Craig Penfold Properties, Inc. v. Travelers Casualty Insurance Co et al
Filing
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Memorandum Opinion and Order: Accordingly, the court dismisses without prejudice Plaintiff's claim of negligence against UBSE. (Ordered by Judge Sam A Lindsay on 1/28/2015) (tlm)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
CRAIG PENFOLD PROPERTIES,
INC.,
Plaintiff,
v.
THE TRAVELERS CASUALTY
INSURANCE COMPANY,
TRAVELERS LLOYDS INSURANCE
COMPANY, and UNIFIELD BUILDING
SCIENCES & ENGINEERING, INC.,
Defendants.
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Civil Action No. 3:14-CV-326-L
MEMORANDUM OPINION AND ORDER
Before the court is Defendant Unified Building Sciences & Engineering, Inc.’s 12(b)(6)
Motion (Doc. 15) (“Motion”), filed April 2, 2014. After careful consideration of the motion,
response, reply, record, and applicable law, the court grants Defendant Unified Building Sciences
& Engineering, Inc.’s 12(b)(6) Motion.
I.
Procedural Background
This action arises out of a dispute over a claim made under an insurance policy (the
“Policy”). Craig Penfold Properties, Inc. (“Plaintiff” of “Penfold”), a Texas corporation, filed this
action on December 11, 2013, against The Travelers Casualty Insurance Company and
TravelersLloyds Insurance Company (collectively, “The Travelers Defendants”) in the 298th Judicial
District Court, Dallas County, Texas. On January 9, 2014, Penfold filed Plaintiff’s First Amended
Petition (“Amended Petition”). In the Amended Petition, Plaintiff added Unified Building Sciences
Memorandum Opinion and Order - Page 1
& Engineering, Inc. (“UBSE” or “Defendant”), a Texas corporation, as a defendant and asserted a
claim for negligence against it. On April 2, 2014, UBSE filed its Motion to Dismiss, urging the
court to dismiss Plaintiff’s claims against it under Federal Rule of Civil Procedure 12(b)(6).
The Travelers Defendants removed the state court action to federal court on January 27,
2014, contending that complete diversity of citizenship exists between the parties and that the
amount in controversy exceeds $75,000, exclusive of costs and interest. The court denied Plaintiff’s
Motion to Remand on August 14, 2014.
II.
Factual Background
Plaintiff contends that UBSE breached its duty to Penfold by failing to properly investigate
an insurance claim and by failing to properly adjust the claim. Pl.’s First Am. Pet. ¶¶ 19-21. With
respect to USBE, Plaintiff alleges the following:
11. On or about January 21, 2013, Defendant UBSE inspected the property.
Defendant USBE [sic] knew that the Travelers Defendants would rely on its report
to adjust the claim. Defendant USBE [sic] inspected and found hail damage to the
roof. In spite of the presence of hail damage, Defendant UBSE failed to recommend
appropriate repairs in conformity with industry standards for roofs with the same or
similar damage. Relying on Defendant UBSE’s report, the Travelers Defendants have
refused to pay Plaintiff for the damages caused during the policy period(s). This
failure to pay for the damages sustained during the policy period(s) is a breach of the
terms of the Policy. The Travelers Defendants engaged UBSE with the
pre-determined belief that it would minimize the amount of damage caused by the
hail/wind storm. UBSE has a long[-]standing relationship with the Travelers
Defendants and other similarly situated commercial property insurers and is well
known for minimizing monetary exposure for its clients.
....
19. Defendant USBE [sic] owed a duty to Plaintiff to adjust the claim and pay the
loss in accordance with the standards in the insurance industry.
20. Defendant UBSE breached their duty to Plaintiff in one or more of the following
ways:
Memorandum Opinion and Order - Page 2
(a) Failing to properly investigate the claim; [and]
(b) Failing to properly adjust the claim;
21. These acts or omissions by the Defendant UBSE, singularly or in any
combination, are a proximate cause of the damages suffered and to be suffered in the
future by Plaintiff, for which Plaintiff now sues.
Pl.’s First Am. Pet. ¶¶ 11, 19-21.
III.
Applicability of the Federal or Texas Pleading Standard
As a threshold issue, Plaintiff argues that the district court should apply the Texas pleading
standards to determine whether it has stated a claim for relief. Pl.’s Resp. ¶ 9. Defendant does not
address this argument in its reply.
In an unpublished opinion, the Fifth Circuit applied Texas’s “fair notice” pleading standard
rather than the federal standard to determine whether the allegations of the petition in a removed case
were sufficient to allege a claim under state law. De La Hoya v. Coldwell Banker Mexico, Inc., 125
F. App’x 533, 537-38 (5th Cir.2005). Although De La Hoya is unpublished, its application of the
Texas pleading standard is logical. When a party files suit in a Texas court, such party expects to be
governed by the rules of the game that apply to the civil pleading requirements of that state court
system. The court does not believe that a pleader in state court should be so hapless that he or she
is put in the untenable position of having to anticipate removal to a federal court system that applies
a more exacting pleading standard.1 Fundamental fairness compels that the standard applicable at
the time the initial lawsuit was filed in state court should govern. Durable Specialties Inc. v. Liberty
Ins. Corp., 11-739, 2011 WL 6937377, at *5 (N.D. Tex. December 30, 2011); see also Iyeldell v.
