Opinion
CV-23-01906-PHX-DJH
07-31-2024
William Richard Dickson, Plaintiff, v. Travelers Casualty Insurance Company of America, et al., Defendants.
ORDER
Honorable Diane J. Humetewa, United States District Judge
This matter involves an insurance dispute arising out of a car accident. Defendant Kristy Brown (“Defendant Brown”) has filed a Motion to Dismiss Plaintiff William Richard Dickson's (“Plaintiff') claims against her under Federal under Rule of Civil Procedure 12(b)(6). (Doc. 10). Plaintiff has filed a Response (Doc. 13) and Defendant Brown has filed a Reply (Doc. 16). For the following reasons, the Court grants Defendant Brown's Motion.
Unless otherwise noted, all references to “rules” herein refer to the Federal Rules of Civil Procedure.
Unless otherwise noted, these facts are taken from Plaintiffs' Complaint (Doc. 1-2). The Court will assume the Complaint's factual allegations are true, as it must in evaluating a motion to dismiss. See Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001).
Plaintiff was involved in a two-car-collision with non-party Timothy Schneider. (Doc. 1-2 at ¶ 18). Plaintiff alleges he incurred $151,182.00 of medical expenses due to this collision. (Id. at ¶ 19). Mr. Schneider's insurance gave Plaintiff the full $100,000.00 limit under his policy. (Id. at ¶ 20). Plaintiff notified his insurance company, Defendant
Travelers Casualty Insurance Company of America (“Defendant Travelers”), of the underinsured claim, but it and Defendant Brown (Travelers claims adjustor) failed to resolve his claim in good faith. (Id. at ¶¶ 21-25).
Due to this “bad faith conduct” Plaintiff sued Defendant Brown, Defendant “John Doe” Brown, Defendant Travelers (collectively “Defendants”), and other unknown parties and corporations who may have caused or contributed to his claims in Arizona state court.(Id. at 2). Plaintiff purports to bring the following causes of action against Defendant Travelers and Defendant Brown:
The Court terminated any unknown, unidentified parties after the Notice of Removal was filed. (Doc. 9).
• breach of contract (Id. at ¶¶ 30-33);
• breach of the covenant of good faith and fair dealing (Id. at ¶¶ 34-36);
• declaratory judgment seeking a declaration that clarifies the “parties' rights and obligations” under the policy (Id. at ¶¶27-29).Plaintiff seeks declaratory relief, monetary damages and attorney's fees from Defendants. (Id. at 5).
Defendant Travelers timely removed this case from state court to this Court, invoking the Court's Diversity Jurisdiction under 28 U.S.C. § 1332. (Doc. 1 at ¶¶ 2, 8). Travelers was served on August 14, 2023, but Plaintiff never served Defendant Brown. (Doc. 1-5 at 2). Plaintiff also failed to prepare a waiver of service, but Defendant Brown preemptively waived service on August 31, 2023, under Rule 4(d). (Doc. 16-2 at 1-2). Now, Defendant Brown has filed a Motion to Dismiss the claims brought against her. (Doc. 10).
II. Legal Standard
A motion to dismiss for failure to state a claim, under Federal Rule of Civil Procedure 12(b)(6), requires that this Court evaluate the legal sufficiency of Plaintiff's claims. Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011). The test requires that the plaintiff present “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). These facts must “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged” with “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.
A complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible “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. (citing Twombly, 550 U.S. at 556). A complaint that provides “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Nor will a complaint suffice if it presents nothing more than “naked assertions” without “further factual enhancement.” Id. at 557. The Court must accept all well-pleaded factual allegations as true and interpret the facts in the light most favorable to the plaintiff. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). That rule does not apply, however, to legal conclusions. Iqbal, 556 U.S. at 678. If the court dismisses a complaint for failure to state a claim, it must then determine whether to grant leave to amend. See Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010).
III. Discussion
Defendant Brown argues that: (1) she cannot be liable for breach of contract because she is not a party to the policy; (2) she cannot be held liable for bad faith by law because she is an adjuster, not the insurer; and (3) that Plaintiff's Declaratory Judgement claim should be dismissed as to all Defendants. (Doc. 10 at 5, 7 and 8). Plaintiff argues in response that (1) Defendant Brown's Motion is untimely; (2) that the relief she requests is inconsistent with Arizona law; and (3) that Declaratory Judgement is “customary” in bad faith claims. (Doc. 13 at 3-4). The Court will first address the timeliness of Defendant Brown's Motion before her substantive arguments.
