Total Rx Care LLC v. Great Northern Insurance Company

Filing 73

Memorandum Opinion and Order granting in part and denying in part 12 Amended Motion to Dismiss for Failure to State a Claim. The Court DISMISSES without prejudice Plaintiff's fraud, fraudulent inducement, and pattern or practice claims. And the Court DISMISSES with prejudice Plaintiff's stand-alone DTPA claim. Amended Complaint due on or before 8/14/2017. (Ordered by Judge Jane J. Boyle on 7/17/2017) (rekc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
TOTAL RX CARE, LLC,
Plaintiff,
v.
GREAT NORTHERN INSURANCE
COMPANY,
Defendant.

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CIVIL ACTION NO. 3:16-CV-2965-B

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Great Northern Insurance Company’s Amended Motion to
Dismiss for Failure to State a Claim. Doc. 12. For the reasons that follow, the Court holds that
Defendant’s Motion is GRANTED in part and DENIED in part.
I.
BACKGROUND
A.

Factual Background1
This case involves an insurance dispute. Plaintiff Total Rx Care is the named insured under

a policy issued by Defendant Great Northern (the Policy), covering the period between September
4, 2015 and September 4, 2016. Doc. 6, Pl.’s Am. Compl. ¶ 5. Plaintiff owned and operated a
pharmacy. Id. Under the Policy, Defendant allegedly promised to provide $25 million of Business
Income and Extra Expense coverage for the pharmacy. Id. ¶ 6. In December 2015, the pharmacy was

1

The Court draws its factual account from Plaintiff’s Amended Complaint as well as from the parties’
briefing on the Motion to Dismiss before the Court. Any contested facts are noted as such.
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hit by a tornado, which resulted in wind and water damage and left the pharmacy non-operational.
Id. ¶ 5. Plaintiff asserts that while it paid the full premium, Defendant failed to fully reimburse
Plaintiff for its losses up to the Policy limits. Id. ¶ 6.
Shortly after the tornado, Defendant’s adjuster inspected the pharmacy. Id. ¶ 7. Defendant
also retained a forensic accounting firm, HSNO, to estimate the amount of income that would be
lost as a result of the tornado’s damage. Id. ¶ 8. According to Plaintiff, HSNO concluded that
Plaintiff’s business income loss was expected to exceed $35 million. Id. ¶ 10. HSNO issued a second
report months later, refining its calculation, and maintained that the loss exceeded the Policy limit
of $25 million. Id. ¶ 17. According to Plaintiff, it has not been fully reimbursed as less than $6 million
has been paid. Id. ¶ 18.
Plaintiff consulted with a contractor to rebuild the pharmacy and received an estimate of
$400,000. Id. ¶ 19. According to Plaintiff, Defendant’s adjuster urged Plaintiff to use Defendant’s
contractor, Belfor Property Restoration, instead and promised to pay any cost increase to induce
Plaintiff’s agreement. Id. Specifically, Plaintiff alleges that Defendant promised to pay the cost to the
extent it exceeded $400,000 (the Belfor Promise). Id. Defendant’s contractor performed the work
once it received Defendant’s approval of the pricing. Id. The cost of rebuilding exceeded $400,000
by $905,233.2 Id. Defendant refused to pay the amount and Plaintiff placed a lien on the property
as a result. Id. Plaintiff’s landlord gave notice that the lien breached its lease and demanded its
removal. Id. Plaintiff forwarded the notice to Defendant but Defendant refused to pay. Id.
Plaintiff initially filed suit in state court, and the case was removed to this Court on October

2

The Court is unclear as to whether the total cost was $905,233 in total or that the total cost
exceeded $400,000 by $905,213, meaning the total cost would be $1,305,233.
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21, 2016. Doc. 1, Notice of Removal. Plaintiff then filed its Amended Complaint and brought the
following claims: (1) a request for declaratory judgment; (2) breach of contract; (3) violations of the
Texas Insurance Code; (4) violations of the Texas Deceptive Trade Practices Act; (5) breach of the
common law duty of good faith and fair dealing; (6) fraud; (7) fraudulent inducement; (8) promissory
estoppel; and (9) pattern and practice. Doc. 6, Pl.’s Am. Compl. ¶¶ 33–50. Defendant, after filing
a Motion to Dismiss (Doc. 9), filed its Amended Motion to Dismiss. Doc. 12. Plaintiff filed a
Response (Doc. 17), and Defendant filed a Reply (Doc. 21). Thus, the issue is ripe and the Court
now turns to the merits of its decision.
II.
LEGAL STANDARD
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint must contain “a
short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). Rule 12(b)(6) authorizes a court to dismiss a plaintiff’s complaint for “failure to state a claim
upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In considering a Rule 12(b)(6) motion
to dismiss, “[t]he court accepts all well-pleaded facts as true, viewing them in the light most favorable
to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting
Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). The court
will “not look beyond the face of the pleadings to determine whether relief should be granted based
on the alleged facts.” Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999).
To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Threadbare

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recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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. “The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
When well-pleaded facts fail to achieve this plausibility standard, “the complaint has alleged—but
it has not shown—that the pleader is entitled to relief.” Id. at 679 (internal quotation marks and
alterations omitted).
III.
ANALYSIS
Defendant moves to dismiss Plaintiff’s claims of: (1) fraud; (2) fraudulent inducement;
(3) pattern and practice; (4) promissory estoppel; and (5) its claim under the Texas Deceptive Trade
Practices Act. Doc. 13, Def.’s Br. in Supp. of Am. Mot. to Dismiss 1–2 [hereinafter Def.’s Br.]. The
Court examines each in turn.3
A.

