THIS MATTER comes before the Court on Defendants Ohio Security Insurance Company and Liberty Mutual Insurance Company's Motion to Dismiss and for Declaratory Judgment and Supporting Authority, filed August 22, 2017 (Doc. 6)("MTD"). The primary issues are: (i) whether the Court should dismiss the Complaint (Third Judicial District Court, County of Doña Ana, State of New Mexico, filed May 22, 2017), filed in federal court August 15, 2017 (Doc. 1-4), because Plaintiff Naresh Raja
FACTUAL BACKGROUND
Value Inn purchased insurance from Liberty Mutual that covered wind and hail damage to its commercial property in Las Cruces, New Mexico. See Complaint ¶ 6, at 2. The Building and Personal Property Coverage Form and Commercial Property Conditions, filed August 22, 2017 (Doc. 6-1)("Contract") has an appraisal provision that states:
If we and you disagree on the value of the property or the amount of loss, eithermay make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.
Contract ¶ E(2), at 8 ("Appraisal Clause"). The Contract also lists several "Duties In The Event Of Loss Or Damage":
a. You must see that the following are done in the event of loss or damage to Covered Property:
....
(5) At our request, give us complete inventories of the damaged and undamaged property. Include quantities, costs, values and amount of loss claimed.
(6) As often as may be reasonably required, permit us to inspect the property proving the loss or damage and examine your books and records....
(7) Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms.
(8) Cooperate with us in the investigation or settlement of the claim.
b. We may examine any insured under oath, while no in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured's books and records. In the event of an examination, an insured's answers must be signed.
Contract ¶¶ 3(a)-(b), at 8. The Contract also states:
No one may bring a legal action against us under this Coverage Part unless:
1. There has been full compliance with all the terms of this Coverage Part; and
2. The action is brought within 2 years after the date on which the direct physical loss or damage occurred.
Contract ¶ D, at 10.
On or about October 23, 2015, the Value Inn's property sustained wind and hail damage. See Complaint ¶ 7, at 2-3. Value Inn filed a claim with Liberty Mutual, but Value Inn believed that the damage exceeded the $130,301.56 estimate that Liberty Mutual's adjuster, Jeffery Robinson, provided. See Complaint ¶ 8-9, at 3. Value Inn requested a settlement conference with Liberty Mutual, and Liberty Mutual requested an Examination Under Oath ("EUO") of Value Inn. Complaint ¶ 10, at 3.
PROCEDURAL BACKGROUND
On May 22, 2017, Value Inn filed the Complaint in state court alleging that Liberty Mutual breached its contract, see Complaint ¶¶ 15-18, at 6-7; acted in bad faith, see Complaint ¶¶ 19-20, at 7-8; violated New Mexico's UIPA; violated New Mexico's UPA, see Complaint ¶¶ 25-27, at 9-10; and made negligent misrepresentations, see Complaint ¶¶ 28-29, at 10-11. Value Inn also sought a court order declaring that an EUO "is not appropriate in this matter and that this claim proceed through the appraisal process in the policy." Complaint ¶ 38(a), at 12. Liberty Mutual removed the case to federal court, asserting that the Court has diversity jurisdiction. See Notice of Removal ¶ 2, at 1-2.
In their MTD, Liberty Mutual asserts that, under their Contract, Value Inn may not bring a legal action against Liberty Mutual or request an appraisal unless Value Inn has fully complied with the Contract's terms. See MTD at 7-8. According to Liberty Mutual, Value Inn has not complied with the Contract's terms, because it has refused to give an EUO or provide certain requested documents. See MTD at 7-8. Liberty Mutual concludes that, because Value Inn has not met the "conditions precedent" to bringing a legal action or demanding an appraisal, Value Inn has failed to state a claim upon which relief may be granted. See MTD at 13.
Next, Liberty Mutual argues that Value Inn's claims for breach of contract and bad faith do not state a plausible claim, because Value Inn makes conclusory allegations that recite UIPA provisions "without regard to applicability or any factual basis." MTD at 13. Liberty Mutual also contends that Value Inn's recitations of UIPA provisions are irrelevant to the breach-of-contract and insurance bad-faith claims, because those claims arise out of contract. See MTD at 13-14. Liberty Mutual contends, moreover, that Value Inn's breach-of-contract and bad-faith claims are premature, "because Plaintiff refuses to allow Liberty Mutual to conduct its investigation." MTD at 14.
