Opinion
Civil No. 10-5013 (JNE/TNL).
July 22, 2011
Richard J. Thomas, Esq., Burke Thomas, PLLP, appeared for Plaintiffs Maria Elvira Leon and My Tierra, Inc., aka, Mi Tierra, Inc.
Jon A. Hanson, Esq., and Nathan A. Lampi, Esq., Hanson Lulic Krall, LLC, appeared for Defendant State Auto Property and Casualty Co.
ORDER
Plaintiffs Maria Elvira Leon and My Tierra, Inc., bring this breach of contract action against Defendant State Auto Property and Casualty Co., a foreign insurer, claiming that Defendant improperly denied Plaintiffs' insurance claim for damages caused by a fire. Defendant argues that this action should be dismissed for insufficient service of process pursuant to Federal Rule of Civil Procedure 12(b)(5). Plaintiffs respond that they properly effected substitute service of process on Minnesota's Commissioner of Commerce. For the reasons set forth below, the Court denies the motion to dismiss.
On January 4, 2011, Plaintiffs personally delivered the Summons and Complaint to the Commissioner's office. After receiving an affidavit of delivery from the Department of Commerce, Plaintiffs sent a copy of the Summons and Complaint as well as the affidavit of delivery to Defendant. On January 11, 2011, Plaintiffs filed their "Affidavit of Service by Mail" on this case's docket, stating that Plaintiffs had served the Commissioner and sent by certified mail a copy of the Summons and Complaint to Defendant. On February 17, 2011, Defendant filed this motion to dismiss, alleging insufficient service of process and arguing that Plaintiffs failed to strictly comply with Minnesota Statutes section 45.028 (2010).
Under Rule 12(b)(5), improper service of process may be grounds for dismissal. The Court may consider evidence outside the pleadings when resolving a Rule 12(b)(5) motion. See 5C Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure §§ 1353, 1364 (3d ed. 2004). "If a defendant is improperly served, a federal court lacks jurisdiction over the defendant." Printed Media Servs., Inc. v. Solna Web, Inc., 11 F.3d 838, 843 (8th Cir. 1993).
Defendant contends that service was insufficient because Plaintiffs did not specify in the Summons or the Complaint the statute that allowed substitute service of process on the Commissioner. See Egge v. Depositors Ins. Co., No. A07-150, 2007 WL 2703137, at *2 (Minn. Ct. App. Sept. 18, 2007) (holding that plaintiff must specify statute allowing substitute service of process under § 45.028, subdivision 1(a)). Foreign insurers operating in Minnesota must file, with the Commissioner's office, a consent to the Commissioner's appointment as an agent for service of process. Minn. Stat. § 60A.19, subd. 3 (2010). After this consent is filed, service of process on the insurer is made according to section 45.028, subdivision 2. § 60A.19, subd. 4. Section 45.028, subdivision 2, requires three steps for effective service of process: first, the Commissioner must receive a copy of the process; second, the plaintiff must send notice of the service and a copy of the process by certified mail to the defendant's last known address; and third, the plaintiff must file an affidavit of compliance with the court. Section 45.028, subdivision 1, also addresses substitute service of process on the Commissioner:
(a) When a person, including any nonresident of this state, engages in conduct prohibited or made actionable by chapters 45 to 83, 155A, 309, and 332, and section 326B.802, or any rule or order under those chapters, and the person has not filed a consent to service of process under chapters 45 to 83, 155A, 309, and 332, and section 326B.802, that conduct is equivalent to an appointment of the commissioner as the person's attorney to receive service of process in any noncriminal suit, action, or proceeding against the person which is based on that conduct and is brought under chapters 45 to 83, 155A, 309, and 332, and section 326B.802, or any rule or order under those chapters.
(b) Subdivision 2 applies in all other cases under chapters 45 to 83, 155A, 309, and 332, and section 326B.802, or any rule or order under those chapters, in which a person, including a nonresident of this state, has filed a consent to service of process. This paragraph supersedes any inconsistent provision of law.
(c) Subdivision 2 applies in all cases in which service of process is allowed to be made on the commissioner of commerce.