Fraud

Plaintiff alleges that it consulted with a contractor to rebuild the pharmacy for about
$400,000. Doc. 6, Pl.’s Am. Compl. ¶ 47. According to Plaintiff, Defendant’s adjuster urged Plaintiff
to use Defendant’s contractor instead, promising to pay any cost increase to induce Plaintiff’s

3

Plaintiff’s Amended Complaint combines the claims for fraud, fraudulent inducement, and
promissory estoppel into one section. Doc. 6, Pl.’s Am. Compl. ¶¶ 47–49. Defendant’s Motion to Dismiss, by
contrast, addresses each of the three individually. Doc. 13, Def.’s Br. 5, 10–11. The Court likewise addresses
each individually.

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agreement. Id. Defendant’s contractor performed the work once it received Defendant’s approval of
the pricing. Id. Plaintiff claims it “would not have entered into a [contract] but for [Defendant’s]
promise to pay the differential.” Id. Plaintiff also states that Defendant was either a third-party
beneficiary or implied party to the contract. Id. According to Plaintiff, these facts show that
Defendant made a misrepresentation that was: (1) material; (2) false; (3) known to be false; (4)
intended to be acted upon; (5) relied upon; and (6) caused injury. Id. ¶ 48. As a result, Plaintiff
alleges that Defendant is estopped from denying its responsibility for the difference in cost. Id.
Under Texas law, the elements of common law fraud are: “(1) a material misrepresentation;
(2) that is false; (3) made with knowledge of its falsity or recklessness as to its truth; (4) made with
the intention that it should be acted upon by another party; (5) relied upon by the other party; and
(6) causing injury.” Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 212
(5th Cir. 2009) (citing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex.
2001)).4
Defendant’s sole challenge to Plaintiff’s fraud claim is that it is barred by the “independent
injury doctrine.” Doc. 13, Def.’s Br. 11–12. The independent injury doctrine precludes a tort cause
of action, like fraud, if: (1) “the claim is for breach of duty created solely by contract rather than a
4

Plaintiff’s state-law fraud claims are subject to the heightened pleading standard of Federal Rule of
Civil Procedure 9(b). Sullivan v. Leor Energy, LLC, 600 F.3d 542, 550–51 (5th Cir. 2010). Rule 9(b) requires
that a plaintiff “state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
To satisfy Rule 9(b), the plaintiff must “specify the statements contended to be fraudulent, identify the
speaker, state when and where the statements were made, and explain why the statements were fraudulent.”
Sullivan, 600 F.3d at 551 (citing ABC Arbitrage Plaintiffs Grp. v. Tchuruk, 291 F.3d 336, 350 (5th Cir. 2002)).
Essentially, the plaintiff must set out “the who, what, when, where, and how” of the fraud. Benchmark Elecs.,
Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003) (quoting Williams v. WMX Techs., Inc., 112 F.3d
175, 179 (5th Cir. 1997)). Although Defendant does not argue that Plaintiff failed to plead any of the
elements of fraud, as will be addressed infra, Plaintiff’s claim falls short in this regard and must be repled.

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duty imposed by law”; and (2) “the injury is only the economic loss to the subject of the contract.”
Cardinal Health Sols., Inc. v. Valley Baptist Medical Ctr., No. 1:07-cv-111, 2009 WL 150942, at *19
(S.D. Tex. Jan. 21, 2009) (quoting Eastman Chem. Co. v. Niro, Inc., 80 F. Supp. 2d 712, 717 (S.D.
Tex. 2000)). Defendant reasons that Plaintiff’s claim for fraud is actually just a claim that Defendant
breached its contractual obligation to pay under the Policy. Doc. 13, Def.’s Br. 11. Because the
amount in question arises under the Policy, Defendant argues it is not an injury independent from
a contract claim and only contractual damages are available. Id. at 11–12.
Plaintiff counters that the independent injury doctrine is not applicable to this case. Doc. 17,
Pl.’s Resp. 16. Plaintiff clarifies that it does not rely on the Policy for its fraud claim; rather the Belfor
Promise “stands on its own two feet.” Id. at 16–17. Plaintiff reasons that Defendant was never
obligated to pay the baseline $400,000. Id. at 17. Therefore, Plaintiff reasons, there is no reason to
classify the amount in excess of the $400,000 as falling within the contractual obligations of the
Policy. Id. Plaintiff argues that it would never have incurred this amount absent Defendant’s promise
to pay the excess, so its damages alleged from fraud are separate from any contractual damages under
the Policy. Id. Furthermore, Plaintiff argues that Defendant had an independent duty not to commit
fraud. Doc. 17, Pl.’s Resp. 19 (citing Eastman Chem. Co., 80 F. Supp. 2d at 717).
But Defendant points out that Plaintiff never plead in its Amended Complaint that any
promises were made outside of those contained in the Policy. Doc. 21, Def.’s Reply 6. Therefore,
Defendant rejects Plaintiff’s characterization of its fraud claim as standing apart from the Policy and
based on a separate promise. Id. In other words, Defendant appears to maintain that because
Plaintiff’s Complaint does not expressly state that Plaintiff seeks recovery under both the Policy and