As for Value Inn's UIPA violation claim, Liberty Mutual argues Value Inn has not stated a claim upon which relief can be granted, because Value Inn does not allege any facts to support its conclusory allegations. See MTD at 16-17.
Liberty Mutual next addresses Value Inn's UPA claim. See MTD at 17-21. Liberty Mutual argues that UPA claims require proving deceptive practices in the sale of a product, see MTD at 18-19, but Value Inn does not allege unfair practices relating to the insurance policy's sale, see MTD at 20. Liberty Mutual requests that the Court award Liberty Mutual attorneys' fees and costs for defending Value Inn's allegedly baseless UPA claims. See MTD at 21.
Next, Liberty Mutual argues that Value Inn does not "set forth the elements" of its negligent misrepresentation claim. MTD at 21. Liberty Mutual contends that Value Inn appears to be alleging a simple negligence claim, but, nonetheless, does not allege simple negligence's elements. See MTD at 21. Moreover, Liberty Mutual contends that the Court previously made an Erie prediction under Erie Railroad Co. v. Tompkins,
Liberty Mutual concludes by asking the Court to declare that Value Inn's legal action and request for appraisal are premature, dismiss Value Inn's Complaint in its entirety for failure to state a claim upon which relief can be granted, and award Liberty Mutual its fees for defending Value Inn's baseless UPA and UIPA claims. See MTD at 22-23.
2. The Response.
In the Plaintiff's Response to Defendants' Motion to Dismiss and Plaintiff's Plea in Abatement, filed August 28, 2017 (Doc. 9)("Response"), Value Inn contends that it has agreed to submit to an EUO
Value Inn notes that the policy has a limitations provision barring legal action against Liberty Mutual after two years from the loss or damage date. See Response ¶ 8, at 4. Consequently, Value Inn contends, it had "no choice" but to file suit when it did. Response ¶ 8, at 4. Value Inn asserts that many courts have refused to uphold limitations provisions that are tied to the date of occurrence and not to the date on which the cause of action accrues. See Response ¶ 9, at 4. Value Inn concludes that the "limitations clause in the subject policy should be held void as against public policy." Response ¶ 10, at 5 (citing Spicewood Summit Office Condominiums Ass'n, Inc. v. American First Lloyd's Ins. Co.,
Value Inn concludes that the "proper remedy" at this point is for the Court to "abate the case pending the additional investigation requested by Defendant and the appraisal." Response ¶ 11, at 5 (citing Vanguard v. Smith,
3. The Reply.
Liberty Mutual replies. See Ohio Security Insurance Company and Liberty Mutual Insurance Company's Reply in Support of Motion to Dismiss and for Declaratory Judgment (Doc. 6) and Response to Plaintiff's Plea for Abatement (Doc. 9), filed September 11, 2017 (Doc. 12)("The Reply"). Liberty Mutual argues that Value Inn, in the Response, effectively concedes that its Complaint is premature, because Value Inn does not address Liberty Mutual's prematurity arguments. See Reply at 3. Liberty Mutual further contends that Value Inn's request for the Court to order Liberty Mutual to conduct an appraisal is moot, because, after Value Inn filed its Response, it submitted to an EUO and provided requested documents, and Liberty Mutual agreed to an appraisal. See Reply at 4. "Furthermore, in the absence of any appraisal award and any additional investigation relevant to appraisal, Plaintiff's claims remain premature and fail to state a claim." Reply at 4.
Liberty Mutual asserts that Value Inn's UIPA claim remains premature, because Value Inn "only recently gave his EUO and provided documentation," and Liberty Mutual has not yet completed an appraisal. Reply at 7. Liberty Mutual also contends that Value Inn's argument that the disparity in their loss estimates establishes a good-faith basis to assert UIPA and UPA violations lacks support in the law. See Reply at 7. According to Liberty Mutual, an insurer is entitled to dispute an issue "if it is fairly debatable or if it believes the claim is overvalued." Reply at 7 (citing United Nuclear Corp. v. Allendale Mut. Ins. Co.,
Liberty Mutual also asserts that Value Inn does not address the majority of its arguments against its UIPA and UPA violation claims, or the arguments against its negligent misrepresentation claim, and, therefore, concedes the arguments. See Reply at 7-9.
