Garrett v. Bromell et al
ORDER AND OPINION granting in part and denying in part 22 Motion for Judgment on the Pleadings. The court GRANTS Defendants' Motion as to the claim for civil conspiracy without prejudice. The court DENIES Defendants 039; Motion as to the claims for outrage, negligence, gross negligence and negligence per se. The court further DENIES Defendants' Motion as to the alleged violation of 42 U.S.C. § 1981, but STRIKES the Fifth and Fourteenth Amendment claims from this cause of action. Signed by Honorable J Michelle Childs on 9/28/2017.(asni, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
John S. Garrett,
Melvin Bromell, Jr. Individually and as
Employee/Agent of Heritage Hauling,
Inc.; Heritage Hauling, Inc.; Alexis
Winburn, Individually and as
Employee/Agent of The Travelers
Indemnity Company of Connecticut; and
The Travelers Indemnity Company of
Civil Action No.: 5:16-cv-02888-JMC
ORDER AND OPINION
This case arises out of an automobile collision between Plaintiff John S. Garrett (“Garrett”)
and Defendant Melvin Bromell, Jr. (“Bromell”) while Bromell was driving a vehicle owned by his
employer, Defendant Heritage Hauling, Inc. (“Heritage”). This case particularly deals with the
subsequent denial of Garrett’s claim by Defendant Alexis Winburn (“Winburn”), an insurance
claims adjuster working on behalf of Defendant The Travelers Indemnity Company of Connecticut
Before the court is Defendants’ Motion for Judgment on the Pleadings pursuant to Federal
Rule of Civil Procedure 12(c) in which Defendants request the court to dismiss Garrett’s action
because of his failure to state a claim upon which relief can be granted. (ECF No. 22.) For the
reasons stated herein, the court GRANTS IN PART AND DENIES IN PART Defendants’
Motion for Judgment on the Pleadings.
FACTUAL AND PROCEDURAL BACKGROUND
On January 12, 2016, Garrett was injured in an automobile collision with Bromell. (ECF
No. 1-1 at 7 ¶¶ 16-17.) Heritage contracted with Travelers to provide a policy of automotive
liability insurance for the protection of Heritage and its employees/agents including Bromell. (Id.
at 6 ¶ 12.) This policy was in effect on the date of the collision. (Id. at ¶ 13.) Garrett, through his
counsel, made a claim under the insurance policy for his injuries stemming from the collision. (Id.
at 7 ¶ 19.) On April 12, 2016, Garrett’s counsel made a settlement demand. (Id. at ¶ 22.) On
April 29, 2016, Garrett received communication from Winburn and Travelers that Travelers was
denying his claim. (Id. at ¶ 23.) On the same day, Garrett’s counsel called Winburn to discuss
Garrett’s claim and the reason for the denial. (Id. at ¶ 24.) Garrett alleges that, during this
conversation, Winburn stated that “[because] Garrett was Caucasian, [and] Bromell was AfricanAmerican that such racial considerations were favorable and a factor for [Traveler’s] denial of
Garrett’s claim.” (Id. at 8 ¶ 26.)
Garrett alleges that the statement by Winburn was given with the authority of Travelers,
Heritage, and Bromell. (Id. at 8 ¶ 27); see also (Id. at 6 ¶ 14, 7 ¶¶ 15, 21.) Garrett further alleges
that Defendants “have a policy, whether written or otherwise, to use the races of claimants and
insureds when determining if and when to settle claims and determining an amount to settle such
claims” and that there was a conspiracy to “unlawfully diminish and/or defeat insurance claims of
claimants based on the race,” (Id. at 8 ¶¶ 29-30) and because of this policy he has been damaged.
(Id. at ¶ 32.)
Garrett has filed four causes of action in this case, (1) an alleged violation of 42 U.S.C. §
1981 and the Fifth and Fourteenth Amendments to the United States Constitution, (2) the tort of
outrage, (3) civil conspiracy; and (4) negligence, gross negligence, and negligence per se. (Id. at
9-10 ¶¶ 34-39, 10-11 ¶¶ 40-46, 11-12 ¶¶ 47-52, 12-14 ¶¶ 53-58.)
