The Hammocks LLC v. Harleysville Mutual Insurance Company
Filing
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MEMORANDUM OF DECISION AND ORDER that the Plaintiffs Objection to the Memorandum and Recommendation of the Magistrate Judge [Doc. 18] is OVERRULED; 17 the Memorandum and Recommendation of the Magistrate Judge is accepted; gr anting 11 Motion to Dismiss, and the second and third causes of action set forth in the Plaintiffs Complaint are hereby DISMISSED WITH PREJUDICE. IT IS FURTHER ORDERED that the Defendant shall file an answer to the Plaintiffs Complaint within twenty-one (21) days from the entry of this Order. Signed by District Judge Martin Reidinger on 8/3/11. (siw)
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:10cv22
THE HAMMOCKS, LLC,
d/b/a Richmond Hill Inn,
)
)
)
Plaintiff,
)
)
vs.
)
)
HARLEYSVILLE MUTUAL
)
INSURANCE COMPANY,
)
)
Defendant.
)
___________________________ )
MEMORANDUM OF DECISION
AND ORDER
THIS MATTER is before the Court on the Defendant’s Motion to
Dismiss [Doc. 11]; the Magistrate Judge’s Memorandum and
Recommendation [Doc. 17] regarding the disposition of said motion; and
the Plaintiff’s Objection to the Memorandum and Recommendation [Doc.
18].
I.
PROCEDURAL AND FACTUAL BACKGROUND
Since October 2005, the Plaintiff has owned certain real property in
Buncombe County, North Carolina known as the Richmond Hill Inn. [Doc.
9-1 at ¶6]. The Plaintiff maintained and used the Richmond Hill Inn
property, consisting of a building commonly known as “the Mansion” and
other buildings, to conduct a hotel or inn business. [Id. at ¶7]. In October
2008, the Defendant issued a policy of commercial property insurance to
the Plaintiff with a stated policy period of October 19, 2008 to October 19,
2009 (“the Policy”). [Id. at ¶8]. On or about March 19, 2009, the Mansion
and certain personal property sustained damage as a result of a fire. [Id. at
¶12]. Thereafter, the Plaintiff notified the Defendant of the fire and the
resulting losses. [Id. at ¶13].
On March 25, 2009, the Plaintiff sought bankruptcy protection from
the United States Bankruptcy Court for the Western District of North
Carolina by filing a voluntary petition for bankruptcy pursuant to Chapter 11
of the United States Bankruptcy Code. [Id. at ¶14]. Thereafter, on May 29,
2009, the Plaintiff submitted to the Defendant a Sworn Statement in Proof
of Loss, which provided sworn testimony regarding the fire loss claim.
[See Doc. 10 at ¶17]. On June 10 and 11, 2009, Dr. William Gray, a
member and acting representative of the Plaintiff, submitted to an
examination under oath by the Defendant’s attorneys. [Id. at ¶19].
On October 11, 2009, the Defendant sought relief from the
bankruptcy stay to pursue an action against the Plaintiff for a declaration
that the Policy did not provide coverage for the Plaintiff’s fire loss. [Id. at
¶21]. The Bankruptcy Court denied the Defendant’s motion for relief from
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the stay. The Plaintiff then initiated the present action as an adversary
proceeding in the Bankruptcy Court. This Court withdrew the reference of
this matter [Doc. 5], and pursuant to this Court’s Order, the Plaintiff then
filed its Complaint in this Court. [See Docs. 8, 10]. In its Complaint, the
Plaintiff asserts three causes of action against the Defendant: a claim for
breach of contract (first cause of action), a claim for bad faith refusal to
settle an insurance claim (second cause of action), and a claim for unfair
and deceptive trade practices (third cause of action).
The Defendant then moved to dismiss the Plaintiff’s second and third
causes of action. [Doc. 11]. In response, the Plaintiff effectively conceded
the motion to dismiss but asked for the dismissal to be without prejudice in
the event that facts are later discovered that would support the dismissed
claims. [Docs. 15].
Pursuant to 28 U.S.C. § 636(b) and the Standing Orders of
Designation of this Court, the Honorable Dennis L. Howell, United States
Magistrate Judge, was designated to consider the Defendant’s Motion to
Dismiss and to submit a recommendation for its disposition. On January
25, 2011, the Magistrate Judge entered a Memorandum and
Recommendation in which he recommended that the Motion to Dismiss be
granted and that the Plaintiff’s second and third causes of action be
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dismissed with prejudice. [Doc. 17]. The Plaintiff timely filed an Objection
to the Memorandum and Recommendation [Doc. 18]. While not opposing
dismissal of these causes of action, the Plaintiff does object to the
Magistrate Judge’s recommendation that such dismissal be with prejudice.
[Id.]. The Defendant has responded to the Plaintiff’s Objection, urging the
Court to adopt the Magistrate Judge’s Recommendation in its entirety [Doc.
19].
Having been fully briefed, this matter is now ripe for disposition.
II.
STANDARD OF REVIEW
A.
Standard of Review Applicable to Objections to Magistrate
Judge’s Memorandum and Recommendation
The Federal Magistrate Act requires a district court to “make a de
novo determination of those portions of the report or specific proposed
findings or recommendations to which objection is made.” 28 U.S.C. §
636(b)(1). In order “to preserve for appeal an issue in a magistrate judge’s
report, a party must object to the finding or recommendation on that issue
with sufficient specificity so as reasonably to alert the district court of the
true ground for the objection.” United States v. Midgette, 478 F.3d 616,
622 (4th Cir. 2007). The Court is not required to review, under a de novo
or any other standard, the factual or legal conclusions of the magistrate
judge to which no objections have been raised. Thomas v. Arn, 474 U.S.