Next, Liberty Mutual requests that the Court deny Value Inn's plea for abatement and dismiss the case as premature and/or moot. See Reply at 10. Liberty Mutual argues that "filing a lawsuit ahead of a limitations period to preserve a claim that has not accrued" is not sufficient reason for the Court to determine that Value Inn has met the pleading standard in Bell Atlantic v. Twombly,
Allowing a party to file a suit in anticipation of a breach of contract that may not even occur is a dangerous precedent that would promote the filing of any premature lawsuit, regardless of whether or not a cause of action has accrued. Filing premature lawsuits would weigh against the interests of judicial economy and is unfair and, therefore, prejudicial to a defendant.
Reply at 10. Moreover, Liberty Mutual argues, "preserving a timely limitations defense is not a legal reason to decline to dismiss this case for failure to state a claim." Reply at 11.
LAW REGARDING RULE 12(b)(1)
"Federal courts are courts of limited jurisdiction; they are empowered to hear only those cases authorized and defined in the Constitution which have been entrusted to them under a jurisdictional grant by Congress." Henry v. Office of Thrift Supervision,
On a facial attack, a plaintiff is afforded safeguards similar to those provided in opposing a rule 12(b)(6) motion: the court must consider the complaint's allegations to be true. See Ruiz v. McDonnell,299 F.3d at 1180 ; Williamson v. Tucker,, 412 (5th Cir. 1981). But when the attack is aimed at the jurisdictional facts themselves, a district court may not presume the truthfulness of those allegations. A court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1). In such instances, a court's reference to evidence outside the pleadings does not convert the motion to a Rule 56 motion. 645 F.2d 404
Hill v. Vanderbilt Capital Advisors, LLC, No. CIV 10-0133,
[T]he trial court may proceed as it never could under 12(b)(6) or Fed. R. Civ. P. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction-its very power to hear the case-there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.
Williamson v. Tucker,
When making a rule 12(b)(1) motion, a party may go beyond the allegations in the complaint to challenge the facts upon which jurisdiction depends, and may do so by relying on affidavits or other evidence properly before the court. See New Mexicans for Bill Richardson v. Gonzales,
LAW REGARDING RULE 12(b)(6)
Rule 12(b)(6) authorizes a court to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within the four corners
A complaint need not set forth detailed factual allegations, yet a "pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action" is insufficient. Ashcroft v. Iqbal,
To survive a motion to dismiss, a plaintiff's complaint must contain sufficient facts that, if assumed to be true, state a claim to relief that is plausible on its face. See Bell Atl. Corp. v. Twombly,
"[P]lausibility" in this context must refer to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs "have not nudged their claims across the line from conceivable to plausible." The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.
Robbins v. Oklahoma,
Although affirmative defenses must generally be pled in the defendant's answer, not argued on a motion to dismiss, see Fed. R. Civ. P. 8(c), there are exceptions. First, a defendant can argue an affirmative defense on a motion to dismiss where the defendant asserts an immunity defense-the courts handle these cases differently
The plaintiff may counter this motion with an assertion that a different statute of limitations or an equitable tolling doctrine applies to bring the suit within the statute. The Tenth Circuit has not clarified whether this assertion must be pled with supporting facts in the complaint or may be merely argued in response to the motion. Cf. Kincheloe v. Farmer,
LAW REGARDING DIVERSITY JURISDICTION AND ERIE
Under Erie Railroad Co. v. Tompkins,
LAW REGARDING MOOTNESS
"Article III, Section 2 of the United States Constitution limits the federal courts' jurisdiction to actual cases and controversies." Salazar v. City of Albuquerque,
A court should not be quick to dismiss a claim for lack of jurisdiction. "Before deciding that there is no jurisdiction, the district court must look at the way the complaint is drawn to see if it is drawn so as to claim a right to recover under the Constitution and the laws of the United States." Bell v. Hood,
LAW REGARDING SUMMARY JUDGMENT
Rule 56(a) of the Federal Rules of Civil Procedure states: "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "The movant bears the initial burden of 'show[ing] that there is an absence of evidence to support the nonmoving party's case.' " Herrera v. Santa Fe Pub. Sch.,
The party opposing a motion for summary judgment must "set forth specific facts showing that there is a genuine issue for trial as to those dispositive matters for which it carries the burden of proof." Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc.,
To deny a motion for summary judgment, genuine factual issues must exist that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc.,