This case was initially filed in the Court of Common Pleas for the County of Orangeburg,
State of South Carolina (Civil Action No.: 2016-CP-38-00760) on June 10, 2016. (ECF Nos. 1 at
1 ¶ 1; 1-1 at 2.) A Notice of Removal was filed on August 19, 2016, pursuant to the provisions of
28 U.S.C. §§ 1331, 1332, 1441(b) and 1446. (ECF No. 1 at 1.) On October 27, 2016, Defendants
filed a Motion for Judgment on the Pleadings pursuant to Fed. R. Civ. P. 12(c). (ECF No. 22.) On
November 14, 2016, Garrett filed a Response to Defendants’ Motion. (ECF No. 23.) On
December 12, 2016, after having been granted an extension by the court, Defendants filed a Reply
to Garrett’s Response. (ECF Nos. 25, 28.)
As an initial matter, the court must determine whether it has jurisdiction over the causes of
action alleged in this case. Federal courts are courts of limited jurisdiction. This case was removed
to this court under 28 U.S.C. §§ 1331, 1332, 1441(b) and 1446.
Jurisdiction is proper within this court pursuant to 28 U.S.C. §§ 1331 (federal question
jurisdiction) and 1367 (supplemental jurisdiction). Under section 1331, district courts have
original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United
States. Garrett’s claim of Defendants’ violation of 42 U.S.C. § 1981, a federal statute, and the
Fifth and Fourteenth Amendments to the United States Constitution support federal question
District courts also have jurisdiction over claims that are connected to claims in which the
district court has original jurisdiction. District courts have “. . . supplemental jurisdiction over all
[ ] claims that are so related to claims in the action within such original jurisdiction that they form
part of the same case or controversy. . .” 28 U.S.C. § 1367(a). Garrett has alleged three South
Carolina state law causes of action, (1) outrage, (2) civil conspiracy, and (3) negligence. These
claims are related to Garrett’s 42 U.S.C. § 1981 claim. A district court may decline to exercise
supplemental jurisdiction over a claim if the claim involves a novel or complex issue of state law.
28 U.S.C. § 1367(c)(1). However, “[g]enerally state tort claims are not considered novel or
complex.” Parker v. Scrap Metal Processors, Inc., 468 F.3d 733, 743–44 (11th Cir. 2006).
Therefore, this court has supplemental jurisdiction over Garrett’s state law claims pursuant to
Defendants also requested removal to this court on the grounds of diversity of citizenship
pursuant to 28 U.S.C. § 1332 and the court finds that jurisdiction on this basis is improper.
Defendants removed the case on this ground, due to the alleged fraudulent joinder of Bromell,
Heritage, and Winburn. (ECF No. 1 at 5-6 ¶ 11, 6-7 ¶ 13.)
Diversity of citizenship must be established at the time of the filing of the action in order
for the court to determine if it has jurisdiction over the case on this basis. Freeport–McMoRan,
Inc. v. K N Energy, Inc., 498 U.S. 426, 428 (1991). Citizenship depends on domicile. Axel
Johnson, Inc. v. Carroll Carolina Oil Co., 145 F.3d 660, 663 (4th Cir. 1998).
When this action was commenced, the Complaint alleged that Garrett is a citizen of
Orangeburg County, South Carolina (ECF No. 1-1 at 5 ¶ 1), that Travelers is licensed to do
business in South Carolina (Id. at 6 ¶ 5), and that Winburn and Bromell are citizens and residents
of South Carolina (Id. at 5 ¶ 2, 4)—Winburn being a resident of Lexington County, and Bromell,
a resident of Horry County. (Id.) The Complaint also alleges that Heritage is a corporation,
organized and existing under the laws of the state of South Carolina with its principal place of
business in Horry County. (Id. at ¶ 3.)
Bromell asserts that Heritage, Winburn, and he were fraudulently joined in this action and
that their South Carolina residency should be disregarded, thereby making diversity jurisdiction
appropriate with Garrett being a citizen and resident of South Carolina and Travelers being
incorporated and having its principal place of business in Connecticut. (ECF No. 1 at 2 ¶ 4, 3 ¶ 5,
6-7 ¶ 13.) The court will address whether Bromell, Heritage and Winburn were fraudulently
joined, which will determine whether this case has been properly brought under diversity
jurisdiction in addition to federal question jurisdiction.
In order to establish Defendants’ liability for his claims, Garrett pleads that Winburn and
Travelers act on behalf of and with the authority of Bromell and Heritage. (ECF No. 1-1 at 6 ¶ 14,
7 ¶¶ 15, 21, 8 ¶ 27), that Bromell is the agent of Heritage (Id. at 6 ¶ 10), and that Winburn is the
agent of Travelers (Id. at 6 ¶ 11.) Plaintiff in pleading that Winburn and Travelers act on behalf
of Heritage and Bromell, pleads that there is a principal/agent relationship between the parties,
thus Heritage and Bromell are responsible for Winburn’s conduct.