Subdivision 1(a) applies where the insurer "has not filed a consent to service of process" on the Commissioner. Under this subdivision, a plaintiff may nevertheless use substitute service on the Commissioner so long as the action is brought under one of the enumerated statutes. Where consent has been filed and the action is brought under one of the enumerated statutes, subdivision 1(b) applies and directs that service be made pursuant to section 45.028, subdivision 2. Subdivision 1(c) applies in all cases "in which service of process is allowed to be made on the commissioner" and requires service to be made pursuant to subdivision 2. Therefore, both sections 60A.19 and 45.028 are consistent and provide that where a defendant consented to substitute service, service of process must be effected pursuant to section 45.028, subdivision 2. See §§ 45.028, subd. 1(c), 60A.19, subd. 4.
Defendant is a foreign insurer that has filed, consistent with section 60A.19, subdivision 3, its consent to substitute service on the Commissioner. (White Aff. Ex. 1) Therefore, service of process must be effected pursuant to section 45.028, subdivision 2. Neither subdivision 1(a) nor subdivision 1(b) of section 45.028 applies in this matter because Defendant has consented to substitute service on the Commissioner and Plaintiffs allege a breach-of-contract action rather than a cause of action under one of the enumerated statutes. Plaintiffs fully complied with section 45.028, subdivision 2, by: (1) delivering the Summons and Complaint to the Commissioner; (2) mailing a copy of the Summons and Complaint as well as an affidavit of delivery to Defendant by certified mail; and (3) filing an affidavit of compliance. Because Plaintiffs' service of process strictly complied with section 45.028, subdivision 2, it is sufficient.
Subdivision 2 of section 45.028 applies to "[s]ervice of process under this section." § 45.028 subd. 2. Defendant argues that the phrase "under this section" requires that Plaintiffs comply with all of subdivision 1 as well as subdivision 2, including subdivision 1(a)'s supposed requirement that one of its enumerated statutes be named. This argument is erroneous because subdivision 1 describes three different scenarios, and subdivision 1(c) is the only part of subdivision 1 applicable here. Therefore, even if compliance with subdivision 1 were required, subdivision 1(c), rather than 1(a) or (b), would be the pertinent part of subdivision 1.
At oral argument, Defendant asserted that subdivision 1(b) applies here because Plaintiff's case is brought "under" section 60A.19. The Court disagrees. Reading subdivision 1(b) in light of subdivision 1(a), the phrase "cases under chapters" means cases made actionable under the enumerated chapters, not cases where service of process falls under the enumerated chapters, as Defendant urges. Plaintiffs do not allege conduct made actionable under any of the enumerated statutes; rather, Plaintiffs allege a cause of action for breach of contract. Because Defendant consented to service of process on the Commissioner, Plaintiffs need only comply with the requirements set out in section 45.028, subdivision 2.
Defendant argues that a state district court case, Owens v. State Farm Fire Casualty Insurance Co., No. 55-CV-10-2283 (Minn. Dist. Ct. Sept. 2, 2010), supports its argument that this case is controlled by subdivision 1(b). In Owens, the defendant argued that service was insufficient because the plaintiff did not name one of the statutes enumerated in subdivision 1. The district court rejected the argument and held that the plaintiff had effected service of process through sections 60A.19 and 45.028, subdivision 2. Defendant has included the affidavit of compliance from Owens in its submissions to the Court and argues that service was adequate in Owens only because the affidavit of compliance from that case includes a reference to section 60A.19. It was defense counsel's position at oral argument that the decision in Owens turned on this allegedly distinguishing fact. But the opinion in Owens reflects no such reasoning, and, further, there would be no reason to require a plaintiff to include a reference to section 60A.19 when the plaintiff is serving process on the Commissioner pursuant to the defendant's consent. However, in cases where the defendant has not consented to service of process on the Commissioner, it is reasonable to require the plaintiff to sufficiently plead the basis for substitute service on the Commissioner because it gives the defendant notice of that basis.
Although the parties rely on Owens, the opinion itself is difficult to locate because it is not accessible in an online commercial legal database. A copy was made available to the Court at the hearing, and the Court hereby attaches it to this Order as Exhibit 1.
