Sedgwick Claims Management Services, Inc. v. Soukup

Filing 12

MEMORANDUM OPINION AND ORDER denying 5 Motion to Dismiss and Motion to Stay. (Ordered by Judge Ed Kinkeade on 7/6/2011) (skt)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SEDGWICK CLAIMS
MANAGEMENT SERVICES, INC.,
Plaintiff,
v.
KIMBERLEY C. SOUKUP,
Defendant.

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Civil Action No.
3:11-CV-336-K

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Kimberley Soukup’s Motion to Dismiss Complaint
Pursuant to Rule 12(b)(6) and Rule 11(b)(1) and Alternative Motion to Stay (Doc. No.
5).

The Court has considered the motion, the response, and the applicable law.

Sedgwick has pleaded specific facts which create a plausibility of entitle to relief within
its complaint on all of its causes of actions, and there is a reasonably clear legal
justification for its claims. Therefore, Ms. Soukup’s motion to dismiss is DENIED.
Because Ms. Soukup has failed to demonstrate that exceptional circumstances exist to
abstain under the Colorado River doctrine, her motion to stay is also DENIED.
I.

Background
Sedgwick is in the business of providing claims administration services for

workers’ compensation programs maintained by its clients. In Texas, employers are
given the choice between opting into a workers’ compensation insurance system as
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opposed to opting out of the system and electing to settle disputes over injuries through
the court system. The workers’ compensation system limits an employee’s ability to
bring suit for on-the-job injuries, but also guarantees certain levels of compensation for
those injuries, including medical bills and lost wages. Subscribing employers, ones that
participate in the workers’ compensation system, frequently hire companies like
Sedgwick to administer their plans.

The workers’ compensation system is highly

regulated, with guidelines in the Texas Labor Code, Texas Insurance Code, the common
law, and other areas.
Ms. Soukup was hired by Sedgwick as a workers’ compensation claims adjuster
in 2007 for a second time; she had previously been employed by Sedgwick in the same
role from 2002 through 2005.

Overall, Ms. Soukup had worked as a workers’

compensation claims adjuster since the mid-1990s. In August 2009, Ms. Soukup was
transferred from Sedgwick’s Dallas, Texas office to its office in Irving, a suburb of Dallas.
The move was prompted by Ms. Soukup’s assignment to the Bridgestone/Firestone
(“Bridgestone”) account, a newly-acquired customer.
Upon beginning work on the Bridgestone account, Ms. Soukup became concerned
with Bridgestone’s level of participation in the claims administration process. According
to Ms. Soukup, employers typically take a back seat to the claims administration
company, allowing the adjuster to largely control the process of screening, evaluating,
and paying workers’ compensation claims. Ms. Soukup claims Bridgestone was violating

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laws through its excessive involvement, and in November 2009 she reported the
situation and asked to be transferred to another client. She asserts Steve Warner, her
supervisor, told her nothing else was available.
In January 2010, Ms. Soukup asserts she was reprimanded for being inflexible and
that her position as a workers’ compensation adjuster on the Bridgestone account was
posted as available, meaning Sedgwick began actively seeking someone to replace her as
the Bridgestone claims adjuster. One month later, she left Sedgwick and joined another
company in the workers’ compensation field. Sedgwick asserts Ms. Soukup refused to
return to work after a leave of absence; Ms. Soukup claims she was effectively discharged
when her position was posted as available.
On June 8, 2010, Ms. Soukup filed suit in the 61st District Court of Harris
County, Texas (“the Harris County lawsuit”) against Sedgwick for wrongful termination
in violation of Sabine Pilot, a Texas Supreme Court case that recognized a cause of action
for employees who are terminated for refusing to perform illegal acts. In the Harris
County lawsuit, Ms. Soukup asserts she was terminated for refusing to look the other
way while Bridgestone was allegedly violating laws and regulations concerning workers’
compensation insurance.