GeoVera Speciality Ins. Co., 11-739, 2011 WL 6937377, at * 2 (N.D. Tex. November 8, 2012) (“For
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purposes of the improper joinder inquiry, this Court finds that the assessment of the sufficiency of
the factual allegations should be reviewed under Texas’s ‘fair notice’ pleading standard, not the
heightened federal pleading standard.”). For these reasons, the court applies the Texas “fair notice”
standard to the allegations of Plaintiff’s Amended Petition.
IV.
Texas Pleading Standard
As the court explained in its opinion denying Plaintiff’s motion to remand, the state standard
for pleadings is more relaxed than the federal standard required to defeat a motion pursuant to
Federal Rule of Civil Procedure 12(b)(6). A pleading in district or county courts of Texas is to
include a “statement in plain and concise language of the plaintiff’s cause of action or the
defendant’s grounds of defense. That an allegation be evidentiary or be of legal conclusion shall not
be grounds for objection when fair notice to the opponent is given by the allegations as a whole.”
Tex. R. Civ. P. 45(b). Texas courts are not to “give pleadings a too cabined reading.” SmithKline
Beecham Corp. v. Doe, 903 S.W.2d 347, 354 (Tex. 1995). Under Texas law, the pleading standard
is one of “fair notice of the claim involved.” Tex. R. Civ. P. 47(a). This standard “looks to whether
the opposing party can ascertain from the pleading the nature and basic issues of the controversy and
what testimony will be relevant at trial.” Penley v. Westbrook, 146 S.W.3d 220, 232 (Tex.
App.
Fort Worth 2004), rev’d on other grounds, 231 S.W.3d 389 (Tex. 2007). A state court
petition is to be liberally construed and is adequately pleaded if one can reasonably infer a cause of
action from what is stated in the petition, even if the pleading party fails to allege specifically one
of the elements of a claim. Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993) (citations omitted).
Memorandum Opinion and Order - Page 4
On March 1, 2013, Rule 91a of the Texas Rules of Civil Procedure became effective. This
new rule provides in pertinent part:
[A] party may move to dismiss a cause of action on the grounds that it has no basis
in law or fact. A cause of action has no basis in law if the allegations, taken as true,
together with inferences reasonably drawn from them, do not entitle the claimant to
the relief sought. A cause of action has no basis in fact if no reasonable person could
believe the facts pleaded.
Tex. R. Civ. P. 91a.1. The motion must be decided “solely on the pleading of the cause of action,
together with any pleading exhibits permitted by Rule 59.” Tex. R. Civ. P. 91a.6. This new rule
now allows a state court to do what a federal court is allowed to do under Federal Rule of Civil
Procedure 12(b)(6).
V.
Analysis
A.
The Requirement to File a Certificate of Merit2
Defendant argues that one basis for dismissing Plaintiff’s negligence claim is Penfold’s
failure to file a certificate of merit, as required by Texas law. Plaintiff contends that filing a
certificate of merit is not required in this action, because its allegations do not relate to professional
negligence and instead arise from UBSE’s role as a de facto adjuster.
Under Texas law, a plaintiff must file a certificate of merit in any action for “damages arising
out of the provision of professional services.” Tex. Civ. Prac. & Rem. Code § 150.002 (a). The
certificate of merit must include an affidavit of a third-party licensed professional and must set forth
2
There is debate as to whether § 150.002(a) applies in federal court. Compare Estate of C.A. v. Grier, 752 F.
Supp. 2d 763, 772 (S.D. Tex.2010) (holding that “Texas certificate-of-merit statute collides with federal law” and
denying the defendant’s “motion to dismiss based on failure to comply with § 150.002. . . because that statute is a
procedural rule that does not apply in this federal-court diversity case.”) with Garland Dollar General LLC v. Reeves
Development LLC, 09-0707, 2010 WL 4259818, at *7 (N.D. Tex. 2010) (holding that Rule 8 is not in conflict with §
150.002 and granting a motion to dismiss for plaintiff’s failure to comply with § 150.002(a)). In any event, Plaintiff
requested that the court apply the Texas pleading requirements, and the court agreed. Accordingly, Plaintiff must also
comply with the Texas certificate-of-merit statute, if it is found applicable.
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“which damages are sought, the negligence, if any, or other action, error, or omission of the licensed
or registered professional in providing the professional service, including any error or omission in
providing advice, judgment, opinion, or a similar professional skill . . . .” Tex. Civ. Prac. & Rem.
Code § 150.002 (b).
To determine whether an action arises out of professional services and requires a certificate
of merit, “the issue is not whether the alleged tortious acts constituted the provision of professional
services, but rather whether the tort claims arise out of the provision of professional services.”
Foundation Assessment, Inc. v. O’Connor, 426 S.W.3d 827, 834 (Tex. App.