Defendant cites several other cases in support of its argument that Plaintiffs' service of process was insufficient. E.g., Berkshire Life Ins. Co. of Am. v. Hudelson, Civ. Nos. 10-691 (RHK/RLE), 10-1007 (RHK/RLE), 2010 WL 2133852, at *1 (D. Minn. May 27, 2010); Egge, 2007 WL 2703137, at *2; Hadler v. White Bear Lake Ins. Co., No. C-8-98-248, 1998 WL 644307, at *1 (Minn. Ct. App. Sept. 22, 1998). However, in none of these cases does the court affirmatively state that the defendant filed consent to substitute service with the Commissioner. The undisputed record here is that consent to substitute service was filed. Defendant points to no case, nor is this Court aware of any, where consent was filed and the plaintiff was nevertheless required to name one of the enumerated statutes to sufficiently serve process. Indeed, the Court can think of no rational reason for requiring such redundancy.
Finally, Defendant argues that Plaintiffs did not timely file an affidavit of compliance. Section 45.028, subdivision 2, requires that an affidavit of compliance be filed on or before the return day of the process. It does not require that any specific form or language be included. Plaintiffs timely filed an "affidavit of service by mail" that demonstrates compliance with section 45.028, subdivision 2. The Court finds that Plaintiffs fulfilled this statutory requirement.
Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:
1. Defendant's Motion to Dismiss for Lack of Jurisdiction [Docket No. 13] is DENIED.ORDER STATE OF MINNESOTA DISTRICT COURT — CIVIL DIVISION COUNTY OF OLMSTED THIRD JUDICIAL DISTRICT Steven Owens, Plaintiff, vs. Court File No. 55-CV-10-2283 State Farm Fire Casualty Ins. Co., Defendant. The above-captioned matter came before the Honorable Joseph Chase, Judge of District Court, on June 28, 2010, at the Olmsted County Government Center in Rochester, Minnesota, on Defendant's motions to dismiss.
Peter Sandberg, of Sandberg Sandberg, 4057 28th Street NW, Rochester, MN, 55901, appeared for and on behalf of Plaintiff Steven Owens.
Bjork T. Hill, of Hanson, Lulic Krall, LLC, 700 Northstar East, 608 Second Ave. South, Minneapolis, Minnesota 55402, appeared for and on behalf of Defendant State Farm Fire and Casualty Insurance Company.
Based upon all of the files, records, proceedings, and argument of counsel, the Court makes the following Order:
IT IS HEREBY ORDERED THAT:
1. Defendant's motions to dismiss are DENIED.
The attached memorandum is incorporated by reference.
Dated: September 2, 2010.
MEMORNADUM Factual Background
In this breach of contract dispute Plaintiff Steven Owens has filed suit against his homeowner's carrier, Defendant State Farm Fire and Casualty Insurance Company. The insurance policy in question covered Plaintiff's home and personal belongings located at 826 First Street SE, Rochester against theft and casualty loss. On or about November 23, 2007 several items of personal property were stolen from Plaintiff's garage. Plaintiff reported the matter to Defendant and sought reimbursement for the items taken. Defendant conducted an investigation into the matter, and eventually agreed to pay part of Plaintiff's claim. Via letters dated February 8, 2010 and February 16, 2010, Defendant denied a portion of Plaintiff's claim alleging insufficient documentation. Mr. Owens brought suit.Defendant insurer is a foreign corporation headquartered in Bloomington, Illinois, that regularly conducts business in Minnesota. Defendant does not have a registered agent to accept service of process in Minnesota. Pursuant to Minn. Stat. §§ 60A.19 and 45.028, Plaintiff served his Summons and Complaint on the Minnesota Commissioner of Commerce (hereinafter "Commissioner") and sent a certified copy to Defendant on March 29, 2010. Plaintiff filed the Complaint — which alleges breach of contract and requests declaratory relief — with this Court on March 31, 2010. As is required under Minn. Stat. § 45.028, Plaintiff also filed an affidavit of compliance and sent a copy of the notice to Defendant.
On April 12, 2010, Defendant moved for dismissal under Minn. R. Civ. P. 12.02, alleging that service was improper and that the Complaint fails to state a claim upon which relief can be granted. Plaintiff responded on May 18, 2010, asserting that service was proper under Minn. Stat. § 60A.19 because Defendant is a foreign insurance corporation, and that any defect in the pleadings can be remedied through amendment, and is not jurisdictional.