To show fraudulent joinder, the removing party must demonstrate either “outright fraud in
the plaintiff's pleading of jurisdictional facts” or that “there is no possibility that the plaintiff would
be able to establish a cause of action against the in-state defendant in state court.” Hartley v. CSX
Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999) (citing Marshall v. Manville Sales Corp., 6 F.3d
229, 232 (4th Cir. 1993)). “The burden on the defendant claiming fraudulent joinder is heavy: the
defendant must show that the plaintiff cannot establish a claim against the non-diverse defendant
even after resolving all issues of fact and law in the plaintiff's favor.” Marshall, 6 F.3d at 232–33
(citing Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992)). “Th[e] standard [for
fraudulent joinder] is even more favorable to the plaintiff than the standard for ruling on a motion
to dismiss under Fed. R. Civ. P. 12(b)(6).” Hartley, 187 F.3d at 424. In addition, “[a]ll the plaintiff
needs to show is that there is a “glimmer of hope,” or a “slight possibility of a right to relief” in
state court.” Sibert v. Raycom Media, Inc., No. 3:17-CV-1544-CMC, 2017 WL 3721238, at *2
(D.S.C. Aug. 29, 2017) (citations omitted).
Defendants do not allege outright fraud in the pleading of the jurisdictional facts, but allege
that no cause of action can be established against Heritage, Bromell or Winburn. (ECF No. 1 at
5-6 ¶ 11, 6-7 ¶ 12-13.) Upon review of these allegations, the court finds that, Bromell, Heritage
and Winburn have not been fraudulently joined.
Due to the alleged denial of Garrett’s insurance claim on the basis of his race (ECF No. 11 at 8 ¶ 26), he brings four causes of action. As to Garrett’s claim of Defendants’ alleged violation
of 42 U.S.C § 1981, “[t]o [establish] a section 1981 claim, a plaintiff must prove that the defendant
intended to discriminate on the basis of race, and that the discrimination interfered with a
contractual interest [the ability to make or enforce a contract].” Denny v. Elizabeth Arden Salons,
Inc., 456 F.3d 427, 434 (4th Cir. 2006). Garrett has not pled that he is a party to the insurance
policy (contract), only that he filed a claim stemming from the collision under the policy. (ECF
No. 1-1 at 7 ¶ 19.) Garrett is a third-party and under South Carolina Law, a third-party who is not
a party to an insurance contract, cannot sue an insurer to enforce the contract. See Trancik v. USAA
Ins. Co., 581 S.E.2d 858, 861 (S.C. Ct. App. 2003) (a third-party who is not a party to a contract
cannot bring suit for breach of contract).
However, section 1981 is a two-part statute. A person’s right to “enforce” a contract must
not be impaired on the basis of race, but a person’s right to “make” a contract cannot be impaired
either. Patterson v. McLean Credit Union, 491 U.S. 164, 176-77 (1989), superseded by statute on
other grounds (citing 42 U.S.C. § 1981(a)). The denial of Garrett’s alleged claim for the insurance
proceeds as a result of the collision, on the basis of race falls within the confines of section 1981
because Travelers prevented Garrett from having the opportunity to make a contract. See Broomes
v. Schmidt, No. CIV. A. 95-4845, 1996 WL 229369, at *2 (E.D. Pa. May 3, 1996) (court states
that a private party’s “racially motivated refusal to contract” was actionable under section 1981.)
Garrett was not given the opportunity to enter into a settlement agreement, thus his ability to
contract was impaired. See Singh v. State Farm Mut. Auto. Ins. Co., 860 P.2d 1193 (Alaska 1993)
(“It is well established that a settlement is a contract, provided that it meets minimal contractual
requirements.”) Garrett, therefore has pled enough facts to establish that he has the possibility of
relief against Defendants under section 1981. 1
Garrett also brings a negligence cause of action against Defendants under the theories of
negligence, gross negligence and negligence per se. (ECF No. 1-1 at 12-14 ¶¶ 53-58.) Among
Garrett’s allegations are that “Defendants have a duty to ensure that individuals, claimants, and
consumers are not discriminated against based upon their race” (Id. at 12 ¶ 54) and that Defendants
also have a “duty to follow the laws and regulations regarding the practice or insurance set forth
by federal and state law.” (Id. at ¶ 55.)
For Defendants to be found liable for negligence, there must be a duty of care owed to
Garrett. Charleston Dry Cleaners & Laundry, Inc. v. Zurich Am. Ins. Co., 586 S.E.2d 586, 588
(2003). Garrett has pled enough facts to establish an alleged violation of section 1981 on the basis
Garrett combined Defendants’ alleged violation of 42 U.S.C. § 1981 and the Fifth and Fourteenth
Amendments into one cause of action.