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an additional promise, the independent injury doctrine must bar Plaintiff’s fraud claim.
Upon review by of the Complaint by the Court, Plaintiff alleges that: (1) the adjuster urged
Plaintiff to use Belfor; (2) the adjuster induced Plaintiff to agree by promising to pay the difference
in price between Plaintiff’s $400,000 quote and the final cost; and (3) Plaintiff would not have hired
Belfor if not for Defendant’s promise to pay. Doc. 6, Pl.’s Am. Compl. ¶ 47. From these allegations,
it is arguable that Plaintiff intended for its fraud claim to be based on a separate promise from the
Policy. While Plaintiff’s Complaint could benefit from further clarification, it does not conclusively
preclude recovery by failing to expressly state that it seeks damages beyond the Policy.
Assuming arguendo that Plaintiff has sufficiently alleged claims under both the Policy and
under a separate promise, the Court is unpersuaded that the independent injury doctrine bars
Plaintiff’s recovery under a fraud claim. “In deciding whether the economic loss rule applies [courts]
examine the source of the defendant’s duty and the nature of the claimed injury.” William Marsh Rice
Univ. v. Arrowhead Research Corp., No. cv-14-03496, 2016 WL 3223313, at *10 (S.D. Tex Mar. 8,
2016) (quoting Clark v. PFPP Ltd. P’ship, 455 S.W.3d 283, 288 (Tex. App.—Dallas 2015, no pet.)).
The Texas Supreme Court has established the following framework for distinguishing between an
action that sounds in tort and one that sounds in contract:
If the defendant's conduct—such as negligently burning down a house—would give
rise to liability independent of the fact that a contract exists between the parties, the
plaintiff's claim may also sound in tort. Conversely, if the defendant's conduct—such
as failing to publish an advertisement—would give rise to liability only because it
breaches the parties' agreement, the plaintiff's claim ordinarily sounds only in
contract. In determining whether the plaintiff may recover on a tort theory, it is also
instructive to examine the nature of the plaintiff's loss. When the only loss or damage
is to the subject matter of the contract, the plaintiff's action is ordinarily on the
contract.

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Formosa Plastics, 960 S.W.2d at 45 (quoting Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494
(Tex. 1991)). Therefore, in determining whether a claim can be brought as a tort, the Court must
consider: (1) “the source of the defendant's duty to act (whether it arose solely out of the contract
or from some common-law duty)”; and (2) “the nature of the remedy sought by the plaintiff.” Regus
Mgmt. Grp., LLC v. IBM, No. 3:07-cv-1799-B, 2008 WL 1836360, at *6 (N.D. Tex. Apr. 24, 2009)
(quoting Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 13 (Tex. 1996)).
Plaintiff alleges that Defendant had an independent legal duty not to commit the intentional
tort of fraud. A duty not to commit fraud is not created by contract, but is instead “a duty imposed
by the common law of Texas.” Eastman Chem. Co., 80 F. Supp. 2d at 717 (quoting Formosa, 960
S.W.2d at 45–47). Therefore, the remaining issue is whether the losses Plaintiff allegedly suffered are
of a different kind than those contemplated by the subject matter of the Policy. See id.
The Court has recently considered a similar issue in McKinney/Pearl, where the Court found
that damages incurred specifically in reliance on a defendant’s alleged misrepresentations went
beyond those that were the subject matter of their contract. McKinney/Pearl Rest. Partners, L.P. v.
Metro. Life Ins. Co., No. 3:14-cv-2498-B, 2015 WL 12723054, at *5 (N.D. Tex. Mar. 12, 2015).
Here, Plaintiff similarly alleges that its damages were incurred specifically in reliance on Defendant’s
alleged misrepresentation about covering the cost beyond $400,000. It does not appear from the
Amended Complaint that Defendant was obligated to pay the initial $400,000 under the Policy, so
the excess amount Defendant allegedly promised to pay would not likely concern the subject matter
of the Policy.
That said, the Court need not resolve whether the “independent injury doctrine” operates

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to bar Plaintiff’s fraud claim at this stage because Plaintiff fails to plead its fraud claim with sufficient
particularity. Specifically, Plaintiff omits references to where the allegedly fraudulent statements took
place, as required by Federal Rule of Civil Procedure 9(b). Thus, the pleadings do not present
“allegations of the particulars of [the] . . . place” the misrepresentation occurred. Benchmark Elecs.,
343 F.3d at 724 (finding that the plaintiff met its location burden as it showed that the
misrepresentation occurred “in Angleton, Texas” and “in the data rooms at the offices of Huber's
investment bankers”). This Court therefore GRANTS Defendant’s Motion to Dismiss as it pertains
to Plaintiff’s claim of fraud.
B.