Forth Worth 2014)
(citing Dunham Eng’g, Inc. v. Sherwin-Williams Co., 404 S.W.3d 785, 793 (Tex.App.
Houston
[14th Dist.] 2013, no pet.) (internal citations omitted). Moreover, courts “are not bound by the labels
the plaintiff uses in formulating its pleadings.” TIC N. Cent. Dallas 3, LLC v. Envirobusiness, Inc.,
13-01021, 2014 WL 4724706, at *4 (Tex. App.
Dallas September 24, 2014, pet. filed) (citation
omitted) (holding that an architecture firm, who was the tenant and seller of a building, was not
providing professional services when it allegedly made misrepresentations regarding the building’s
condition, because “[Plaintiff] did not allege that [Defendant] made any of these representations as
architects or in the course of business.”). Courts “will examine the ‘substance’ of the plaintiff’s
pleadings to determine whether the ‘cause of action’ arises out of the provision of professional
services.” Id. (citation omitted).
Here, Penfold filed a negligence claim against UBSE, and the only question is whether
Plaintiff’s claim for negligence arises out of professional services provided by UBSE. Plaintiff
argues that it was not required to file a certificate of merit, because its “allegations clearly evince a
breach of duty by UBSE in its capacity as the adjuster of the damage to Plaintiff’s building.” Pl.’s
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Resp. ¶ 15. Plaintiff also alleges that “UBSE owed a duty to Plaintiff to adjust the claim and pay the
loss in accordance with the standards in the insurance industry.” Pl.’s First Am. Pet. ¶ 19. Plaintiff,
however, asserts that UBSE inspected its property and found hail damage; that UBSE wrote a report
that it knew the Travelers Defendants would rely; and “that UBSE failed to recommend appropriate
repairs in conformity with industry standards for roofs with the same or similar damage.” Pl.’s First
Am. Pet. ¶ 11. Based on Plaintiff’s pleadings, the only logical conclusion for the court to reach is
that UBSE inspected the property and made a recommendation to the Travelers Defendants regarding
the extent of the damage to Plaintiff’s roof in the course of its business as an engineering firm. The
court is not bound by the labels used in Plaintiff’s pleadings, and the substance of those pleadings
leads to the conclusion that Plaintiff’s negligence claim arises out of the provision of the professional
engineering services. Accordingly, Plaintiff was required to file a certificate of merit.
B.
Whether to Dismiss With or Without Prejudice
Under Texas law, “[t]he plaintiff’s failure to file the affidavit in accordance with this section
shall result in dismissal of the complaint against the defendant,” and “[t]his dismissal may be with
prejudice.” Tex. Civ. Prac. & Rem. Code § 150.002 (e). Texas courts disagree as to the scope of
the court’s discretion to dismiss without prejudice. Compare Bruington Eng’g, Ltd. v. Pedernal
Energy, LLC, 13-00558, 2014 WL 4211024, at *7 (Tex. App.
San Antonio August 27, 2014)
(interpreting the statute to allow dismissal without prejudice only in a narrow set of circumstances)
with TIC N. Cent. Dallas 3, LLC, 2014 WL 4724706, at *4 (disagreeing with Bruington’s narrow
interpretation of the statute).
Bruington held that the ability of a court to dismiss without prejudice depends on whether
a plaintiff contemporaneously filed a certificate of merit with the first-filed complaint, as the statute
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so requires. Id. at 7; see also Tex. Civ. Prac. & Rem. Code § 150.002 (a) (requiring a plaintiff to
file an affidavit contemporaneously as their complaint). Bruington interpreted the statute to mean
that, notwithstanding a narrow exception, “[a] failure to file a section 150.002(a) affidavit
contemporaneously with the first-filed petition mandates dismissal with prejudice pursuant to section
150.002(e).” 2014 WL 4211024, at *7.
In TIC N. Cent. Dallas 3, LLC, on the other hand, the court held that “the statutory provision
giving trial courts discretion to dismiss without prejudice reflects the legislature’s intent to allow trial
courts to determine when a plaintiff should be given a second opportunity to comply with the
statute.” 2014 WL 4724706, at *4. Specifically, the legislature’s purposes for the statute was “to
deter and end meritless claims quickly.” Id. at *3. The court also noted that it disagreed with the
interpretation adopted by Bruington. Id. at *4 (“We conclude when a plaintiff files a new action and
includes a certificate of merit with the first-filed petition in that action, the plaintiff has complied
with the plain language of the statute.”).
After considering the competing interpretations, the court determines that the statute provides
courts with discretion to dismiss without prejudice and does not limit this discretion in the manner
that Bruington suggests. Accordingly, the court dismisses without prejudice Plaintiff’s claim of
negligence against UBSE.3
3
Rule 12(b)(6) motions are ordinarily decided on the merits. In this case, the court’s basis for granting
Defendant’s motion is based on a procedural defect. Under these circumstances, the court believes that a dismissal with
prejudice is not warranted.
Memorandum Opinion and Order - Page 8
It is so ordered this 28th day of January, 2015.
Sam A. Lindsay
United States District Judge
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