A. Defendant Brown's Motion to Dismiss is Timely
Plaintiff argues in its Response that, under Arizona Rule of Civil Procedure 12(a)(1)(C) (“ARCP”), Defendants had twenty-days from the time they were served with Plaintiff's Complaint to file this Motion, and because Defendant Brown filed this Motion more than twenty-days after she was served, this Motion is untimely. (Doc. 13 at 3). Indeed, ARCP 12(a)(1)(A)(i) provides that “[a] defendant or third-party defendant must file and serve an answer or other responsive pleading within twenty days after being served with the summons and complaint.” (emphasis added). The federal version of this rule is almost identical but gives a defendant twenty-one-days instead of twenty to file. Fed.R.Civ.P. 12(a)(1)(A)(i). The Rules, Arizona and Federal, require that any defense to a claim for relief in any pleading “must be asserted in the responsive pleading if one is required.” Fed.R.Civ.P. 12(b); Ariz. R. Civ. P 12(b). A party may assert certain defenses, such as failure to state a claim, by motion; but such a motion “must be made before pleading if a responsive pleading is allowed.” Id.
The Court notes that the federal rule, not the state rule, governs this procedural issue. See 757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 330 F.Supp.3d 1153, 1159 (D. Ariz. 2016) (“federal courts sitting in diversity apply state substantive law and federal procedural law”) (citations omitted).
Travelers was served on August 14, 2023, but Defendant Brown was never served. (Docs. 1-5 at 2). Instead, she waived service under Rule 4(d)(3) on August 31, 2023. (Doc. 16-2 at 1-2). Consequently, Defendant Brown had until October 30, 2023, to file her answer or other responsive pleading. Fed.R.Civ.P. 4(d)(3) (“A defendant who, before being served with process, timely returns a waiver need not serve an answer to the complaint until 60 days after the request was sent.”). Defendant Brown filed her responsive pleading, the Motion to Dismiss, on the day it was due: October 30, 2023. (Doc. 10). Thus, Defendant Brown's Motion to Dismiss is timely and properly before this Court.
B. Breach of Contract
Moving to the heart of Defendant Brown's Motion, she first argues that she cannot be liable for breach of contract because she is not a party to the policy. (Doc. 10 at 5-6). Plaintiff argues his breach of contract claim against Defendant Brown is viable because Arizona law allows claims against individuals for “unfair settlement practices.” (Doc. 13 at 3-4).
To state a cognizable claim for breach of contract under Arizona law, a plaintiff must allege that “(1) a contract existed, (2) it was breached, and (3) the breach resulted in damages.” Riverwalk Condo. Unit Owners Ass'n v. Travelers Indem. Co., 2018 WL 3774084, at *2 (D. Ariz. June 28, 2018) (citing Steinberger v. McVey ex rel. Cty. of Maricopa, 234 Ariz. 125, 140 (Ariz.Ct.App. 2014)). “For an enforceable contract to exist, there must be an offer, an acceptance, consideration, and sufficient specification of terms so that the obligations involved can be ascertained.” Rogus v. Lords, 804 P.2d 133, 135 (Ariz.Ct.App. 1991). It is black letter law, then, that a defendant must be a party to the contract at issue for a breach of contract claim to survive a failure to state a claim defense. See Riverwalk, 2018 WL 3774084, at *2.
Here, Plaintiff has not alleged that Defendant Brown is a party to the policy. (Doc. 1-2). Plaintiff only alleges that she is “an authorized agent, employee and/or representative of Travelers who, at all material times, was responsible for the handling of Williams's insurance claim.” (Id. at ¶ 5). Importantly, in Plaintiff's breach of contract claim, he alleges that “[t]he policy is a contract between [Defendant Travelers] and [Plaintiff] entitling him with access to benefits.” (Id. at ¶ 30). Thus, because Plaintiff has not alleged that a contract existed between Defendant Brown and Plaintiff, the Court must dismiss Plaintiff's claim for breach of contract against Defendant Brown for failure to state a claim under Rule 12(b)(6). See Riverwalk, 2018 WL 3774084, at *2.