Garrett pleads that there has been a violation of the Fifth and Fourteenth Amendments to the United
States Constitution. (ECF No. 1-1 at 9 ¶ 37.) However, Defendants are not state or federal actors,
nor are they acting at the behest of the state or federal government, thus, Garrett cannot establish
a claim against Defendants. See Settles v. Pinkerton, Inc., 482 F. Supp. 461, 466 (D.S.C 1979)
(“the due process clause of the Fifth Amendment applies to and restricts only the federal
government and not private persons.”) (citations omitted); see also Civil Rights Cases, 109 U.S.
3, 11 (1883) (“It is state action of a particular character that is prohibited. Individual invasion of
individual rights is not the subject-matter of the [Fourteenth] [A]mendment.”)
that he was not able to make a contract because of his race. Within section 1981 there is a duty
not to discriminate in making or enforcing contracts, and thus a violation of section 1981 would
breach a duty owed to Garrett. See 42 U.S.C § 1981. This breach of duty would make Defendants
possibly liable under a theory of negligence per se. See Trivelas v. S.C. Dep't of Transp., 558
S.E.2d 271, 275 (Ct. App. 2001) (negligence per se is negligence arising from the defendant’s
violation of a statute). However, Garrett must be covered by the statute and his injury must also
be the type of injury to be prevented by the statute. Id. (citing Rayfield v. South Carolina
Department of Corrections, 374 S.E.2d 910 (S.C. Ct. App. 1988)). Section 1981 was created to
prevent racial discrimination from impairing someone’s ability to make or enforce of contracts,
therefore Garrett is able to establish a claim for negligence per se against Defendants.
Because Garrett can possibly establish a negligence claim against Defendants, Heritage,
Winburn and Bromell, they have not been fraudulently joined in this action. Additionally, because
these Defendants were each citizens and residents of South Carolina at the institution of this action,
diversity jurisdiction under 28 U.S.C. § 1332 is improper.
A party may move for judgment on the pleadings after the pleadings have closed, but must
do so early enough to avoid delaying trial. Fed. R. Civ. P. 12(c). A motion for judgment on the
pleadings is decided under the same standard as a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6). Deutsche Bank Nat. Tr. Co. v. I.R.S., 361 F. App'x 527, 529 (4th Cir. 2010)
(citing Independence News, Inc. v. City of Charlotte, 568 F.3d 148, 154 (4th Cir. 2009). “On a
Rule 12(b)(6) motion, a complaint must be dismissed if it does not allege enough facts to state a
claim to relief that is plausible on its face.” Id. (citing Monroe v. City of Charlottesville, 579 F.3d
380, 386 (4th Cir. 2009)). Given that a Fed. R. Civ. P. 12(c) motion is decided under the same
standard as a 12(b)(6) motion, all facts alleged in the complaint are presumed to be true, and all
reasonable inferences must be drawn in the plaintiff’s favor. Republican Party of N. Carolina v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992) However, the court is not required to accept the legal
conclusions the plaintiff sets forth in his Complaint as true. Edwards v. City of Goldsboro, 178
F.3d 231, 244 (4th Cir. 1999).
“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.’” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A complaint
requires more than a statement simply alleging the defendants illegally harmed the plaintiff. Id.
“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.” Id.
a. 42 U.S.C. § 1981 Claim
42 U.S.C. § 1981 is a civil rights act stating that “[a]ll persons within the jurisdiction of the
United States shall have the same right in every State and Territory to make and enforce contracts
. . .” Section 1981 further defines “make and enforce contracts” to include “. . . the making,
performance, modification, and termination of contracts, and the enjoyment of all benefits,
privileges, terms, and conditions of the contractual relationship.” 42 U.S.C. § 1981(b). The United
States Supreme Court in Domino’s Pizza, Inc. v. McDonald stated that for there to be a violation
of section 1981, there must initially be identified, an “impaired contractual relationship under
which the plaintiff has rights.” 546 U.S. 470, 476 (internal quotation marks omitted). The Supreme
Court used the language of “rights” because they did not want to exclude or affirm the possibility
that a third-party beneficiary could have rights under a contract. Id. at 476 n.3. In order to state a
claim under section 1981, a plaintiff must establish that he was discriminated upon because of his
race, and that this discrimination impaired his ability to make or enforce a contract. See Denny,
456 F.3d at 434.
Garrett has not pled that he is in a contractual relationship with Defendants. Garrett pleads
that Heritage contracted with Travelers in order to receive automotive liability insurance that
would cover Heritage’s employees/agents. (ECF No. 1-1 at 6 ¶ 12.) Garrett further pleads that
after his collision with Bromell, he made a claim under that insurance policy. (Id. at 7 ¶ 19) and
that his claim was ultimately denied allegedly on the basis of race. (Id. at 8 ¶ 26.)
