Opinion
Civil 3:18-CV-1357
10-09-2019
RUTA KRETULSKIE, Plaintiff, v. MADISON NATIONAL LIFE INSURANCE COMPANY, INC., ENCORE UNLIMITED, LLC, and DISABILITY INSURANCE SPECIALISTS, LLC, Defendants.
Caputo, Judge.
REPORT AND RECOMMENDATION
Martin C. Carlson United States Magistrate Judge.
I. Introduction and Statement of the Case
This case involves a dispute regarding what is alleged to have been the wrongful denial of disability benefits. The plaintiff, Ruta Kretulskie, was denied benefits on a group long-term disability insurance policy she held as part of her employment with the Capital Area Intermediate Unit No. 15 in Enola, Pennsylvania. The policy was issued through Defendant Madison National Life Insurance Company (“Madison National”). After fruitlessly pursuing the appeals process from her denial of benefits through Madison National, the plaintiff filed suit here alleging, inter alia, a claim for civil conspiracy against the named defendants.
The well-pleaded facts in the plaintiff's amended complaint purporting to give rise to this claim, which we must accept as true for purposes of considering this motion to dismiss, are as follows: the plaintiff worked for the Capital Area Intermediate Unit at the Loysville Youth Development Center (“Development Center”) in Loysville, Pennsylvania as a mathematics and special education teacher. (Doc. 6, at 6-7). The Development Center is a secure residential housing facility for young men between the ages of 12 and 20 who have been convicted of crimes and were committed to serve time at the Center. (Id. at 7). Most of the young men the plaintiff taught “were diagnosed with learning and/or emotional disabilities” that required her expertise in special education. (Id.) The plaintiff was also required to be able to exercise “child restraint techniques as needed” for the young men she taught as “an essential function of the job.” (Id. at 7-8).
In June of 2015, the plaintiff was diagnosed as having osteoporosis of the spine with an increased risk of fracture. (Id. at 9). In response to this diagnosis, the plaintiff obtained a letter from her physician stating that she “should avoid any situations which would potentially cause physical harm or involve any stress on her bones.” (Id.) The plaintiff presented this letter to her employer along with an application for a reasonable accommodation to remove the exercise of child restraint techniques from her job description. (Id.) This request was denied by the Capital Area Intermediate Unit because, despite the existence of the plaintiff's disability, the performance of child restraint, when needed, “was an essential part of her teaching position.” (Id. at 10). After learning of this decision, the plaintiff opted to resign from her position to avoid the potential injury that could result from restraining a 100-250 pound child. (Id. at 7).
The plaintiff claims that the young men at the Development Center weighed between 100-250 pounds, and that the exercise of child restraint, if necessary, could place too much stress on her bones, particularly her spine, to justify her continued employment at the Development Center without a reasonable accommodation.
Upon leaving her position, the plaintiff was granted disability retirement from the Pennsylvania Public School Employees' Retirement System, beginning June 10, 2016. (Id. at 10). Thereafter, the plaintiff submitted a claim for long-term disability benefits under the insurance policy held with Madison National. (Id.) Madison National outsourced the evaluation of the plaintiff's claim to Defendant Encore Unlimited, LLC (“Encore”), which conducted a labor market survey and prepared a report for Madison National. (See Doc. 6, Exhibit H). Madison National denied the plaintiff's claim, which, allegedly, was due “in substantial part, or entirely, ” upon the report prepared by Encore. (Doc. 6, at 14).
The plaintiff appealed this denial, and Madison National assigned the appeal decision to Defendant Disability Insurance Specialists, LLC (“DIS”). (Id. at 17-18).