The Court heard oral argument from the parties on Defendant's motions on June 28, 2010 and the matter was placed under advisement on that date.
Legal Analysis
I. Is statutory substitute service available in this situation?
Defendant contends Plaintiff may not serve the Commissioner because the Defendant did not violate, and Plaintiff has not alleged that Defendant violated, any of the chapters enumerated in Minn. Stat. § 45.028 subd. 1 (2009). Defendant argues that the manner of service utilized by Plaintiff is only permitted where it is alleged that there has been a violation of Minnesota Statutes chapters 45 to 83, 155A, 309, 322, section 326B.802, or any rule or order under those chapters. As Plaintiff's Complaint alleges no such a violation, Defendant argues that the attempted service was ineffective, and this matter should be dismissed.
Plaintiff, on the other hand, asserts that this matter is a common-law breach of contract action against a foreign insurance company. He argues that service upon the Commissioner is permitted under Minn. Stat. § 60A.19 in such cases; and there is no requirement that Defendant have committed or that Plaintiff assert any violation of a statutory chapter listed in Minn. Stat. § 45.028, subd. 1.
Foreign insurance corporations are subject to the nearly identical (and seemingly duplicative) provisions of Minn. Stat. § 60A.19, Subdivision 1(3) and Subdivision 3. Subdivision 1(3) requires that a foreign insurance company doing business in Minnesota appoint the Commissioner "its lawful attorney in fact and therein irrevocably agree that legal process in any action or proceeding against it may be served upon [the Commissioner] with the same force and effect as if personally served on it, so long as any of its liability exists in this state." Minn. Stat. § 60A.19 subd. 1 (2009). Subdivision 3 provides:
Before any corporation . . . issuing policies of insurance of any character and not organized or existing pursuant to the laws of this state is admitted to . . . transact the business of insurance in this state, it shall, . . . appoint the commissioner and successors in office it's true and lawful attorney, upon whom . . . summonses and all lawful processes in any action or legal proceeding against it may be served, and that authority thereof shall continue in force irrevocable as long as any liability of the company remains outstanding in this state.
Minn. Stat. § 60A.19 subd. 3 (2009).
Minn. Stat. § 60A.19, subd. 4 provides that "the service of process authorized by this section shall be made in compliance with section 45.028 subdivision 2." Minn. Stat. § 45.028 subd. 2 states that "service of process under this section can be made on the commissioner by leaving a copy of the process in the office of the commissioner, or by sending a copy of the process to the commissioner by certified mail;" and requires that a copy of the process be sent by certified mail to the defendant and the court be provided with an affidavit of compliance. Id
Lest there be any question that foreign insurance companies are subject to substitute service in Minnesota, the legislature repeats this authorization at Minn. Stat. § 543.08: "If the defendant is a foreign insurance corporation, the summons may be served in compliance with section 45.028, subdivision 2."
If service of process is made in a manner not specifically authorized it is ineffective. Turek v. A.S.P. of Moorhead, Inc., 618 N.W.2d 609, 611 (Minn. App. 2000). When a party attempts to serve process upon a defendant by substitute service authorized by statute, the party must strictly adhere to the requirements of that statute. Wood v. Martin, 328 N.W.2d 723, 726 (Minn. 1983).
Defendant asserts that the phrase "under this section" in Minn. Stat. § 45.028 subd. 2 means that substitute service on the Commissioner is available only in cases in which: (A) the insurer has violated one of the statutory chapters listed in Minn. Stat. § 45.028 subd. 1, and; (B) the complaint so alleges. I am not persuaded.
Defendant's argument is flatly at odds with § 60A.19. When a foreign insurance company does business in Minnesota, the Commissioner is the company's attorney in fact for purposes of receiving service "in any action or proceeding against it." Minn. Stat. § 60A.19 subd. 1(3) (2009) (emphasis added). The present suit is an example of the most typical action brought by an insured against his/her insurance carrier — one for failure to pay a loss allegedly covered under the policy. It is a common-law breach of contract claim. Hundreds of such purely common-law insurance coverage suits are brought every year in Minnesota. While it is conceivable that a statutory violation may also be implicated in some of these claims, it seems likely that the number of insured-versus-insurer suits that involve a statutory violation is vastly exceeded by those that have only a common-law basis. Acceptance of Defendant's position would mean that substitute service is not available for "any claim" against an out-of-state insurer as § 65A.19, subd. 1(3) provides. Indeed, it would be available only for a small, specialized fraction of those claims.