The first issue the court must decide is Garrett’s relationship to the insurance contract
between Bromell, Heritage and Travelers. Garrett is not insured under the insurance contract so
the court must determine if he is a third-party beneficiary, and moreover whether he can bring a
claim to enforce the contract. The second question is whether Traveler’s alleged denial of Garrett’s
claim on the basis of his race impaired his ability to make a contract.
To determine whether Garrett is a third-party beneficiary to the insurance contract for
purposes of section 1981 the court must look to the law of the forum state. Macedonia Church v.
Lancaster Hotel Ltd. P'ship, 560 F. Supp. 2d 175, 181 (D. Conn. 2008). See also Burnett v.
Grattan, 468 U.S. 42, 47–48 (1984) (the court must look first to federal law to see if there is a law
that carries the act into effect, second if there is no federal law that will carry the act into effect
then the court may consider the application of state common law, and if there is no state common
law then the court looks to the “predominance of the federal interest,” as courts are to apply state
law only if it is not inconsistent with federal law.” (citing 42 U.S.C. § 1988)).
There is no federal common law of contracts that will carry section 1981 into effect, so the
court turns to South Carolina State law in order to determine whether or not Garrett would be a
third-party beneficiary. See Macedonia Church, 560 F. Supp. 2d at 181 (D. Conn. 2008) (applying
Connecticut law); see also Denny, 456 F.3d at 436 (“[d]efendant's contention that [plaintiff] may
not actually have wanted [a service] ignores the fact that this was a third-party beneficiary
contract.”) (court points to Virginia law).
Under South Carolina State law, “if a contract is made for the benefit of a third person, that
person may enforce the contract if the contracting parties intended to create a direct, rather than an
incidental or consequential, benefit to such third person.” Bob Hammond Const. Co. v. Banks
Const. Co., 440 S.E.2d 890, 891 (S.C. Ct. App. 1994) (citing Cothran v. Rock Hill, 43 S.E.2d 615
(1947).) Moreover, “South Carolina contract law carries a presumption that an individual who is
not a party to a contract lacks privity to enforce it.” Trancik, 581 S.E.2d at 861. “Third-partyliability-insurance contracts are generally indemnity contracts whereby the insurer, or the first
party, agrees to pay the insured, or the second party, the amount of any damages the insured may
become legally liable to pay a third party.” Id. Garrett is a third party, incidental beneficiary
because he does not directly benefit from the contract between Heritage, Bromell and Travelers,
possibly benefitting only when there is a covered event under the policy, such as the alleged
collision. (ECF No. 1-1 at 7 ¶¶ 17-19.)
The South Carolina Court of Appeals continued in Trancik, stating “. . . the third party, or
the incidental beneficiary, does not have a contractual relationship with the insurer and cannot
maintain an action against the insurer for breach of the insurance contract.”) 581 S.E.2d at 861.
Garrett in his position as a third party, incidental beneficiary of the policy between Heritage,
Bromell and Travelers, has a right to the insurance proceeds from his collision with Bromell.
However, because he is not in a contractual relationship with Bromell, Heritage and Travelers, he
does not have the right to “enforce” the contract. Trancik, 581 S.E.2d at 861. Section 1981 does
not however, just refer to “enforcing” contracts, but also to “making” them, so even though Garrett
cannot enforce the contract, the court must inquire as to whether or not he was impaired in making
Under section 1981, a contractual relationship does not have to exist initially for there to
be protection, as long as the party would have rights under the proposed contractual relationship.
See Domino’s Pizza, 546 U.S. at 476 (“§ 1981 protects the would-be contractor along with those
who already have made contracts.”) Section 1981 “prohibits, when based on race, the refusal to
enter into a contract with someone, as well as the offer to make a contract only on discriminatory
terms.” Patterson, 491 U.S. at 176–77.