DIS subsequently denied the plaintiff's appeal via letter dated March 8, 2017 based upon a review of the plaintiff's medical records by its independent physicians. (Id. at 18). A second appeal filed by the plaintiff proved equally unavailing and DIS likewise denied her second appeal by letter dated August 8, 2017. (Id. at 20-21). Thereafter, the plaintiff filed a complaint in Schuylkill County Court, which was removed to this court on July 9, 2018. (Doc. 1). The plaintiff then filed an amended complaint (Doc. 6) alleging, in pertinent part, that the named defendants participated in a civil conspiracy to “deny otherwise legitimate claims in order to save . . . Madison [National] money and earn themselves money by supporting the denial of otherwise legitimate claims.” (Id. at 29). Notably missing from this conspiracy count in its current form was any allegation that the defendants acted with malice as that term is defined under Pennsylvania law; that is, well-pleaded facts showing that the sole purpose of the conspiracy was to injure the plaintiff and that this intent was without justification. Rather than alleging malice against the plaintiff, fairly construed, Count IV asserted that the defendants were motivated by a bias in favor of their own financial interests when they acted to deny these claims. (Id. ¶¶85-89). Defendant Encore then filed the instant motion to dismiss (Doc. 27) Count IV of the amended complaint on September 9, 2019, arguing that the plaintiff had failed to adequately allege the elements of a civil conspiracy claim under Pennsylvania law. This motion is fully briefed and was referred to the undersigned on October 4, 2019. (Doc. 34). For the reasons that follow, we will recommend that Encore's motion be granted, and that Count IV of the plaintiff's amended complaint be dismissed with leave to amend.
II. Discussion
A. Motion to Dismiss-Standard of Review
A motion to dismiss tests the legal sufficiency of a complaint. It is proper for the court to dismiss a complaint in accordance with Rule 12(b)(6) of the Federal Rules of Civil Procedure only if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). With respect to this benchmark standard for legal sufficiency of a complaint, the United States Court of Appeals for the Third Circuit has aptly noted the evolving standards governing pleading practice in federal court, stating that:
Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court's opinion in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008)] and culminating recently with the Supreme Court's decision in Ashcroft v. Iqbal, BU.S.B, 129 S.Ct. 1937 (2009) pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss.Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009).
In considering whether a complaint fails to state a claim upon which relief may be granted, the court must accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom are to be construed in the light most favorable to the plaintiff. Jordan v. Fox Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally, a court need not “assume that a . . . plaintiff can prove facts that the . . . plaintiff has not alleged.” Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in order to state a valid cause of action, a plaintiff must provide some factual grounds for relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of actions will not do.” Id. at 555. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id.
In keeping with the principles of Twombly, the Supreme Court has underscored that a trial court must assess whether a complaint states facts upon which relief can be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court held that, when considering a motion to dismiss, a court should “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 679.
According to the Supreme Court, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678. Rather, in conducting a review of the adequacy of a complaint, the Supreme Court has advised trial courts that they must:
[B]egin by identifying pleadings that because they are no more than conclusions are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.Id. at 679.
Thus, following Twombly and Iqbal, a well-pleaded complaint must contain more than mere legal labels and conclusions; it must recite factual allegations sufficient to raise the plaintiff's claimed right to relief beyond the level of mere speculation. As the United States Court of Appeals for the Third Circuit has stated:
[A]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “plausible claim for relief.” In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to “show” such an entitlement with its facts.Fowler, 578 F.3d at 210-11.
As the court of appeals has observed: “The Supreme Court in Twombly set forth the ‘plausibility' standard for overcoming a motion to dismiss and refined this approach in Iqbal. The plausibility standard requires the complaint to allege ‘enough facts to state a claim to relief that is plausible on its face.' Twombly, 550 U.S. at 570, 127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual pleadings ‘allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.' Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). This standard requires showing ‘more than a sheer possibility that a defendant has acted unlawfully.' Id. A complaint which pleads facts ‘merely consistent with' a defendant's liability, [ ] ‘stops short of the line between possibility and plausibility of “entitlement of relief.”' ” Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011) cert. denied, 132 S.Ct. 1861, 182 L.Ed.2d 644 (U.S. 2012).
In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis: “First, the court must ‘tak[e] note of the elements a plaintiff must plead to state a claim.' Iqbal, 129 S.Ct. at 1947. Second, the court should identify allegations that, ‘because they are no more than conclusions, are not entitled to the assumption of truth.' Id. at 1950. Finally, ‘where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.' Id.” Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010).
