identift and regulate alleged abuses,

if any, by

insutance cartiets and health care providers in matteÍs undet the'VØotkers' Compensation Act."

N.C.

Chtrlþractic Ass'a, Inc. u. Aetna Ca¡. dy Sar. C0.,89

N.C. App. 1, 9,365 S.E.2d

3"1.2,31.6

(1988). Given the nature of Plaintiffls claims, the unambiguous dectee of the North Carolina

Cout of Appeals that "a/l clums concetning

the processing and harudling

compensation claim ate within the exclusive jurisdiction

of a wotkets'

of the Industtial

Commission,

whether the alleged conduct is intentional or not[,]" and no apparent Notth Catolina Supreme

Court precedent to the conttatf, this Court is inclined to say they
S.E.2d 622,625 G\.C. Ct.

Fot

decades,

administtation of the

'\pp.

201.5) (emphasis

do.

Bowden u. Yoang768

in ongrnal).

the North Carolina Indusuial Commission has

Noth

Catolina

'Wotkets'

overseen the

Compensation Act, the putpose of which is

"to provide compensation for an employee in [Notth Carolina] who has suffeted an injury by
accident which arose out of his employment, the compensation to be paid by the employer,

without regatd to whether the accident and tesulting injury was caused by the negligence of
the employer." Johnson

(citing I-ee

a.

u.

First Union Corþ.,131 N.C. App. 1,42,144,504 S.E.2d 808, 810 (1998)

Anerican Enka Corþ.,212 N.C. 455,461.-62,1,93 S.E. 809, 81,2 (1937)). While

ptovides the exclusive temedy fot wotk-telated

i"i"ry

it

matters, the Act has been consttued to

give the Industrial Commission jurisdiction not only over those wotk-telated in¡ury claims but
also any claims "a¡dtllzrry" to the odginal
Bowderu,768 S.E.2d.

^t624.

injury-including those against insutance caliers.

Ancillary claims have included those telated to ftaud, bad faith,

civil conspuacy, unfair and deceptive ttade practices, and intentional infliction of emotional
disttess.

See

Johøson, 131

N.C. ,\pp. at 144,504 S.E.2d at 810 (dismissing for lack of subject

matter jurisdiction employees' claim that workers' compensation carner had fabdcated
evidence and engaged
IYallcouering 142

in othet ftaudulent conduct);

Deem a. Treadawal

dy

Sons Painting dz

N.C. App. 472, 476-79,543 S.E.2d 209,21.1.-1.3 Q001) (dismissing for lack

of subject matter jutisdiction employee's fraud, bath faith, and unfut and deceptive

trade

ptactice claims against employet and insutance carier for mishandling workers' compensation

claim); Bowden,768 S.E.2d. at 624-26 (dismissing

for lack of subject matter judsdiction

employee's intentional infLiction of emotional distress and bad faíth claims against insurance
carder).

The standard

gener.ated by Jobnson, Deem, and ultimately Bowden

is clear "all claims

atising ftom an employet's or insurer's ptocessing and handling of a wotkers' compensation
claim fall within the exclusive judsdiction of the Industdal Commission, regardless of whether

the alleged conduct was intentional or merely negligent." Bowden,768 S.E.2d.
Court is unpetsuaded that the

Noth

^t

625. This

Carohna Supreme Court would disagree with such

5

a

proposition and therefote defers to the sttaþhtforwatd rule established by the

Noth

Catolina

Coutt of Appeals.2

Having done so, this Court now turns to the question of whethet Plaintiffs claims
indeed "arise Írorr' an employet's
compensation claim," or otherwise.

ot insutet's processing and handling of a wotkets'
Id. Plaintiff contends that his claims

are

not anclllary to

his otiginal workets' compensation claim. He instead contends that he seeks a detetmination

of his contractual dghts

as a

third-pârty beneîtciary, which he putports would entitle him to

fedetal jurisdiction undet l-nwery u. Camþbell, 185 N.C. App 659, 649 S.E.2d 453 Q007).
Additionally, Plaintiff telies upon Clark
(1,964),

u. Gastonialce Cream

C0.,261N.C. 234, 1,345.8.2d354

to further suppott his atgument that the instant dispute falls outside the scope of

employer-employee disputes otdinarily teviewed

and adjudicated by the

Industdal

Commission. Fot the following reasons, howevet, this Court finds Plain:j.f?s l-nwer1 and Clark
arguments unconvincing.