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140, 150, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985). Additionally, the Court
need not conduct a de novo review where a party makes only “general and
conclusory objections that do not direct the court to a specific error in the
magistrate's proposed findings and recommendations.” Orpiano v.
Johnson, 687 F.2d 44, 47 (4th Cir. 1982).
B.
Rule 12(b)(6) Standard of Review
In order to survive a motion to dismiss pursuant to Rule 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct.
1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). To be
“plausible on its face,” a plaintiff must demonstrate more than “a sheer
possibility that a defendant has acted unlawfully.” Iqbal, 129 S.Ct. at 1949.
[T]he Supreme Court has held that a complaint must
contain “more than labels and conclusions, and a
formulaic recitation of the elements of a cause of
action will not do.” To discount such unadorned
conclusory allegations, “a court considering a motion
to dismiss can choose to begin by identifying
pleadings that, because they are not more than
conclusions, are not entitled to the assumption of
truth.”
This approach recognizes that “naked
assertions” of wrongdoing necessitate some “factual
enhancement” within the complaint to cross “the line
between possibility and plausibility of entitlement to
relief.”
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At bottom, determining whether a complaint states on
its face a plausible claim for relief and therefore can
survive a Rule 12(b)(6) motion will “be a contextspecific task that requires the reviewing court to draw
on its judicial experience and common sense. But
where the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct,
the complaint has alleged – but it has not ‘show[n]’ –
‘that the pleader is entitled to relief,’” as required by
Rule 8. ... [E]ven though Rule 8 “marks a notable and
generous departure from the hyper-technical,
codepleading regime of a prior era, ... it does not
unlock the doors of discovery for a plaintiff armed with
nothing more than conclusions.”
Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Twombly,
550 U.S. at 555, 557, 127 S.Ct. 1955 and Iqbal, 129 S.Ct. at 1950).
III.
DISCUSSION
Unless the district court specifically holds otherwise, a dismissal
pursuant to Federal Rule of Civil Procedure 12(b)(6) is with prejudice. See
Fed. R. Civ. P. 41(b) (“Unless the dismissal order states otherwise, a
dismissal under this subdivision (b) and any dismissal not under this rule -except one for lack of jurisdiction, improper venue, or failure to join a party
under Rule 19 -- operates as an adjudication on the merits.”). The
determination of whether a dismissal should be with or without prejudice is
a matter within the sound discretion of the district court. See Payne v.
Brake, 439 F.3d 198, 204 (4th Cir. 2006).
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The Plaintiff concedes that dismissal of the second and third causes
of action would be proper, and it has made no effort to demonstrate that
these claims have any plausible basis in fact. Indeed, as the Magistrate
Judge noted, the Plaintiff in responding to the motion to dismiss presented
“no forecast of evidence that plaintiff believes it will likely uncover during
the discovery process that would make its claims plausible.” [Doc. 17 at 5].
The Plaintiff makes no objection to the Magistrate Judge’s conclusion in
this regard.
Nevertheless, the Plaintiff contends that dismissal of its bad faith and
unfair and deceptive trade practice claims should be without prejudice so
that it may renew such claims “in the event the Plaintiff develops facts
further supporting such claims through discovery in this action.” [Doc. 18 at
2]. The Plaintiff’s argument, however, is completely antithetical to the
teachings of the Supreme Court set forth in Twombly and Iqbal, supra.
These cases make clear that a plaintiff first must assert a plausible claim
before being permitted to use the invasive and costly tools of discovery.
See Twombly, 550 U.S. at 558, 127 S.Ct. 1955 (“when the allegations in a
complaint, however true, could not raise a claim of entitlement to relief ‘this
basic deficiency should . . . be exposed at the point of minimum
expenditure or time and money by the parties and the court’”); Iqbal, 129
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S.Ct. at 1954 (“Because respondent’s complaint is deficient under Rule 8,
he is not entitled to discovery, cabined or otherwise.”).
In its Objection, the Plaintiff appears to suggests that a dismissal
without prejudice would somehow permit the Plaintiff to engage in
discovery in an effort to uncover facts to support the subsequent renewal of
its dismissed claims. The dismissal of these claims without prejudice,
however, would have no impact on the scope of allowable discovery in this
action. Rule 26(b)(1) allows discovery “regarding any nonprivileged matter
that is relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1).
Regardless of whether these claims are dismissed without prejudice, the
Plaintiff will be limited to pursuing the discovery of matters relevant to its
breach of contract claim. A dismissal without prejudice would not entitle
the Plaintiff to pursue discovery solely in an effort to revive its previously
dismissed and implausible claims.
For the reasons stated in the Magistrate Judge’s Memorandum and
Recommendation, the Court will, in the exercise of its sound discretion,
dismiss the Plaintiff’s second and third causes of action with prejudice.
IV.
CONCLUSION
Having conducted a de novo review of those portions of the
Memorandum and Recommendation to which objections were filed, the
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Court concludes that the Magistrate Judge’s proposed conclusions of law
are supported by and are consistent with current case law.
Accordingly, IT IS, THEREFORE, ORDERED that the Plaintiff’s
Objection to the Memorandum and Recommendation of the Magistrate
Judge [Doc. 18] is OVERRULED, and the recommendation of the
Magistrate Judge [Doc. 17] is ACCEPTED.
IT IS FURTHER ORDERED that the Defendant’s Motion to Dismiss
[Doc. 11] is GRANTED, and the second and third causes of action set forth
in the Plaintiff’s Complaint are hereby DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that the Defendant shall file an answer to
the Plaintiff’s Complaint within twenty-one (21) days from the entry of this
Order.
IT IS SO ORDERED.
Signed: August 3, 2011
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