Fraudulent Inducement Claim
Like the elements of fraud, to establish a claim for fraudulent inducement, a plaintiff must

demonstrate that: (1) the defendant made a misrepresentation; (2) the defendant knew the
representation was false and intended to induce the plaintiff to enter into a contract; (3) the plaintiff
relied on it in entering into the contract; and (4) the plaintiff’s reliance led to an injury by entering
into the contract. Bohnsack, 668 F.3d at 277. And as with fraud, a plaintiff alleging a state-law
fraudulent inducement claim is subject to Federal Rule of Civil Procedure 9(b)'s heightened pleading
standard. Hoffman v. L & M Arts, 838 F.3d 568, 576 (5th Cir. 2016) (citing Shandong Yinguang
Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010); Dorsey v. Portfolio
Equities, Inc., 540 F.3d 333, 338–39 (5th Cir. 2008)).
Fraudulent inducement is “a species of fraud that requires the plaintiff and defendant to have
entered into an enforceable contract.” Bohnsack v. Varco, L.P., 668 F.3d 262, 273 (5th Cir. 2012).
To establish fraudulent inducement, the “elements of fraud must be established as they relate to an

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agreement between the parties." Id. at 277 (quoting Haase v. Glazner, 62 S.W.3d 795, 798–99 (Tex.
2001)). Therefore, “asserting a fraudulent inducement claim against a third party to the contract is
inconsistent with Texas case law.” William Marsh Rice Univ. v. Arrowhead Research Corp., No. 1403496, 2015 WL 10987080, at *8 (S.D. Tex. July 23, 2015).
Plaintiff relies on the same allegations for fraudulent inducement as it did for fraud. Doc. 6,
Am. Compl. ¶¶ 47–49. That is, Plaintiff alleges that: (1) Defendant urged Plaintiff to use Belfor
instead of the contractor Plaintiff had chosen; (2) Defendant induced Plaintiff to agree by promising
to pay the difference in price between Plaintiff’s $400,000 quote and the final cost; (3) Defendant
knew this representation was false, or made it recklessly and without knowledge of its truth; (4)
Defendant intended for Plaintiff to rely on the statement; (5) Plaintiff would not have hired Belfor
if not for Defendant’s promise to pay; and (6) Plaintiff suffered damages due to Defendant’s
representation. Id. ¶¶ 47–49.
Defendant argues in its Motion to Dismiss that Plaintiff is barred from asserting a fraudulent
inducement claim because Defendant is not a party to the contract between Belfor and Plaintiff, and
Texas law requires that the claim relate to an agreement between the parties. Doc. 13, Def.’s Br. 6.
The only agreement between the parties, according to Defendant, is the Policy, and Plaintiff does
not allege that Defendant induced Plaintiff into that agreement. Id. Therefore, Defendant argues,
a fraudulent inducement claim cannot be brought against it. Id.
Plaintiff responds by citing to its Amended Complaint where it alleged that Defendant was
either a third-party beneficiary or implied party to the contract. Doc. 17, Pl.’s Resp. 21. Plaintiff
reasons that Defendant is a third-party beneficiary, and because a third-party beneficiary assumes the

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same rights and duties as the named parties, Defendant is an implied party to the contract. Id.
Plaintiff appears to reason that as a third-party beneficiary Defendant is a party to the contract
between Plaintiff and Belfor, so a fraudulent inducement claim is not barred as a matter of law. See
id. (citing Board of Cty Comm’rs of Le Flore Cty v. Dist. Court of Okl. Cty, 435 P.2d 157, 164 (Okla.
1967).
In its Reply, Defendant first argues that Plaintiff fails to cite to any authority supporting its
argument that a plaintiff can bring a fraudulent inducement claim against a third-party beneficiary.
Doc. 21, Def.’s Reply 2. Defendant then rejects the cases Plaintiff did rely on because they are
factually dissimilar. Id. In those cases, says Defendant, the third-party beneficiary was suing and
seeking to enforce contractual rights. Id. But here, the Defendant is not suing and the claim is in tort
rather than in contract. See id. Next, Defendant argues that a third-party beneficiary does not have
standing to bring a claim of fraudulent inducement because status as a third-party beneficiary is not
conferred until the contract is formed. Doc. 21, Def.’s Reply 2 (citing Erwin v. Texas Health Choice,
L.C., 187 F. Supp. 2d 661, 668 (N.D. Tex. Feb 22, 2002)). Because Defendant could not sue as a
third-party beneficiary for any actions committed before the contract’s formation, Defendant reasons
that it likewise cannot be sued for such actions. Id. 2–3. Lastly, Defendant argues that even if it could
be sued for fraudulent inducement as a third-party beneficiary, Plaintiff failed to make any factual
allegations to support its claim that Defendant is a third-party beneficiary. Id. at 3.
The Court agrees with Defendant that it is unclear whether a third-party beneficiary can be
sued for fraudulent inducement. And Plaintiff did not cite to any case authority supporting this
contention. Nonetheless, the Court need not make a decision on this point because, as a threshold