State Farm's own argument illustrates that its position would essentially gut § 60A.19's provision for substitute service "in any action or legal proceeding" against a foreign insurer. State Farm observes that: (1) many of the statutory chapters enumerated in § 45.028, subd. I have no application to insurance; (2) among those chapters that are insurance-related, only one is even arguably implicated in this garden-variety suit for payment of a denied insurance claim, and; (3) as to that chapter (Chapter 72A, the Unfair Claims Practices Act), no private cause of action is available. (Defendant's Memorandum of Law, pp. 5-6) In other words, there is no statutory cause of action available in this very typical case and therefore, according to State Farm, no possibility of substitute service. State Farm's interpretation of the law would render substitute service unusable by Minnesota insureds in most suits against foreign insurance companies.
Defendant cites the unpublished cases of Hadler v. White Bear Lake Ins. Co., 1998 WL 644307 and Egge v. Depositors Ins. Co., 2007 WL 2703137 for the proposition that in order to use substitute service on the Commissioner, a violation of a provision listed in Minn. Stat. § 45.028, subd. 1 must be alleged in the complaint. Unpublished cases have, of course, no precedential value (Minn. Stat. § 480A.08, subd. 3), although their reasoning may be persuasive. In this case, I do not find that to be true.
In Hadler, the plaintiff had bungled service by mailing the summons and complaint rather than "leaving a copy of the process in the office of the commissioner." And he had attempted to serve the wrong insurer to boot. But the fundamental defect in the court's analysis in both Hadler and Egge is the failure to address § 60A.19. Those courts apparently gave no consideration to that statute's clear statement that substitute service on a foreign insurer is appropriate "in any action or legal proceeding." I suggest that there is no reported case law consistent with State Farm's argument for the simple reason that that position is plainly wrong. To the degree Hadler and Egge adopt that position, those cases are mistaken.
State Farm's initial brief seeking dismissal fails even to mention Minn. Stat. § 60A. 19 and that statute's reference to substitute service being available "in any action or proceeding against" a foreign insurer. In this writer's view, this is a significant and glaring omission. Attorneys are quite properly zealous advocates for their client's position and not, of course, required to do opposing counsel's job for him/her. But attorneys also have a duty of candor to the court. See Rule 3.3, Rules of Professional Conduct. The comment to that rule explains that "a lawyer is not required to make a disinterested exposition of the law, but must recognize the existence of pertinent legal authorities."
I conclude that § 60A. 19 is controlling here: With that conclusion counsel for State Farm disagrees, and I understand that. But it seems to me reasonably indisputable that § 60A.19 is "pertinent" to the question before the Court. State Farm's omission to mention that statute until compelled to do so in response to the insured's argument, strikes me as coming closer to a lack of frankness with the Court than should be comfortable for counsel. I suggest that legal argument which ignores, in the first instance, highly "pertinent" authority until the opposing party has brought that law to the Court's attention, is neither helpful to the Court nor persuasive.
There is nothing in § 60A.19 (or § 543.08) that would indicate substitute service is available for statutory claims but not for common-law suits against foreign insurers. Section 60A.19's reference to Minn. Stat. § 45.028, subd. 2 defines only the procedure by which service on a foreign insurance corporation is to be performed. Section 45.028, subd. 2 is solely and entirely a procedural provision that describes the manner and method of accomplishing effective service on the Commissioner. It begins with the accurate heading "How made." The substantive provisions State Farm seeks to invoke here are found entirely in § 45.028, subd. 1 — a provision not referred to by § 60A.19. State Farm's argument that the phrase "under this section" in § 45.028, subd. 2 effectively pulls into § 60A.19 the provisions of § 45.028, subd. 1 — thereby eviscerating § 60A.19's "any action" provision — stretches the statutory language beyond its breaking point.