C. Breach of the Covenant of Good Faith and Fair Dealing
Defendant Brown next argues that she cannot be held liable for breach of the covenant of good faith and fair dealing because she is the insurance adjuster, not the insurer. (Doc. 10 at 7-8). Plaintiff incongruently argues that Arizona law provides for claims against individuals for “unfair settlement practices.” (Doc. 13 at 3-4). The Court agrees with Defendant Brown.
First, as a threshold matter, the Court notes that Plaintiff has not alleged a claim for unfair settlement practices under A.R.S. § 20-461. (Doc. 1-2). However, even if Plaintiff had alleged such a claim in his Complaint, Plaintiff's argument would fail as Section 20-461 does not create a private cause of action for unfair settlement practices. A.R.S. § 20461 (“Nothing contained in this section is intended to provide any private right or cause of action to or on behalf of any insured or uninsured resident or nonresident of this state.”).
Second, Plaintiff cannot maintain this claim against Defendant Brown under Arizona law-which recognizes “an implied duty of good faith and fair dealing in every insurance contract.” McGhee v. Sedgwick Claims Mgmt. Servs. Inc., 2019 WL 1598032, at *2 (D. Ariz. Apr. 15, 2019) (citing Rawlings v. Apodaca, 726 P.2d 565, 569 (Ariz. 1986)). This duty “arises by virtue of the contractual relationship, but the breach of the duty sounds in tort.” Id. (citing Walter v. F.J. Simmons and Others, 818 P.2d 214, 236 (Ariz.Ct.App. 1991)). “Although an insurer may delegate the performance of its duty of good faith to a non-servant, it remains liable for the actions taken by this delegate because the duty of good faith itself is non-delegable.” Id. Third parties to a contract, such as an insurance adjuster like Defendant Brown, “cannot be directly liable for breaching the covenant of good faith and fair dealing because [they are] not a party to the insurance contract from which that covenant derives.” Id. (citing Meineke v. GAB Business Servs., Inc., 991 P.2d 267, 270 (Ariz.Ct.App. 2000) (explaining that the actions of an adjuster who mishandled a claim may be imputed to the insurer, but the adjuster does not owe a separate duty to the insured); see also Jacobs v. Am. Family Mut. Ins. Co., 2013 WL 11785112, at *1-3 (D. Ariz. Aug. 29, 2013) (dismissing a breach of the covenant of good faith and fair dealing claim against an independent insurance adjuster because the adjuster was not a party to the insurance contract).
Here, Defendant Brown is an insurance adjuster for Defendant Travelers, therefore, she “cannot be directly liable for breaching the covenant of good faith and fair dealing because [she] is not a party to the insurance contract from which that covenant derives.” McGhee, 2019 WL 1598032, at *2. So, the Court must dismiss Plaintiff's claim for breach of the covenant of good faith and fair dealing against Defendant Brown because Plaintiff cannot state this claim against her as a matter of law. Id.
D. Declaratory Judgment
Lastly, Defendant Brown argues that Plaintiff's Declaratory Judgement claim should be dismissed as to all Defendants for three reasons: (1) declaratory judgment is not the proper vehicle for this valuation dispute as it can only establish whether or to what extent Plaintiff's rights under the policy have been satisfied or breached; (2) it is not a separate cause of action; and (3) it is duplicative of his breach of contract claim. (Doc. 10 at 8-10). Plaintiff simply argues that seeking a Declaratory Judgement is “customary” in bad faith claims. (Doc. 13 at 3-4). Plaintiff's Counsel also states that “[h]aving worked for a federal judge and having worked as insurance defense counsel for the better part of two-decades . . . I find both the arguments of [Defendant] Brown and absence of well-established authorities a great concern.” (Id. at 5). Yet Plaintiff fails to cite any authority, well-established or not, to contradict Defendant Brown's cited cases where other courts have dismissed a Plaintiff's Declaratory Judgment claim as duplicative when brought alongside a breach of contract claim. (See e.g., Doc. 10 at 10 (citing Mangindin v. Washington Mut. Bank, 637 F.Supp.2d 700, 707-08 (N.D. Cal. 2009) (“A claim for declaratory relief is unnecessary where an adequate remedy exists under some other cause of action”)).