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matter, Plaintiff failed to adequately allege facts that would allow the Court to plausibly infer that
Defendant was a third-party beneficiary to the contract.
First, the Court rejects Plaintiff’s contention that simply stating that Defendant is a thirdparty beneficiary is enough to survive a 12(b)(6) motion. Plaintiff’s statement that Defendant is a
third-party beneficiary is a legal conclusion, not a factual assertion, and the Court is not bound to
accept legal conclusions in a complaint as true. See Twombly, 550 U.S. 544, 555 (2007) (citing
Papasan v. Allain, 478 U.S. 265, 286 (1986) (noting that courts “are not bound to accept as true a
legal conclusion couched as a factual allegation”); see also Choi v. Manhattan Mortg. Co., 63 F. Supp.
2d 874, 881 (N.D. Ill. 1999) (finding the allegation that a plaintiff was a third-party beneficiary of
a contract is a legal conclusion that the court need not accept for the purpose of a motion to
dismiss). Therefore, the Court cannot assume that Defendant was a third-party beneficiary of the
contract, and instead the Court will consider whether Plaintiff has alleged facts that, if true, would
allow the Court to infer Defendant’s third-party beneficiary status.
Under Texas law, a contract creates a third-party beneficiary only if the signatories (1)
“intended to confer a benefit on that third party”; and (2) “entered the contract to confer that
benefit on the third party.” In re Moose Oil & Gas Co., 613 F.3d 521, 527 (5th Cir. 2010) (citing
MCI Telecomm. Corp. v. Texas Utilities Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999)). A “court will
not create a third-party beneficiary contract by implication.” Fleetwood Enters., Inc. v. Gaskamp, 280
F.3d 1069, 1075 (5th Cir. 2002) (quoting MCI Telecomm., 995 S.W.2d at 651). Simply because “a
person is directly affected by the parties’ conduct, or that he may have a substantial interest in a
contract’s enforcement, does not make him a third-party beneficiary.” Id. In other words, “the intent

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to make someone a third-party beneficiary must be clearly written or evidenced in the contract.” Id.
at 1076.
Here, Plaintiff does not plead any facts that show it and Belfor intended to confer a benefit
on Defendant, or that it and Belfor entered into their contract for the purpose of conferring that
benefit on Defendant. Furthermore, if there were any intent to make Defendant the beneficiary,
Plaintiff failed to allege that this intent is clearly written or evidenced in the contract. Therefore, the
Court cannot infer from the facts alleged that Defendant is a third-party beneficiary. See Iqbal, 556
U.S. at 678.
Because the Court cannot infer that Defendant is a party to the contract, Plaintiff fails to
state a claim for fraudulent inducement because the elements of fraud must be established as they
relate to an agreement between the parties. See Haase, 62 S.W.3d at 798–99. As Defendant is not
a party to the contract between Plaintiff and Belfor, Plaintiff has not adequately pled a fraudulent
inducement claim.
But even if Defendant were a party to the contract, Plaintiff would still fail to meet the
heightened pleading standard of Rule 9(b) by not pleading the location of the fraudulent inducement
with particularity. Accordingly, the Court GRANTS Defendant’s Motion to Dismiss as it pertains
to Plaintiff’s fraudulent inducement claim.
C.

Promissory Estoppel Claim
Texas courts apply the Restatement(Second) of Contracts’s definition of promissory estoppel:

“A promise which the promisor should reasonably expect to induce action or forbearance of a
definite and substantial character on the part of the promisee or a third party and which does induce

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such action or forbearance is binding if injustice can be avoided only by enforcement of the promise."
Zenor v. El Paso Healthcare Sys., Ltd., 176 F.3d 847, 864 (5th Cir. 1999) (citations omitted) (quoting
Restatement (Second) of Contracts, § 90)). To demonstrate a plausible claim for promissory estoppel
under Texas law, Plaintiff must show: "(1) a promise, (2) foreseeability of reliance thereon by the
promisor, and (3) substantial reliance by the promisee to his detriment.” MetroplexCore, L.L.C. v.
Parsons Transp., Inc., 743 F.3d 964, 977 (5th Cir. 2014) (quoting English v. Fischer, 660 S.W.2d 521,
524 (Tex. 1983)).
Plaintiff employs the same arguments for this claim as it did for its fraud and fraudulent
inducement claims. Doc. 6, Pl.’s Am. Compl. ¶¶ 47–49. Plaintiff thus argues: (1) that Defendant
made a promise to pay the difference in cost between $400,000 and the cost of Belfor’s services; (2)
that Defendant could foresee Plaintiff’s reliance; and (3) that Plaintiff relied to its detriment. Id.
For its part, Defendant argues that Plaintiff’s claims are ultimately claims that Defendant
breached a duty to pay under the Policy. Doc. 13, Def.’s Br. 10. Under Texas law, “the doctrine of
promissory estoppel may be invoked only where no contract on the subject matter exists.” Elite Ctr.
for Minimally Invasive Surgery, LLC v. Health Care Serv. Corp., 221 F. Supp. 3d 853, 863 (S.D. Tex.
2016). Therefore, Defendant reasons, promissory estoppel is inapplicable because the relief Plaintiff
seeks is covered by a written contract.
Plaintiff does not contest that the damages related to the Belfor Promise might be covered
by the Policy. See Doc. 17, Pl.’s Resp. 13–14. Rather, Plaintiff asserts that its promissory estoppel
claim is pled alternatively in the event discovery reveals that the Belfor Promise is not covered by the
Policy. Id. Plaintiff relies on Federal Rule of Civil Procedure 8, which states that a party “may state