In considering a motion to dismiss, the court generally relies on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s] that a defendant attached as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered.” Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also, U.S. Express Lines, Ltd. v. Higgins, 281 F.3d382, 388 (3d Cir. 2002) (holding that “[a]lthough a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss in one for summary judgment”). However, the court may not rely on other parts of the record in determining a motion to dismiss, or when determining whether a proposed amended complaint is futile because it fails to state a claim upon which relief may be granted. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
B. Civil Conspiracy
As a federal court exercising diversity jurisdiction in this case, we are obliged to apply the substantive law of Pennsylvania to this dispute. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d. Cir. 2000). Applying Pennsylvania law, initially a plaintiff alleging a civil conspiracy must plead particularized facts which address the length of the conspiracy, its purpose, and any actions taken by the alleged conspirators to achieve the goals of the conspiracy. RDK Truck Sales & Serv., 2009 U.S. Dist. LEXIS 43245, *78 (E.D. Pa. 2009) (citing Bair v. Purcell, 500 F.Supp.2d 468, 500 (M.D. Pa. 2007)). Under Pennsylvania law, “ ‘to state a cause of action for civil conspiracy, the following elements are required: (1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage.' ” Gen. Refractories Co. v. Fireman's Fund Ins. Co., 337 F.3d 297, 313 (3d Cir. 2003) (citing Strickland v. Univ. of Scranton, 700 A.2d 979, 987-988 (Pa. Super. Ct. 1997) (citation and internal quotations marks omitted)). The plaintiff must base his or her allegations of a civil conspiracy on an underlying tort. Festa v. Jordan, 803 F.Supp.2d 319, 326 (M.D. Pa. 2011) (Caputo, J.); see McGreevy v. Stroup, 413 F.3d 359, 371 (3d Cir. 2005) (citing Boyanowsky v. Capital Area Intermediate Unit, 215 F.3d 396, 405 (3d Cir. 2000)). “Ultimately, ‘only a finding that the underlying tort has occurred will support a claim for civil conspiracy.' ” Reese v. Pook & Pook, LLC, 158 F.Supp.3d 271, 292 (E.D. Pa. 2016) (quoting Alpart v. Gen. Land Partners, Inc., 574 F.Supp.2d 491, 506 (E.D. Pa. 2008) (quotation omitted)).
Lastly, in Pennsylvania,
“[p]roof of malice, i.e., an intent to injure, is essential in proof of a conspiracy.” Commerce Bank/Pennsylvania v. First Union Nat. Bank, 2006 Pa. Super. 305, 911 A.2d 133, 143 (quoting Thompson Coal Co., 412 A.2d at 472). “Malice requires . . . that the sole purpose of the conspiracy was to injure the plaintiff, ” and that this intent was without justification. Doltz v. Harris & Assocs., 280 F.Supp.2d 377, 389 (E.D. Pa. 2003) (emphasis added). Because malice can only be found when the sole purpose of the conspiracy is to injure the plaintiff, a showing that a person acted for professional reasons, and not solely to injure the plaintiff, negates a finding of malice. See Bro-Tech Corp. v. Thermax, Inc., 651 F.Supp.2d 378, 419 (E.D. Pa. 2009); Thompson Coal Co., 412 A.2d at 472 (noting that the intent to injure must be absent justification, which cannot exist when an act is merely done “with the intention of causing temporal harm, without reference to one's own lawful gain, or the lawful enjoyment of one's own rights”) (quoting Rosenblum v. Rosenblum, 320 Pa. 103, 181 A. 583, 585 (1935)).Festa, 803 F.Supp.2d at 327 (Caputo, J., emphasis added); Three Rivers Hydroponics, LLC v. Florists' Mut. Ins. Co., 2018 U.S. Dist. LEXIS 20699, *18-19 (W.D. Pa. 2018) (“injury that is incidental to another purpose, even if it appears ‘selfish or unreasonable,' is not malicious”); see Synthes, Inc. v. Emerge Med., Inc., 2012 U.S. Dist. LEXIS 134886, *48 (E.D. Pa. 2012) (“A plaintiff must . . . show that ‘the sole purpose of the conspiracy is to cause harm to the party who has been injured.' ”); RDK Truck Sales & Serv. v. Mack Trucks, Inc., 2009 U.S. Dist. LEXIS 43245, *78-79 (E.D. Pa. 2009) (“Malice can only be found ‘when the sole purpose of the conspiracy is to cause harm to the party who has been injured.' ”). Thus, Pennsylvania law requires what is described as a showing of “unadulterated malice, ” concerted activity undertaken for the sole purpose of harming the plaintiff, in order to sustain a civil conspiracy claim. See Lackner v. Glosser, 2006 PA Super 14, ¶ 39, 892 A.2d 21, 35 (2006).