On February 18, 2011, Sedgwick filed this lawsuit and

asserted various causes of action, largely alleging that Ms. Soukup violated her
confidentiality agreement and misappropriated trade secrets by copying information to
her personal e-mail account before leaving the company. Ms. Soukup filed this motion

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to dismiss or, in the alternative, to stay on May 2, 2011. She moves pursuant to Federal
Rule of Civil Procedure 12(b)(6), for failure to state a claim, and Rule 11(b)(1), as a
sanction for filing a complaint for an improper purpose. In the alternative, Ms. Soukup
moves this Court to stay proceedings in this pending the outcome of the Harris County
lawsuit.
II.

Legal Standards
A.

Rule 12(b)(6) motion to dismiss

In reviewing a Rule 12(b)(6) motion, which tests the legal sufficiency of the
claims stated in the complaint, a court must look solely at the pleadings themselves.
Jackson v. Procunier, 789 F.2d 307, 309 (5th Cir. 1986). In looking at whether the
complaint states a valid claim upon which relief can be granted, the court must view all
facts in a light most favorable to the plaintiff and resolve any doubts in favor of the
plaintiff. Lowrey v. Texas A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997).
To survive a 12(b)(6) motion, a plaintiff must not make mere conclusory
allegations, but must plead specific facts. Guidry v. Bank of LaPlace, 954 F.2d 278, 281
(5th Cir. 1992). “Where a complaint pleads facts that are ‘merely consistent with’ a
defendant’s liability, it ‘stops short of the line between possibility and plausibility of
entitlement to relief.’” Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937, 1949 (2009) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). A dismissal is proper where a
complaint lacks allegations “regarding a required element necessary to obtain relief.”

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Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995) (citation omitted).
B.

Rule 11(b)(1) motion to dismiss

A court must focus on objective circumstances to determine if an attorney has
conducted a “reasonable inquiry” and that a paper filed with the court is “well
grounded” in law and fact. Nat’l Ass’n of Gov’t Employees, Inc. v. Nat’l Fed’n of Fed.
Employees, 844 F.2d 216, 224 (5th Cir. 1988). If a reasonably clear legal justification can
be shown for the filing of the paper in question, there is no improper purpose and
sanctions are inappropriate. Id. A district court’s decision to impose sanctions is
reviewed for an abuse of discretion. Id. at 222.
C.

Colorado River abstention

The Fifth Circuit applies a two-tiered standard of review for abstention decisions.
Nationwide Mut. Ins. Co. v. Unauthorized Practice of Law Comm., 283 F.3d 650, 652 (5th
Cir. 2002). The abstention ruling itself is reviewed for an abuse of discretion, but
whether or not a particular abstention doctrine’s requirements are met is reviewed de
novo. Id.
III.

Analysis
Upon review of Sedgwick’s pleadings, this Court concludes the company has

pleaded specific facts which establish a plausibility of entitlement to relief on all of its
causes of action. See Iqbal, 129 S. Ct. at 1949. Therefore, Ms. Soukup’s motion to
dismiss pursuant to Rule 12(b)(6) is denied. The Court also finds a reasonably clear

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legal justification for Sedgwick’s complaint, based on Ms. Soukup’s alleged theft of
Sedgwick’s confidential information. See Nat’l Ass’n of Gov’t Employees, 844 F.2d at 224.
Ms. Soukup’s motion to dismiss pursuant to Rule 11(b)(1) is also denied.
The Colorado River abstention doctrine draws its name from a U.S. Supreme Court
case, Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).
That case created a framework by which federal courts decide whether or not to stay or
dismiss federal proceedings for coercive relief when parallel state court proceedings exist.
Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 650 (5th Cir. 2000).
A.