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as many separate claims or defenses as [the party] has, regardless of consistency.” Fed. R. Civ. P.
8(d)(3). If the Belfor Promise is not covered by the Policy, then Plaintiff’s promissory estoppel claim
is premised “on the idea that the Belfor-Related Promise involved a false representation that is in
addition to the promises that underlie the Policy.” Doc. 17, Pl.’s Resp. 13. In reply, Defendant
focuses only on Plaintiff’s failure to clarify that its promissory estoppel claim was an alternative claim.
Doc. 21, Def.’s Reply 6.
As there is a possibility the Belfor Promise is not covered by the Policy, Plaintiff’s promissory
estoppel claim can survive as an alternative to Plaintiff’s breach of contract claims. See Fed. R. Civ.
P. 8(d)(3); see also Baisden v. I’m Ready Prods., Inc., No. H-08-0451, 2008 WL 2118170, at *10 (S.D.
Tex. May 16, 2008). Turning to Plaintiff’s factual allegations, the Court concludes that Plaintiff has
sufficiently pled facts that, taken as true, allow the Court to infer a promissory estoppel claim.
Specifically, Plaintiff alleges that: (1) Defendant knowingly misrepresented the relief available to
Plaintiff as it pertained to the Belfor Promise; (2) it would not have entered the Belfor Agreement
save for Defendant’s misrepresentation; and (3) such reliance incurred significant costs on Plaintiff.
Doc. 6, Pl.’s Am. Compl. ¶ 47. This is enough to infer that Defendant made a misrepresentation that
was relied on to Plaintiff’s detriment, and that injustice is avoided only by enforcing the promise.
Plaintiff also asserts an additional theory for the survival of its promissory estoppel claim:
Even if the Belfor Promise is covered by the Policy, Plaintiff argues that the Policy is at risk of being
invalidated. Id. at 20–21. According to Plaintiff, where the contract upon which a claim is based may
be invalidated at a future date, a plaintiff is permitted to plead a promissory estoppel claim in
conjunction with any contract claims. Id.; Waller v. DB3 Holdings, Inc., No. 3:07-cv-0491-D, 2008

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WL 373155, at *6 (N.D. Tex. Feb. 12, 2008); see also Kiewit Offshore Servs., Ltd. v. Dresser-Rand
Global Servs., Inc., No. H-15-1299, 2016 WL 4564472, at *20 (S.D. Tex. Sept. 1, 2016) (granting
summary judgment for the defendant, stating that the plaintiff could not maintain its quasi
contractual claims because the proceedings were beyond the pleadings stages and the existence of
a valid contract had been conclusively established). Therefore, even if the Belfor Promise is covered
by the Policy, Plaintiff argues that the promissory estoppel claim should survive Defendant’s Motion
because the Policy might be invalidated. Doc. 17, Pl.’s Resp. 21.
To support its contention that the Policy may be invalidated at a later date, Plaintiff cites to
Defendant’s Amended Answer where Plaintiff believes Defendant has reserved its right to invalidate
the Policy. Doc. 17, Pl.’s Resp. 20 (quoting Doc. 14, Def.’s Am. Answer 7). Specifically, Plaintiff
quotes Defendant as stating that it has “reserved the right to assert at a later date that Total RX’s
Policy claims are barred due to dishonesty and/or concealment or misrepresentation.” Id.
Plaintiff’s interpretation that this means Defendant may try to invalidate the contract
altogether is misguided, and overlooks some vital language in its quote. Defendant’s Amended
Answer reads that Defendant “reserves the right to assert at a later date that Total RX’s claims are
barred, in whole or in part, due to fraud under Texas law and under the terms of the policy.” Doc. 14,
Def.’s Am. Answer ¶ 59 (emphasis added). It does not follow that Defendant would try to invalidate
the Policy by relying on the terms of the Policy. Defendant has not reserved the right to invalidate
the Policy, but instead, it has reserved the right to bar Plaintiff’s claims based on the Policy’s
provisions. Id.
There is no indication, then, that the Policy may be invalidated at a future date. So Plaintiff’s

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theory based on the possibility of the Policy’s invalidation appears untenable. The Court need not
base its decision on this argument, though, because as discussed above, Plaintiff’s claim survives as
an alternative to its breach of contract claims. Even though Defendant argues that Plaintiff did not
clarify that its promissory estoppel claim was pled alternatively, the Court construes Plaintiff’s
Amended Complaint as doing so. Furthermore, as the Court is giving Plaintiff the opportunity to
replead, Plaintiff can clarify its intent upon amending its Complaint. The Court therefore DENIES
Defendant’s Motion to Dismiss as it pertains to Plaintiff’s promissory estoppel claim.
D.

Pattern or Practice Claim
Plaintiff also brings a “pattern or practice claim.” Doc. 6, Pl.’s Am. Compl. ¶ 50. In doing so,

however, Plaintiff does not cite to a specific case or statute providing for “pattern or practice” as a
separate cause of action. Instead, Plaintiff simply states that certain acts taken by Defendant occur
with such frequency that they constitute a general business practice and pattern. Id. In support,
Plaintiff cites to two statutes that prohibit discriminatory and unfair conduct as evidence that Texas
has taken a “stand against an insurance group’s concerted effort to underpay insurance proceeds.”
Doc. 17, Pl.’s Resp. 11.
In Response, Defendant argues that, even if a claim of pattern or practice exists, Plaintiff’s
claim should be dismissed because it is devoid of factual support. Doc. 13, Def.’s Br. 6–7. But the
Court cannot consider the factual sufficiency of a claim without knowing what is required to succeed
on that claim. And the Court is unaware of any case law that supports a stand-alone claim for
pattern or practice in this situation.5 As the Court has no indication that a claim of pattern or

5

The Court did find statutory recovery based on pattern or practice included in the Real Estate
Settlement & Procedures Act but that recovery is specific to the Act. 12 U.S.C. § 2605(f)(1)(B). The Court
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practice presents any cause of action in this situation, the Court GRANTS Defendant’s Motion to
Dismiss on that claim. If Plaintiff chooses to maintain its pattern and practice cause of action in its
amended complaint, Plaintiff must clarify on what case or statute it relies for bringing it as a standalone claim.
E.