Travelers alleged denial of Garrett’s claim on the basis of race falls within the auspice of
section 1981. See Broomes, 1996 WL 229369, at *2 ([d]efendant[s] argue that § 1981 does not
encompass “a private person’s right to enter into settlement negotiations with another party for a
motor vehicle accident. [Court states that] [i]f Defendant means to argue that § 1981 does not apply
to a racially motivated refusal to contract by a purely private party, the short answer is that the
statute on its face clearly applies to such conduct.”) (internal citations omitted); see e.g., Runyon
v. McCrary, 427 U.S. 160, 173 (1976) (section 1981 reaches private discrimination). Garrett
wanted to settle his claim with Defendants, which would allow him to make a contract with them.
See Broomes v. Schmidt, No. CIV. A. 95-4845, 1996 WL 138087, at *2 (E.D. Pa. Mar. 27, 1996)
(“[a]n agreement to settle a potential legal claim is a contract”). However, in the denial of his
claim based on race, his opportunity to make a contract was impaired. See Singh, 860 P.2d at 1199
(Supreme Court of Alaska adopts Alaska Superior Court’s view that “an insurance company’s
refusal to enter into a settlement agreement with an injured party who was not its own insured fell
within section 1981 if the basis for refusal was racial discrimination.”)
Garrett would have rights to the proceeds under the contract, and but for the denial of his
claim, he might have been able to enter a settlement agreement to receive them. Garrett’s alleged
inability to make a contract because of his race would be a violation of section 1981, thus he has
pled a plausible claim upon which relief can be granted. Therefore, the court denies Defendants’
Motion for Judgment on the Pleadings as to Garrett’s claim for the alleged violation of 42 U.S.C.
§ 1981. 2
The court will address the applicability of the McCarran-Ferguson Act briefly as both
parties address this in footnotes of their Motion and Response. (ECF Nos. 22 at 4 n.2; 23 at 4 n.2.)
This court disagrees with Defendants’ assertion that federal law is inapplicable in this case. The
McCarran-Ferguson Act, 15 U.S.C. §§ 1011-15 (1945) (amended 1947) does not preempt the use
of federal law. 3
Garrett also pleads under the same cause of action that Defendants have violated his Fifth and
Fourteenth Amendment rights. (ECF No. 1-1 at 9 ¶ 37.) Defendants are not federal or state actors,
thus no claim can be brought against them. See supra note 1.
The District Court of Maryland in Duane v. Government Employees Ins. Co. citing Cochran v.
Paco, Inc., 606 F.2d 460, 464 (5th Cir. 1979) adopted a four-step procedure to determine the
applicability of the McCarran-Ferguson Act:
“(1) If the federal statute does not relate specifically to insurance, (2) the court next
must determine whether the challenged activities constitute the business of
insurance for purposes of § 1012(b). (3) If so, the court must determine whether
the state in question has enacted any law for the purpose of regulating those
activities. (4) If such state legislation exists, the court finally must decide whether
application of the federal statute would “invalidate, impair, or supersede” that law.
[If it does, then the use of the federal law is preempted].”
784 F. Supp. 1209, 1220 (D. Md. 1992), aff'd sub nom. Duane v. GEICO, 37 F.3d 1036 (4th Cir.
Applying the third step, the court did not find any South Carolina State law that regulates the denial
of insurance claims based on race. Thus, there appears to be no conflict between state law and
Garrett asserts that Defendants “recklessly inflicted severe emotional distress” on him by
denying his claim based on race (ECF No. 1-1 at 10 ¶ 41). He further asserts that Defendants’
conduct in making the statement about his race being a factor in denying his claim was so “extreme
or outrageous” that it exceeded all possible bounds of decency. (Id. ¶ 42.) Garrett additionally
asserts that his emotional distress was so severe that no reasonable person could be expected to
endure it (Id. at ¶¶ 43-44), and he suffered injury. (Id. at 10-11 ¶ 45.) The tort of outrage in South
Carolina requires that
(1) The defendant intentionally or recklessly inflicted severe emotional distress, or was
certain, or substantially certain, that such distress would result from his conduct;
(2) The conduct was so “extreme and outrageous” so as to exceed “all possible bounds
of decency” and must be regarded as “atrocious, and utterly intolerable in a
(3) The actions of the defendant caused plaintiff's emotional distress; and
(4) The emotional distress suffered by the plaintiff was “severe” such that “no
reasonable [person] could be expected to endure it.”
Hansson v. Scalise Builders of S.C., 650 S.E.2d 68, 72 (2007) (citing Ford v. Hutson, 276 S.E.2d
776, 778) (1981)).