When reviewing a motion for summary judgment, the court should keep in mind certain principles. First, the court's role is not to weigh the evidence, but to assess the threshold issue whether a genuine issue exists as to material facts requiring a trial. See Anderson v. Liberty Lobby, Inc.,
There are, however, limited circumstances in which the court may disregard a party's version of the facts. This doctrine developed most robustly in the qualified immunity arena. In Scott v. Harris,
At the summary judgment stage, facts must be viewed in the light most favorable to the nonmoving party only if there is a "genuine" dispute as to those facts. Fed. Rule Civ. Proc. 56(c). As we have emphasized, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.' " Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. [at] 586-587[ , 106 S.Ct. 1348 ]... (footnote omitted). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. [at] 247-248[ 89 L.Ed.2d 538 ].... When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment. 106 S.Ct. 2505
Scott v. Harris,
The United States Court of Appeals for the Tenth Circuit applied this doctrine in Thomson v. Salt Lake County,
[B]ecause at summary judgment we are beyond the pleading phase of the litigation, a plaintiff's version of the facts must find support in the record: more specifically, "[a]s with any motion for summary judgment, when opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts." York v. City of Las Cruces,, 1210 (10th Cir. 2008) (quoting Scott, 523 F.3d 1205 [ 550 U.S. at 380] ); see also Estate of Larsen ex rel. Sturdivan v. Murr, 127 S.Ct. 1769 , 1258 (10th Cir. 2008). 511 F.3d 1255
Thomson v. Salt Lake Cty.,
In evaluating a motion for summary judgment based on qualified immunity, we take the facts "in the light most favorable to the party asserting the injury." Scott v. Harris,, 377[ 550 U.S. 372 , 127 S.Ct. 1769 ] (2007). "[T]his usually means adopting ... the plaintiff's version of the facts," 167 L.Ed.2d 686 id. at 378 [], unless that version "is so utterly discredited by the record that no reasonable jury could have believed him," 127 S.Ct. 1769 id. at 380 []. In Scott, the plaintiff's testimony was discredited by a videotape that completely contradicted his version of the events. 127 S.Ct. 1769 550 U.S. at 379 []. Here, there is no videotape or similar evidence in the record to blatantly contradict Mr. Rhoads' testimony. There is only other witnesses' testimony to oppose his version of the facts, and our judicial system leaves credibility determinations to the jury. And given the undisputed fact of injury, Mr. Rhoads' alcoholism and memory problems go to the weight of his testimony, not its admissibility.... Mr. Rhoads alleges that his injuries resulted from a beating rendered without resistance or provocation. If believed by the jury, the events he describes are sufficient to support a claim of violation of clearly established law under Graham v. Connor, 127 S.Ct. 1769 , 395-96[ 490 U.S. 386 , 109 S.Ct. 1865 ] (1989), and this court's precedent. 104 L.Ed.2d 443
Rhoads v. Miller,
LAW REGARDING THE UIPA
The New Mexico Legislature passed the UIPA, N.M. Stat. Ann. § 59A-16-20, "to
The UIPA imposes liability for a laundry list of unfair insurance claims practices, including the following:
A. misrepresenting to insureds pertinent facts or policy provisions relating to coverages at issue;
B. failing to acknowledge and act reasonably promptly upon communications with respect to claims from insureds arising under policies;
C. failing to adopt and implement reasonable standards for the prompt investigation and processing of insureds' claims arising under policies;
D. failing to affirm or deny coverage of claims of insureds within a reasonable time after proof of loss requirements under the policy have been completed and submitted by the insured;
E. not attempting in good faith to effectuate prompt, fair and equitable settlements of an insured's claims in which liability has become reasonably clear;
F. failing to settle all catastrophic claims within a ninety-day period after the assignment of a catastrophic claim number when a catastrophic loss has been declared;
G. compelling insureds to institute litigation to recover amounts due under policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds when such insureds have made claims for amounts reasonably similar to amounts ultimately recovered;
H. attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
I. attempting to settle claims on the basis of an application that was altered without notice to, or knowledge or consent of, the insured, his representative, agent or broker;
J. failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made;
K. making known to insureds or claimants a practice of insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
L. delaying the investigation or payment of claims by requiring an insured, claimant or the physician ofeither to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;
M. failing to settle an insured's claims promptly where liability has become apparent under one portion of the policy coverage in order to influence settlement under other portions of the policy coverage;
N. failing to promptly provide an insured a reasonable explanation of the basis relied on in the policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; or