Parallel proceedings

The threshold inquiry in a Colorado River case is to determine if the state court
lawsuit and the federal court lawsuit are parallel proceedings. RepublicBank Nat. Ass’n
v. McIntosh, 828 F.2d 1120, 1121 (5th Cir. 1987); see also Chesapeake Operating, Inc. v.
Whitehead, No. C-10-301, 2010 WL 5464204, *4 (S.D. Tex. Dec. 29, 2010).
“Parallelism,” for purposes of a Colorado River analysis, frequently means “‘substantially
the same parties’ [are] litigating ‘substantially the same issues.’” FinServ Cas. Corp. v.
Settlement Funding, LLC, 724 F. Supp. 2d 662, 679 (S.D. Tex. 2010) (citing Tyrer v. City
of S. Beloit, Ill., 456 F.3d 744, 752 (7th Cir. 2006)). While abstention under Colorado
River requires parallel state court proceedings, “it may be that there need not be applied
in every instance a mincing insistence on precise identity of [the same parties and same
issues] . . . .” McIntosh, 828 F.2d at 1121.

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Here, Sedgwick has asserted six causes of action which have not been asserted in
the Harris County lawsuit, and Ms. Soukup initially named four additional parties in the
Harris County lawsuit that are not present in our case. Sedgwick argues these claims
arise from an incident unrelated to the Harris County lawsuit. Ms. Soukup counters
that Sedgwick’s claims arise from the same set of facts and circumstances as Ms.
Soukup’s Sabine Pilot lawsuit. In the Harris County lawsuit, Ms. Soukup claims she was
terminated for “being inflexible” for raising concerns she had about the legality of
Bridgestone’s actions in administering its workers’ compensation claims. App. to Def.
Mot., Exh. A at ¶ 4.8. In this lawsuit, Sedgwick claims Ms. Soukup took sensitive
company data with her when she left the company, by saving files to her personal e-mail
account, before immediately beginning work with another claims administration
company. Doc. No. 1 at ¶ 23–29.
Ms. Soukup’s position is supported by the protective order entered January 31,
2011 by Judge Bennett in the Harris County lawsuit: it covers “highly sensitive,
confidential, personal, proprietary, or trade secret information,” App. to Def. Mot., Exh.
D at ¶ 5, which is “produced or exchanged in the course of this litigation” and “shall not
be disclosed to any person except in accordance with the terms of this Protective Order,”
id. at ¶ 6. In its claims in this lawsuit, Sedgwick is plainly alleging that Ms. Soukup
misappropriated confidential information in retaliation for Sedgwick’s actions. As this
circuit has recognized, a mincing insistence on identical parties and claims is not

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necessary to a finding of parallel proceedings. McIntosh, 828 F.2d at 1121. This Court
finds that this lawsuit and the Harris County lawsuit are parallel proceedings for the
purposes of a Colorado River analysis.
B.

Exceptional circumstances

Once a federal court has decided that a state court lawsuit and the federal court
lawsuit are parallel proceedings for the purposes of a Colorado River analysis, the federal
court must decide if exceptional circumstances justifying abstention are present. Brown
v. Pacific Life Ins. Co., 462 F.3d 384, 395 n.7 (5th Cir. 2006). A federal court may
abstain from deciding an action when exceptional circumstances exist. Colo. River, 424
U.S. at 817–20. Courts consider six factors when evaluating whether or not “exceptional
circumstances” exist: (1) assumption by either state or federal court over a res; (2)
relative inconvenience of the fora; (3) avoidance of piecemeal litigation; (4) order in
which jurisdiction was obtained by the concurrent fora; (5) extent federal law provides
the rules of decision on the merits; and (6) adequacy of the state proceedings in
protecting the rights of the party invoking federal jurisdiction. Stewart v. W. Heritage Ins.
Co., 438 F.3d 488, 491–92 (5th Cir. 2006). The decision whether to dismiss a federal
action because of parallel state court proceedings does not rest on a mechanical checklist,
but on a careful balancing of factors in a case, with the scale heavily weighted towards
exercising jurisdiction. Brown, 462 F.3d at 395.
Here, there is no res in dispute; Ms. Soukup and Sedgwick are debating the