We recognize that some federal District courts have suggested a differing opinion regarding the definition of “malice” and whether the sole purpose of a civil conspiracy must be to injure the plaintiff. Burris v. Main Line Health Sys., 2017 U.S. Dist. LEXIS 88739, *39 (E.D. Pa. 2017). Certain courts have allowed these claims to proceed “where the harm to [the] plaintiff was not simply a ‘side-effect' of lawful activity” and was instead “the result of intentional, improper, activity.” Id. These cases have critiqued the general rule under Pennsylvania law, which requires that malice be the sole motivation of the conspirators arguing that the problem with proving “unadulterated malice” is that a conspiracy claim “must fail if there is any business justification at all, notwithstanding some intent to injure a party.” Spear v. Fenkell, 2016 U.S. Dist. LEXIS 135374, *181 (E.D. Pa. 2016). Whatever force this argument might have in the abstract as a policy matter, we are constrained observe that this argument goes beyond existing Pennsylvania's civil conspiracy precedent to allow more claims to proceed, and the majority of courts within this circuit follow the “unadulterated malice” standard. This approach best summarizes the current state of Pennsylvania law as we read it, which we are bound to follow as a court sitting in diversity jurisdiction. It is not our place to rewrite Pennsylvania law in favor of a more lenient standard than Pennsylvania courts have chosen. We accordingly utilize this more stringent standard when evaluating this motion to dismiss.
Moreover, this showing of unadulterated malice is not satisfied through allegations that the defendants were motivated to take some joint action by their own financial self-interest. Indeed, in Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 211, 412 A.2d 466, 472 (1979), the Pennsylvania Supreme Court rejected such a formulation of the civil conspiracy intent requirement, granting summary judgment in favor of a defendant in a civil conspiracy action after finding that there were no facts of record which indicated that the defendant acted solely to injure appellants, but rather the facts indicated that the defendant acted solely to advance his own interests and those of his clients. Id. Simply put, under the unadulterated malice standard adopted by Pennsylvania courts, concerted action motivated by a desire to promote some gain for the defendant does not meet this malice requirement. See Agra Enterprises, Inc. v. Brunozzi, 302 Pa. Super. 166, 174, 448 A.2d 579, 583 (1982). Rather, more is needed to establish this element of a civil conspiracy under Pennsylvania law. Instead, assertions that the sole purpose of the conspiracy was to harm the plaintiff is what Pennsylvania law appears to require.
It is against these legal standards that we turn to Defendant Encore's motion to dismiss.
C. Defendant Encore's Motion to Dismiss Should be Granted.
Encore argues that the plaintiff has failed to allege sufficient facts to support her claim for civil conspiracy. Specifically, Encore claims that the plaintiff's amended complaint is devoid of well-pleaded facts which would indicate that it acted maliciously toward the plaintiff as defined by Pennsylvania law since the amended complaint alleges on its face that the defendants were motivated by their own financial self-interest when they denied the plaintiff's claims, and does not allege that these actions were undertaken with the sole purpose of injuring Kretulskie. For her part, the plaintiff appears to primarily rely on a handful of federal cases construing Pennsylvania law which favor a more liberal approach to construing the malice requirement in civil conspiracy cases to argue that the plaintiff's allegation that Defendant Encore acted for its own pecuniary benefit should not be fatal to her claim for civil conspiracy.