O. violating a provision of the Domestic Abuse Insurance Protection Act.
N.M. Stat. Ann. § 59A-16-20. N.M. Stat. Ann. § 59A-16-30 provides a cause of action for UIPA violations and allows attorney's fees for prevailing parties. See N.M. Stat. Ann. § 59A-16-30. The Honorable Bruce D. Black, United States District Judge for the District of New Mexico, concluded that a plaintiff failed to plausibly plead a UIPA claim:
Dr. Yumukoglu alleges generally that Provident's conduct "violates one or more of the provisions of Section 59A-16-20 NMSA 1978 (1984)," the section of the New Mexico Unfair Insurance Practices Act that prohibits unfair claims practices. Dr. Yumukoglu does not specify which of the fifteen provisions of this section he feels Provident has violated, and after a review of the statute, the Court cannot perceive which subsection could have been violated under the fact alleged. At the very least, Dr. Yumukoglu has failed to comply with the pleading requirements of Federal Rule of Civil Procedure 8(a)(2). Rule 8(a)(2) requires that a civil complaint set forth "a short and plain statement of the claim showing that the pleader is entitled to relief." Here, it is not clear either what Dr. Yumukoglu is claiming or to what relief he is entitled under § 56A-16-20. Dr. Yumukoglu's claim appears, like his claim for breach of the duty of good faith and fair dealing, to be based on Provident's alleged bad faith in terminating his disability benefits. As discussed above, the Court finds that Provident's decision to terminate Dr. Yumukoglu's benefits did not amount to bad faith. Provident's motion for summary judgment on Plaintiff's claim for statutory violation is granted.
Yumukoglu v. Provident Life & Accident Ins. Co.,
LAW REGARDING THE UPA
The UPA makes unlawful any "[u]nfair or deceptive trade practices [or] unconscionable trade practices in the conduct of any trade or commerce."
an act specifically declared unlawful pursuant to the Unfair Practices Act, a false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services ... by a person in the regular course of the person'strade or commerce, that may, tends to or does deceive or mislead any person.
A claim under New Mexico's UPA has four elements:
First, the complaining party must show that the party charged made an "oral or written statement, visual description or other representation" that was either false or misleading. Second, the false or misleading representation must have been "knowingly made in connection with the sale, lease, rental or loan of goods or services in the extension of credit or ... collection of debts." Third, the conduct complained of must have occurred in the regular course of the representer's trade or commerce. Fourth, the representation must have been of the type that "may, tends to or does, deceive or mislead any person."
Stevenson v. Louis Dreyfus Corp.,
NEW MEXICO LAW REGARDING NEGLIGENCE
Generally, a negligence claim requires the existence of a duty from a defendant to a plaintiff, breach of that duty, which is typically based on a standard of reasonable care, and the breach being a cause-in-fact and proximate cause
New Mexico courts have stated that foreseeability of a plaintiff alone does not end the inquiry into whether the defendant owes a duty to the plaintiff. See Herrera v. Quality Pontiac,
"As a general rule, an individual has no duty to protect another from harm." Grover v. Stechel,
"[T]he responsibility for determining whether the defendant has breached a duty owed to the plaintiff entails a determination of what a reasonably prudent person would foresee, what an unreasonable risk of injury would be, and what would constitute an exercise of ordinary care in light of all the surrounding circumstances." Herrera v. Quality Pontiac,
NEW MEXICO LAW REGARDING NEGLIGENT MISREPRESENTATION
To prevail on a negligent misrepresentation in New Mexico courts, a plaintiff must show: "(1) the defendant made a material representation to plaintiff, (2) the plaintiff relied upon the representation, (3) the defendant knew the representation was false or made it recklessly, and (4) the defendant intended to induce reliance by the plaintiff." Robey v. Parnell,
NEW MEXICO LAW REGARDING CONTRACT INTERPRETATION
In contract cases, "the role of the court is to give effect to the intention of the contracting parties." Bogle Farms, Inc. v. Baca,
The question whether an agreement contains an ambiguity is a matter of law. See Mark V., Inc. v. Mellekas,
LAW REGARDING ATTORNEY'S FEES
The obligation to pay attorneys' fees can arise by statute or contractual agreement. See United States ex rel. Trustees of the Colo. Laborers Health & Welfare Trust Fund & Expert Env'l Control, Inc.,
"To determine the reasonableness of a fee request, a court must begin by calculating the so-called 'lodestar amount' of a fee, and a claimant is entitled to the presumption that this lodestar amount reflects a 'reasonable' fee." Robinson v. City of Edmond,