The Court will not address this argument as it pertains to Defendant Travelers as it must file its own motion to dismiss this count.
Troubling to the Court is that this, and other first-person statements seem to convert Plaintiff's counsel's role from legal advocate to that of a witness.
In Plaintiff's Complaint, he seeks a “declaratory judgment” generally; but does not cite to the state or federal statute under which he seeks relief. (Doc. 1-2 at ¶¶ 27-29). Plaintiff seeks a declaration from the Court that clarifies the “parties' rights and obligations” under the policy. (Id. at ¶¶27-29). When an action is removed to federal court based on diversity, the “Federal Declaratory Judgment Act, rather than the state act controls because the federal Act is a procedural statute, not a jurisdiction-conferring statute.” Farwest Pump Co. v. Secura Ins., 2021 WL 3668319, at *1 (D. Ariz. June 10, 2021) (citing 757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, 330 F.Supp.3d 1153, 1159 (D. Ariz. 2016)). So, the Court will analyze Plaintiff's claim and Defendant's Motion under the Federal Declaratory Judgement Act: 28 U.S.C. § 2201 (“DJA”).
The DJA states that “[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration[.]” Id. § 2201(a). The exercise of jurisdiction under the DJA is at the discretion of the district court. Gov't Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998). “Even if the district court has subject matter jurisdiction, it is not required to exercise its authority to hear the case.” Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002). However, “[a] District Court cannot decline to entertain such an action as a matter of whim or personal disinclination.” Dizol, 133 F.3d at 1223. When determining whether to retain jurisdiction over a DJA action, the Court “must make a sufficient record of its reasoning to enable appropriate appellate review.” Id. at 1225. When a breach of contract claim would resolve all questions regarding contract interpretation, “declaratory relief may be duplicative and inappropriate.” Fine v. Kansas City Life Ins. Co., 627 F.Supp.3d 1153, 1164 (C.D. Cal. 2022) (citing United Safeguard Distributors Ass'n, Inc. v. Safeguard Bus. Sys., Inc., 145 F.Supp.3d 932, 961 (C.D. Cal. 2015)).
Here, Plaintiff cannot maintain a DJA action against Defendant Brown to clarify a policy to which she is not a party. Plaintiff has not alleged that Defendant Brown is a party to the policy. (Doc. 1-2). Again, Plaintiff only alleges that “[t]he policy is a contract between [Defendant Travelers] and [Plaintiff] entitling him with access to benefits.” (Id. at ¶ 30). For a Plaintiff to maintain a DJA action, there must be an actual controversy. 28 U.S.C. § 2201(a). There cannot be an “actual controversy” regarding a contract which Defendant Brown is not a party to. So, the Court must dismiss this claim as well.
III. Leave to Amend
Where a district court grants a motion to dismiss, it should generally provide leave to amend unless it is clear that the complaint could not be saved by any amendment. See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The Court “may exercise its discretion to deny leave to amend due to ‘undue delay, bad faith or dilatory motive on [the] part of the movant, repeated failure to cure deficiencies by amendments previously allowed undue prejudice to the opposing party . . . [and] futility of amendment.' ” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182, (1962)). Leave to amend may be denied when “the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). In sum, leave to amend “is properly denied [where] amendment would be futile.” Carrico v. City and Cty. of San Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011).
Here, the Court will allow Plaintiff to amend his Complaint because it is not absolutely clear that it cannot be saved by any amendment. See Fed.R.Civ.P. 15(a); Manzarek, 519 F.3d 1031. However, Plaintiff is warned that any claims for breach of contract, breach of the covenant of good faith and fair dealing, or declaratory judgment against Defendant Brown would still fail as a matter of law-as illustrated above.
Accordingly, IT IS ORDERED that Defendant Brown's Motion to Dismiss (Doc. 10) is GRANTED.
IT IS ALSO ORDERED that Plaintiff's claims for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory judgment against Defendant Brown (Doc. 1-2 at ¶¶ 27-36) are DISMISSED.