Due to a heightened pleading standard for outrage, the Supreme Court of South Carolina
cautioned in Hansson that “. . . a party cannot establish a prima facie claim for damages resulting
from defendant’s tortious conduct with mere bald assertions. To permit a plaintiff to legitimately
state a cause of action by simply alleging, ‘I suffered emotional distress’ would be irreconcilable
with this court’s development of the law in this area.” 650 S.E.2d at 72. Garrett has not simply
alleged that he has suffered emotional distress in a vacuum; instead he alleges that because of
Winburn’s statement denying his claim based on race, he suffered severe emotional distress.
Garrett ties his emotional distress directly to Winburn’s conduct, asserting that it is extreme and
outrageous, and pleads that he has suffered such severe emotional distress that no person could be
expected to endure it. For these reasons the court finds that Garrett has stated a plausible claim,
thus Defendants’ Motion for Judgment on the Pleadings is denied as to Garrett’s claim for outrage.
c. Civil Conspiracy
“It is well settled in South Carolina that the tort of civil conspiracy contains three
elements: (1) a combination of two or more persons; (2) for the purpose of injuring the plaintiff;
(3) causing plaintiff special damage.” Kuznik v. Bees Ferry Assocs., 538 S.E.2d 15, 31 (S.C. Ct.
App. 2000). A party that is claiming civil conspiracy also “. . . must plead additional facts in
furtherance of the conspiracy separate and independent from other wrongful acts alleged in the
complaint, and the failure to properly plead such acts will merit dismissal of the claim.” Hackworth
v. Greywood at Hammett, LLC, 682 S.E.2d 871, 875 (S.C. Ct. App. 2009) (citation omitted).
Garrett’s civil conspiracy allegations incorporate by reference the facts that he pled for his
other causes of action. (ECF No. 1-1 at 11 ¶ 47.) Garrett further asserts that Defendants “did
combine, conspire or otherwise join with at least one other person and/or entity” to “deny [ ] and/or
cause an unreasonable delay in [his ability] to receive the compensation he is entitled to.” (Id. at
¶¶ 48-49.) Lastly, Garrett pleads that Defendants conspired with one another to “unlawfully
diminish and/or defeat insurance claims of claimants based on race.” (Id. at 8 ¶ 30.) Garrett does
not plead separate, independent facts in furtherance of the conspiracy, only reincorporating the
facts concerning the other allegations, thus, without them, his claim is not plausible.
Moreover, Garrett fails to plead special damages, which are required to state a claim for
civil conspiracy. See Hackworth, 682 S.E.2d at 874 (citing Vaught v. Waites, 387 S.E.2d 91, 95
(S.C. Ct. App. 1989) (“[ ] because the quiddity of a civil conspiracy claim is the special damage
resulting to the plaintiff, the damages alleged must go beyond the damages alleged in other causes
of action.”) (emphasis added). “Special damages are those elements of damages that are the
natural, but not the necessary or usual, consequence of the defendant’s conduct . . . [and] must be
specifically alleged in the complaint to avoid surprise to the other party.” Hackworth, 682 S.E.2d
at 875 (citation omitted). The South Carolina Court of Appeals further stated in Hackworth that
“[i]f a plaintiff merely repeats the damages from another claim instead of specifically listing
special damages as part of their civil conspiracy claim, their conspiracy claim should be
dismissed.” Id. Finally, South Carolina Rule of Civil Procedure 9(g) also provides “when items
of special damage are claimed, they shall be specifically stated.” Garrett does not include or
specifically list his special damages in his pleading, and he asserts the same damages that he does
in his previous causes of action. Compare (ECF No. 1-1 at 11 ¶ 52) with (ECF No. 1-1 at 9-10 ¶
39, 11 ¶ 46, 14 ¶ 58.)
Garrett’s failure to plead separate, independent facts in furtherance of the conspiracy and
to plead special damages leads this court to find that Garrett has failed to state a claim upon which
relief can be granted, and therefore the court grants Defendants’ Motion for Judgment on the
Pleadings as to his claim for civil conspiracy.
Garrett pleads that Defendants were negligent under a general negligence theory, a gross
negligence theory and/or a negligence per se theory. (ECF No. 1-1 at 12-14 ¶¶ 53-58.)
To establish a cause of action for negligence, Garrett must plead that he was (1) owed a
duty of care; (2) Defendants breached that duty; and (3) damage proximately resulted from the
breach of duty. Charleston Dry Cleaners & Laundry, 586 S.E.2d at 588. For gross negligence,
Garrett must plead that there has been “. . . the intentional, conscious failure to do something which
[ ] is incumbent upon one to do or the doing [of something] intentionally that one ought not to do.”
Hollins v. Richland County Sch. Dist. One, 427 S.E.2d 654 (1993) (citing Richardson v.