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reasons and manner in which she left the company. The absence of a res supports the
exercise of federal jurisdiction. Stewart v. W. Heritage Ins. Co., 438 F.3d 488, 492 (5th
Cir. 2006). This factor therefore weighs against abstention.
Second, although the state courthouse in the Harris County lawsuit is nearly 250
miles from the federal courthouse in Dallas, the events alleged in this lawsuit took place
while Ms. Soukup was working out of Sedgwick’s Irving, Texas office. The parties have
provided little information on where these alleged events took place, the location of
witnesses, or the location of sources of proof. Without more information, and with the
balancing of factors weighted in favor of exercising jurisdiction, this factor supports
rejecting abstention.
Third, the Fifth Circuit has made clear the “piecemeal litigation” factor could
more accurately be described as the “danger of inconsistent results” factor. Black Sea
Inv., 204 F.3d at 650–51. Duplicative litigation, though it is wasteful, is an unavoidable
byproduct of overlapping jurisdiction between our federal and state judicial systems. Id.
at 650. Where no court has assumed jurisdiction over a disputed res, there is no danger
of inconsistent results. Id. at 651. Accordingly, this factor weighs against abstention.
Fourth, the Harris County lawsuit was filed eight months before the suit in this
Court. This factor should not be applied simply in terms of which suit was filed first;
the progress made towards resolution in each case should also be considered. Moses H.
Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 21 (1983). Here, the Harris

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County lawsuit was set for trial on June 6, 2011 until it was continued a few weeks ago.
Ms. Soukup has not even filed an answer in the lawsuit currently pending before this
Court. Because the Harris County lawsuit was filed first and has progressed much
farther than this lawsuit, this factor weighs in favor of abstention.
Fifth, of the six causes of action Sedgwick has asserted in this lawsuit, five arise
under Texas state law. In the Harris County lawsuit, Ms. Soukup has filed a Sabine Pilot
claim, one which arises purely out of Texas state law and concerns wrongful termination.
The substantial majority of claims asserted in the two cases deal exclusively with Texas
state law issues. However, this circuit has recognized that, absent rare circumstances,
the fact that a case involves only issues of state law “is at most neutral.” Stewart, 438
F.3d at 493. Therefore, this factor is neutral in this case.
Finally, the state court proceedings can adequately protect Sedgwick’s rights. The
protective order entered in the Harris County lawsuit restricts dissemination of
Sedgwick’s confidential information, App. to Def. Mot., Exh. D, and there is nothing to
stop Sedgwick from asserting the claims in this lawsuit as counterclaims in the Harris
County lawsuit, see Tex. R. Civ. P. 63 (parties may amend pleadings as of right up to
seven days prior to trial, so long as the amendment does not operate to surprise the
opposite party). This factor, though, “can only be a neutral factor or one that weighs
against, not for, abstention.” Evanston Ins. Co. v. Jimco, 844 F.2d 1185, 1193 (5th Cir.
1988). This factor is neutral.

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That leaves the total at three against abstention, one in favor of abstention, and
two neutral. Considering the heavy weight this Court must give in resolving questions
under Colorado River in favor of exercising federal jurisdiction, Brown, 462 F.3d at 395,
the Court exercises its discretion to continue hearing all issues in this case and denies the
motion to stay, Nationwide Mut. Ins. Co., 283 F.3d at 652.
IV.

Conclusion
Sedgwick has sufficiently pleaded its claims to survive a Rule 12(b)(6) motion to

dismiss for failure to state a claim, and there is a reasonably clear legal justification for
its complaint. Ms. Soukup’s motion to dismiss is DENIED. Because Ms. Soukup has
failed to demonstrate that exceptional circumstances exist justifying abstention under
Colorado River, her motion to stay is DENIED.
SO ORDERED.
Signed July 6th, 2011.

______________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE

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