Texas Deceptive Trade Practices Act Claim
Defendant also moves to dismiss Plaintiff’s claim of unlawful deceptive trade practice under

the Texas Deceptive Trade Practices Act (DTPA). Doc. 13, Def.’s Br. 7. In its Amended Complaint,
Plaintiff claims that Defendant violated the DTPA, as incorporated by Texas Insurance Code
§ 541.151, when it induced Plaintiff to rebuild the pharmacy using Belfor as the contractor. Doc. 6,
Pl.’s Am. Compl. ¶ 41. It is unclear whether Plaintiff pleads a stand-alone DTPA claim in addition
to its DTPA claim incorporated by the Insurance Code. It appears to the Court, however, that
Defendant seeks to dismiss only the stand-alone DTPA claim, to the extent Plaintiff pleads one.6 The
Court therefore analyzes Defendant’s Motion as challenging only Plaintiff’s stand-alone DTPA claim,
to the extent that Plaintiff makes one.
1.

DTPA $500,000 Consideration Limit

The DTPA allows consumers to recover when they are the victim of “[f]alse, misleading, or

also found references to pattern or practice contained in discrimination cases, but even there, “a pattern and
practice claim is not a ‘separate and freestanding cause of action.’ Rather, it is a method of proof applied by
the court—almost exclusively in class actions—to analyze disparate treatment claims.” Jackson v. Texas Parks
and Wildlife Dept., 2015 WL 12862879, at *5 (W.D. Tex. Oct. 2, 2015) (quoting Celestine v. Petroleos de
Venezuella SA, 266 F.3d 343, 355 (5th Cir. 2001)).
6

The Court notes several factors in coming to this conclusion. In its Motion to Dismiss, Defendant
ignores all other Insurance Code claims made by Plaintiff and focuses on the DTPA alone. Doc. 13, Def.’s
Br. 7–10. Further, in its Reply, Defendant focuses on arguing that Plaintiff does, in fact, make a stand-alone
claim under the DTPA. Doc. 21, Def.’s Reply 5.
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deceptive acts or practices in the conduct of any trade or commerce.” Tex. Bus. & Com. Code
§ 17.46(a). To plead a claim for a DTPA violation under § 17.46, Plaintiff must show that there was
a false, misleading, or deceptive act or practice that was: (1) specifically enumerated in subsection
(b) of § 17.46; and (2)that it was relied on by a consumer to the consumer's detriment. Tex. Bus. &
Com. Code § 17.50(a). Plaintiff claims that Defendant specifically violated the practice enumerated
in § 17.46(b)(12): “[R]epresenting that an agreement confers or involves rights, remedies, or
obligations which it does not have or involve, or which are prohibited by law.” Doc. 6, Pl.’s Am.
Compl. ¶ 41. Plaintiff alleges that the agreement to allow Belfor to rebuild the pharmacy conferred
an obligation on Defendant to pay the amount by which the cost exceeded $400,000. Id. As a result,
Plaintiff claims: (1) Defendant violated a specifically enumerated practice by not meeting its
obligation; and (2) that Plaintiff relied on the promise to its detriment. Id. ¶ 42.
Defendant moves to dismiss, in part, because it claims that the DTPA does not apply where
the consideration of the transaction in question exceeds $500,000. Doc. 13, Def.’s Br. 7–8. The
DTPA provides that:
Nothing in this subchapter shall apply to a cause of action arising from a transaction,
a project, or a set of transactions relating to the same project, involving total
consideration by the consumer of more than $500,000, other than a cause of action
involving a consumer’s residence.
Tex. Bus. & Com. Code § 17.49(g). As Plaintiff alleges it is owed the amount exceeding $400,000
by $905,233, Defendant claims that the consideration limit of $500,000 is easily exceeded and the
claim should therefore be dismissed. Doc. 13, Def.’s Br. 7–8.
Plaintiff responds by identifying the interplay between the DTPA and the Texas Insurance
Code to show that the consideration limit does not apply to this case. Doc. 17, Pl.’s Resp. 15. Plaintiff
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cites to Crown Life Insurance where the court determined that when a party brings a DTPA claim
under the Insurance Code, the only claims and exceptions available are those specifically
incorporated by the Insurance Code. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 386 (Tex. 2000)
(holding that the DTPA’s general requirement that a plaintiff be a “consumer” did not apply to a
specific DTPA claim brought under the Insurance Code because the general requirement was not
incorporated by the Insurance Code). Plaintiff’s reliance on Crown Life Insurance is applicable only
to Plaintiff’s DTPA claim as incorporated by the Insurance Code, not any stand-alone DTPA claim.
And to the extent Plaintiff makes a stand-alone DTPA claim, Defendant’s Motion seeks to dismiss
only that claim. Therefore, the Court need not consider how the $500,000 would affect Plaintiff’s
claim for a violation of § 17.46 claim as it is incorporated by the Insurance Code, but rather how it
affects any claim for a violation of § 17.46 brought solely under the DTPA.
As discussed above, it is somewhat unclear whether Plaintiff brought a stand-alone violation
of the DTPA as based on § 17.46. According to Defendant, because Plaintiff alleged that it could
recover damages under the DTPA, and because the section authorizing such damages is not
incorporated into the Insurance Code, Plaintiff appears to allege a stand-alone DTPA claim. Doc.
21, Def.’s Reply 5. Thus, Defendant asserts that the stand-alone claim should be dismissed because
it exceeds the $500,000 consideration limit. Id.
The Court agrees. To the extent that Plaintiff asserts its claim based on a violation of § 17.46
as a stand-alone DTPA claim, the claim is barred by the $500,000 consideration limit. The Court
notes, however, that it makes no conclusion with regard to Plaintiff’s claim based on a violation of
§ 17.46 as it is incorporated by the Insurance Code.