Hambright, 374 S.E.2d 296, 298 (1988)) (internal quotation marks omitted). It is the failure to
exercise slight care. Clyburn v. Sumter County Sch. Dist. # 17, 451 S.E.2d 885 (1994). Lastly,
Garrett pleads negligence per se, which stems from the violation of a statute. See Williams ex rel.
Estate of Williams v. CSX Transp., Inc., No. 2007-MO-001, 2007 WL 8434527, at *3 (S.C. Jan. 2,
2007) (“[w]hile the violation of a regulation may constitute negligence per se, this only establishes
the duty and breach elements of a negligence claim.”) In order for Garrett to state a claim for
negligence per se the court must also evaluate (1) whether the type of injury pled is the type to be
prevented under the statute, and (2) whether Garrett is within the category of people to be protected
by the statute in order to complete his claim. Whitlaw v. Kroger Co., 410 S.E.2d 251, 252-53
Garrett alleges in particular that Defendants have two duties: the first is a “duty to ensure
that individuals, claimants, and consumers are not discriminated upon their race”; and second, “a
duty to follow the laws and regulations regarding the practice of insurance set forth by federal and
state law.” (ECF No. 1-1 at 12 ¶¶ 54-55.) Garrett alleges that Defendants breached these duties
in a myriad of different ways (Id. at 12-13 ¶ 56) and that he has been injured and is entitled to
damages. (Id. at 13-14 ¶ 57-58.)
Garrett alleges in particular that Defendants “failed to properly investigate [his] claims.”
(Id. at 12 ¶ 56(a).) Under South Carolina law, an insurer has a “good faith duty to investigate a
claim.” Flynn v. Nationwide Mut. Ins. Co., 315 S.E.2d 817, 820 (S.C. Ct. App. 1984) (citing Lord
v. State Automobile and Casualty Underwriters, Des Moines, Iowa, 208 Kan. 227, 491 P.2d 917
(1971)). However, under Carolina Bank & Tr. Co. v. St. Paul Fire & Marine Co., “the duty of
good faith in the performance of obligations based on or arising under the contract does not extend
to a person who is not a party to the insurance contract.” 310 S.E.2d 163, 166 (S.C. Ct. App.
1983). Garrett is not a party to the insurance contract; thus, Defendants do not owe him a duty of
good faith and he cannot state a claim of negligence for Defendants’ alleged failure to investigate.
Garrett also pleads that Defendants were negligent in allegedly violating or permitting
employees/agents to violate 42 U.S.C § 1981 and the Fifth and Fourteenth Amendments to the
United States Constitution, and South Carolina Code § 38-59-20 (2017) (Improper Claim Practices
under the South Carolina Claims Practices Act). Garrett has appropriately pled a plausible claim
for relief for Defendants alleged violation of 42 U.S.C. § 1981, for the denial of his right to make
a contract based on race. Section 1981 was enacted in order that people within the jurisdiction of
the United States would have the ability to make or enforce a contract, without being discriminated
against based on race. The denial of Garrett’s claims based on race is the type of injury to be
prevented by the statute. Because of the alleged violation of section 1981, and injury therein that
Garrett allegedly suffered, Garrett can bring a claim of negligence per se against Defendants.
However, as to Defendants’ alleged violation of South Carolina Code § 38-59-20, there is
no private right of action under the statute and thus Garrett cannot bring a negligence per se claim
against Defendants under this statute. See Masterclean, Inc. v. Star Ins. Co., 556 S.E.2d 371, 376
(2001) (“Third parties do not have a private right of action under S.C. Code Ann. § 38–59–20.
Instead, third parties are entitled to administrative review before the Chief Insurance
Commissioner.”) (internal citations omitted).
Garrett has alleged that Defendants were negligent either generally, grossly, or per se, and
because Garrett has alleged facts sufficient enough to allow him to state a claim of negligence per
se against Defendants for the alleged violation of section 1981, the court denies Defendants’
Motion for Judgment on the Pleadings as to his claims for negligence, negligence per se and gross
For the aforementioned reasons, the court GRANTS IN PART and DENIES IN PART
Defendants’ Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure
12(c). The court GRANTS Defendants’ Motion as to the claim for civil conspiracy without
prejudice. The court DENIES Defendants’ Motion as to the claims for outrage, negligence, gross
negligence and negligence per se. The court further DENIES Defendants’ Motion as to the alleged
violation of 42 U.S.C. § 1981, but STRIKES the Fifth and Fourteenth Amendment claims from
this cause of action.
IT IS SO ORDERED.
United States District Judge
September 28, 2017
Columbia, South Carolina
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