Constrained as we are to follow the substantive law of Pennsylvania in assessing this claim, we must decline this invitation to expand the malice requirement defined by state law in the fashion proposed by the plaintiff. We reiterate that we are bound to follow existing Pennsylvania law as a court sitting in diversity jurisdiction. As we read it, Pennsylvania law dictates that “a showing that a person acted for professional reasons, and not solely to injure the plaintiff, negates a finding of malice.” Festa, 803 F.Supp.2d at 327 (Caputo, J.) Further, Pennsylvania law seems to clearly underscore that the element of malice required for a civil conspiracy claim is not satisfied by pleading that the defendants were motivated by their own economic interests. In this case the plaintiff's amended complaint includes the allegation that the named defendants “conspired to wrongfully deny Plaintiff's [c]laim for their own selfish purposes.” As we have stated, “injury that is incidental to another purpose, even if it appears ‘selfish or unreasonable,' is not malicious.” Three Rivers Hydroponics, LLC v. Florists' Mut. Ins. Co., 2018 U.S. Dist. LEXIS 20699, *18-19 (W.D. Pa. 2018). While the named defendants' actions may have caused some injury to the plaintiff, based on the plaintiff's own pleadings, the defendants were motivated by their own financial interests and did not act solely to cause harm to the plaintiff. This deficiency in the pleadings is fatal to the plaintiff's civil conspiracy claim, and we accordingly recommend that this claim be dismissed with leave granted to amend.
We do not address the other elements of a claim for civil conspiracy here because the dispositive element is whether the defendants acted with malice. However, we caution the plaintiff that these other elements combined with malice pose a high burden as she amends her pleadings going forward.
See e.g., Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 211, 412 A.2d 466, 472 (1979); Lackner v. Glosser, 2006 PA Super 14, ¶ 39, 892 A.2d 21, 35 (2006); Agra Enterprises, Inc. v. Brunozzi, 302 Pa. Super. 166, 174, 448 A.2d 579, 583 (1982). See also Com. ex rel. Pappert v. TAP Pharm. Prod., Inc., 885 A.2d 1127, 1141 (Pa. Commw. Ct. 2005) (holding that complaint which alleged that defendants acted “with knowledge and intent to cause such injuries [to plaintiffs] and/or with reckless disregard for the consequences, ” satisfied malice element of civil conspiracy claim under state law.)
While we conclude that Count IV of this amended complaint, the civil conspiracy claim under Pennsylvania law, does not fully satisfy the requisites of state law by adequately pleading that the defendants acted with the sole purpose of injuring the plaintiff, we also recognize that plaintiffs often should be afforded an opportunity to amend a complaint before the complaint is dismissed in its entirety, See Fletcher-Hardee Corp. v. Pote Concrete Contractors, 482 F.3d 247, 253 (3d Cir. 2007), unless granting further leave to amend would be futile or result in undue delay. Alston v. Parker, 363 F.3d 229, 235 (3d Cir. 2004). Further, we note that well-pleaded allegations that the defendants acted with knowledge and intent to cause injuries to the plaintiff or with reckless disregard for the consequences may meet this pleading requirement under Pennsylvania law. See Com. ex rel. Pappert v. TAP Pharm. Prod., Inc., 885 A.2d 1127, 1141 (Pa. Commw. Ct. 2005). Accordingly, it is recommended that Count IV be dismissed without prejudice to the plaintiff endeavoring to amend her complaint to allege facts which satisfy the requirements set by Pennsylvania law for a civil conspiracy claim.
III. Recommendation
For the foregoing reasons it is RECOMMENDED that the defendant's motion to dismiss (Doc. 27) be GRANTED, and that Count IV be dismissed from this case with leave granted to amend.
The parties are hereby placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations, or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party
shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses, or recommit the matter to the magistrate judge with instructions.