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2.

Covered By the Policy

Defendant also argues that the DTPA claim should be dismissed because it is covered by the
Policy, and a breach of contract is not actionable under the DTPA. Doc. 13, Def.’s Br. 9. Defendant
asserts that because Plaintiff identifies the lawsuit as a “first-party insurance coverage case,” any
claim that Defendant reneged on a promise is a claim that Defendant breached a contractual
obligation. Id.; Doc. 6, Pl.’s Am. Compl. ¶¶ 20, 33. Consequently, Defendant claims, Plaintiff has
failed to plead a cognizable DTPA claim and the claim should be dismissed. Doc. 13, Def.’s Br. 10.
Plaintiff refutes Defendant’s assertion. Doc. 17, Pl.’s Resp. 15. According to Plaintiff, its
DTPA claim is based on a misrepresentation of coverage, and DTPA recovery may be based on a
misrepresentation of coverage, as opposed to a denial of coverage. Doc. 17, Pl.’s Resp. 16 (citing
Webb v. Int’l Trucking Co., Inc., 909 S.W.2d 220, 230 (Tex. App.—San Antonio 1995, no writ)).
In Webb, the defendant insurance company agreed to pay for the plaintiff’s truck repair so
long as the repairs were made in the vicinity of the accident, but after the repairs were made, the
defendant refused to pay for them. 909 S.W.2d at 230. The defendant in Webb argued that the case
was about mere denial of coverage and that a plaintiff could not recover for that under the DTPA.
Id. The court in Webb disagreed and held that DTPA recovery may be predicated on
misrepresentation of insurance coverage. Id.
Webb appears to support Plaintiff’s argument that DTPA recovery is available based on
misrepresentation. But Plaintiff’s argument does not save its stand-alone DTPA claim from dismissal
because the $500,000 consideration limit still operates as discussed above. The Court need not
consider the impact of Webb on Plaintiff’s DTPA claims as incorporated by the Insurance Code

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because those claims are outside the scope of Defendant’s Motion to Dismiss.
Thus, because Plaintiff’s stand-alone DTPA claim is subject to the $500,000 consideration
limit, Plaintiff failed to plead a cognizable DTPA claim. The Court therefore GRANTS Defendant’s
Motion to Dismiss as it pertains to Plaintiff’s stand-alone DTPA claim.
IV.
CONCLUSION
For the foregoing reasons, the Court GRANTS in part and DENIES in part Defendant’s
Motion. Specifically, the Court DENIES Defendant’s Motion as it pertains to Plaintiff’s promissory
estoppel claim. And the Court GRANTS Defendant’s Motion as it pertains to Plaintiff’s fraud,
fraudulent inducement, pattern or practice, and stand-alone DTPA claims. Accordingly, the Court
DISMISSES without prejudice Plaintiff’s fraud, fraudulent inducement, and pattern or practice
claims. And the Court DISMISSES with prejudice7 Plaintiff’s stand-alone DTPA claim.
The Court finds it appropriate to give Plaintiff an opportunity to replead its claims.8 An
amended complaint is due on or before Monday, August 14, 2017. Failure to file an amended
pleading by this deadline will result in a dismissal of Plaintiff’s claims.
7

The Court dismisses this claim with prejudice because the Court does not believe, as a matter of law,
that Plaintiff can recover under a stand-alone DTPA claim. Thus, repleading cannot cure the deficiency, and
any attempt to do so would be futile. See Kelley v. KIMC Inv., Inc., No. 3:10-cv-2384-L, 2012 WL 639283,
at *7 (N.D. Tex. Feb. 28, 2012).
8

Normally, courts will afford a plaintiff the opportunity to overcome pleading deficiencies, unless it
appears that the defects are incurable. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313
F.3d 305, 329 (5th Cir. 2002) (“[D]istrict courts often afford plaintiffs at least one opportunity to cure
pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or the plaintiffs
advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal.”) Here,
Plaintiff failed to plead some of its claims with sufficient factual specificity. Given that this is the Court's first
review of its pleadings, it is proper to grant Plaintiff leave to amend its Complaint, if he can do so in a way that
overcomes the deficiencies identified in this Order.
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SO ORDERED.
SIGNED: July 17, 2017.

______________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE

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