I see no need here to construe the statute because I see no ambiguity in the legislature's expression of its intention: "In any action or legal proceeding" seems perfectly clear; and clear statutory language must be given its "plain meaning." Wynkoop v. Carpenter, 574 N.W.2d 422, 425 (Minn. 1998). But if statutory construction were necessary, "absurd results and unjust consequences" are to be avoided. Swanson v. Brewster, 784 N.W.2d 264, 274 (Minn. 2010). The reading (and result) State Farm advocates is absurd.
II. Should Plaintiff's Complaint be dismissed for failing to comply with Minn. R. Civ. P. 8.01 and Minn. Stat. § 544.36?
Defendant also moves for dismissal based on the fact that the Complaint indicates that Plaintiff seeks damages "in a sum less than Fifty thousand ($50,000) dollars." Minn. Stat. § 544.36 states: "In a pleading in a civil action which sets forth an unliquidated claim for relief, whether an original claim, cross-claim, or third-party claim, if a recovery of money is demanded in an amount less than $50,000, the amount shall be stated." Minn. R. Civ. P. 8.01 reiterates that "If a recovery of money for unliquidated damages is demanded in an amount less than $50,000, the amount shall be stated." Minn. R. Civ. P. 8.01 (2010).
Plaintiff concedes that by failing to state a specific damage amount he has not complied with the statute and rule. The parties disagree about the implications of such non-compliance, however. Defendant contends that failing to state a specific damage request warrants dismissal under the theory that Plaintiff has failed to state a claim upon which relief can be granted under Minn. R. Civ. P. 12.02(e) (2010). Plaintiff counters that the failure to set forth a specific prayer for relief is not a jurisdictional error, but a procedural one properly remedied through amendment of the deficient pleading.
A party may move for dismissal based on failure to state a claim upon which relief can be granted under Minn. R. Civ. P. 12.02(e); but such a motion "serves an extremely limited function." Northern States Power Co. v. Franklin, 122 N.W.2d 26, 29 (Minn. 1963). "The functions of a pleading today are simply to give fair notice to the adverse party of the incident giving rise to the suit with sufficient clarity to disclose the pleader's theory upon which his claim for relief is based, to permit the application of the doctrine of res judicata, and to determine whether the case must be tried by the jury or the court." Id. When a party seeks dismissal under Rule 12.02(c) "a pleading will be dismissed only if it appears to a certainty that no facts, which could be introduced consistent with the pleading, exist which would support granting the relief demanded." Id. When considering such a motion, the court "must treat the allegations in the complaint as true." Weigland v. Walser Auto. Groups, Inc., 683 N.W.2d 807, 811 (Minn. 2004). "A claim is sufficient against a motion to dismiss under Rule 12.02[e] if it is possible on any evidence which might be produced, consistent with the pleader's theory, to grant the relief demanded." Northern States at 29. "The law favors cases being decided on their true merits." Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 426 (Minn. 1987).
In analyzing this motion with these considerations in mind, I conclude that dismissal is neither required nor justified. Minn. Stat. § 544.36 and Minn. R. Civ. P. 8.01 require a party seeking less than fifty thousand dollars in damages to claim a specific dollar amount; but those provisions mandate no specific sanction for failing to do so. No case has been brought to the Court's attention, and I have located none, indicating that this pleading oversight is jurisdictional and requires dismissal.
Permitting the Plaintiff to amend his Complaint to include a specific dollar figure less than fifty thousand dollars makes no fundamental change in the Plaintiff's claim that he was insured by Defendant and sustained a covered loss during the period of coverage. It does not require the parties to explore additional issues not previously raised. It cannot reasonably be argued that Defendant would be prejudiced by such an amendment.
In situations such as this "it is proper to place substance over form" and permit "amendment to correct" a pleading mistake. Metro Bldg. Cos., Inc. v. Ram Bldgs., Inc., 783 N.W.2d 204, 209 (Minn. App. 2010). Dismissal here would "contravene the policy favoring adjudication of cases on their merits." Id. This is a "curable defect;" "dismissal is not required." Id.
Defendant's motion to dismiss for failure to state a claim upon which relief can be granted under Minn. Stat. § 544.36 and Minn. R. Civ. P. 8.01 is denied.
J.F.C. Assistance with research and preparation provided by Christopher Coon, J.D. and Emily Buchholz, J.D.