This Court tecognizes that Plaintiffs bteach of conüact claim will necessatily involve
some exetcise

of contractual construction and detetmination of PlaintifPs rþhts under the

agreement between Btidgefield and Livetfield. L,oweryt, howevet, does not hold that allmatters

pettaining to contractual construction and the determination of the dghts of potential contract
beneficiaties ate absolutely beyond the scope of the Industtial Commission.

I-,awery,

instead,

2 Moteovet, the Notth CaroTtna Supteme Coutt had opportunity to address both
Johnson and Deem,
but chose not to do so. See Joltnson u. Firsr Union Corþ.,131 N.C. App.1,42,504 S.E.2d 808, reu. allowed,
349 N.C. 529,526 S.E.2d 175 (1998),rea. inprouidenlþ a//owed,351 N.C, 339,525 S.E.2d 1,71,,rehþdenied,
351 N.C. 648,543 S.E.2d 870 (2000); Deem u. Treadawal dy Sons Painîing dz l{/alhouering,142 N.C. ,A,pp.
472 Q001), reu. denied,354 N.C. 21,6 Q001).
6

only stands for the limited proposition that, aftet a complete Industrial Commission heating
and awatd of benefìts to an employee ftom his sub-conttactor employet,

by an employee seeking a

declaratory jadgment

^

subsequent action

of his dghts with tespect to an insutance

agteement between a sub-contractor employer and its general contractor is beyond the scope

of the "employet-employee" telationship ordinarily govetned by the Wotkers' Compensation
Act. L.ower1,185 N.C. App. at 663-64, S.E.2d

^t

455-56.

Hete, Plaintiff, unlike the plaintiff tn L.owery, does not seek a declaratory judgment

of

his rights to a second^ty contra'ct entitling him to compensation ftom the coffets of a general

contractor. Instead, Plaintiff alleges breach of the very contract between insuranc e cartter. and
employet purportedly covering the workers' compensation claim fìled by Plaintiff against his

employet. His breach of contract claim,
ptoximate to the original

i"j"ty

as

well as his intentional tort claims, is fat more

and "employer-employee" telations ordinarily governed by the

Wotkets'Compensation Act than the declaratory judgment action brought by the plaintiff in
Iawery.

Clark is similatly inapplicable. Clark concetned only the Industrial Commission's rigltt
to reþnz an insurance

issuet

policy in a ptoceeding in which a plainiff assetted no claim against the

of the insutance policy

-

nef its tþht to construe an insut^nce agreement that

necessarily implicates the claimant's "employet-employee" relationship.

Like l-.owery,the Clark

court issued a limited declatation, holding only that the Workers' Compensation Act "does

not confer upon the Commission exptessly ot by implication jurisdiction to determine, in

a

ptoceeding in which plaintiff asserts no claim against [the insurance company], a þlaintifPs]
assetted

tþht to teform

a

policy and to recover ftom [the insutance company] the amount of

7

plaintiffs

^watd."

C/ark,261 N.C. at240,134 S.E.2d

^t359.

Plaintiff, here, does not seek

teform of his insutance policy, and, having asserted a direct claim against Bridgefield
concerning its handling of his workers' compensation claim, the factual symmetry between the
instant action a¡d Clark is wholly diminished.

Plaintiff instead taises questions about his employer's identity3 and, believing his
employet to be Livetman, whethet Bddgefield's denial of his claim constitutes a bteach

contrâct andf or an intentional

tort.

These claims do not

fit within the limited

of

exceptions

carved out by l-.owery and Clark, and arc instead more appropÅately categotized as "ancll)ary"

to Plaintiffs original injury and
compensation

claim.

subsequent processing and handling

Bridgefield's investigation and denial

of

of his workers'

PlaintifPs workers'

compensation claim fits within the plain meaning of "processing and handling," and, having
found no reason to disregatd it, this Cout defers to the clear dictates of Bowden ardits progeny.

III.
For the reasons stated above,

CONCLUSION

IT IS HEREBY ORDERED

that Defendant's motion

(Docket Er,t y 19) be GRANTED, and this acrion is heteby DISMISSED without prejudice

fot lack of subject mattet judsdiction. A Judgment dismissing this action will be entered
contemporaneously with this Order.

This the

llthday of February,201.6.

U

oe
stef
States Magisttate Judge

3 The parties tecently notified the Court regarding the Industrial Commission's Intedocutory Opinion

and Awatd. (Docket E ttry 52.) The paties do not believe that opinion renders moot any pafi of
Plaintiffs claims or Bddgefield's pending modon. pocket Entry 53.)

I