"To determine what constitutes a reasonable rate, the district court considers the prevailing market rate in the relevant community." New Mexico v. Valley Meat Co., LLC,
ANALYSIS
Liberty Mutual's affirmative defense that Value Inn did not satisfy conditions precedent for bringing legal action fails. The Court concludes that the Supreme Court of New Mexico would require a showing that the defendant suffered substantial prejudice before it would dismiss a complaint filed before the plaintiff satisfied a contract's conditions precedent to filing suit where there is a substantial probability that dismissing the claim would prevent the plaintiff from ever obtaining relief. Here, if the Court dismissed Value Inn's Complaint, there is a substantial probability that any subsequent case asserting those claims would be untimely; moreover, there is nothing that Court can properly consider when deciding this motion to dismiss indicating that Liberty Mutual suffered substantial prejudice. Value Inn states a claim for relief for breach of contract, insurance bad faith, and some UIPA violations. The Court will, however, dismiss some of Value Inn's UIPA claims, all of its UPA claims, and its negligent misrepresentation claim for failing to state a claim upon which relief can be granted. The Court will not abate this action. The Court, therefore, grants in part and denies in part the MTD.
I. THAT VALUE INN FAILED TO SATISFY ITS INSURANCE POLICY'S CONDITIONS PRECEDENT TO SUIT DOES NOT BAR VALUE INN'S CLAIMS.
According to the Complaint, Value Inn has not satisfied the Contract's conditions precedent for bringing action against Liberty Mutual. The Contract states that "[n]o one may bring legal action against [Liberty Mutual] under this Coverage Part unless ... there has been full compliance with all the terms of this Coverage Part." Contract ¶ D(1), at 10.
Liberty Mutual argues that "submitting to an EUO and providing documentation of the alleged loss are conditions precedent to suit." MTD at 8.
In considering a motion to dismiss, the Court must accept as true all well-pled factual allegations in the complaint, view those allegations in the light most favorable to the non-moving party, and draw all reasonable inferences in the plaintiff's favor. See Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
The Court does not want to dismiss the importance of an EUO and providing information to the insurance company before suing. The Supreme Court of New Mexico most likely does not want its state courts flooded with suits against insurance companies filed before the insurance company has some chance to investigate, evaluate, settle, or resolve its claims. The Court concludes that, in most cases, the Supreme Court of New Mexico would enforce an insurance policy's provisions requiring that the insured submit to an EUO and provide certain documents even if the insurance
The Court bases its prediction on the Supreme Court of New Mexico precedent indicating that an insurance company's obligations under an insurance policy may persist even when an insured breaches a policy's provision. In Found. Reserve Ins. Co. v. Esquibel,
Exactly one year later, the Supreme Court of New Mexico refused to extend its Esquibel reasoning to a time-to-sue provision in an insurance contract. See Sanchez v. Kemper Ins. Companies,
Eleven years later, the Supreme Court of New Mexico decided Roberts Oil Co. v. Transamerica Ins. Co.,
defend[ed] two partial summary judgments relieving them of liability under their respective insurance policies for an incident of groundwater contamination that occurred several years before they were notified of the insured's claims against them and after the insured had assumed substantial obligations and incurred significant expenses to remediate the contamination. The insured appeal[ed] from the summary judgments, arguing that, even if it breached a clause in the policies providing that it would not make such voluntary payments, the breach did not discharge the insurers absent prejudice to them.
Roberts Oil,
Roberts Oil reaches that result by "focusing on the purpose of the particular clause in question and inquiring whether that purpose will be advanced by applying it to the dispute in a given case."
When enforcement does not serve the reasons for the provision's inclusion in the policy, the insured's reasonable expectation that coverage will not be arbitrarily denied must be given effect. In short, the authority of the provision is limited by the reality of the way insurance policies are bought and sold; the effect of the provision is limited by the reasonable expectations of the insured.
We hold that time limit on commencement of suit clauses, notice of loss clauses, proof of loss clauses, and cooperation clauses should all be reviewed on the basis of whether their application in a particular case advances the purpose for which they were included in the policy. Only by so reviewing these clauses can courts satisfy the consumer's reasonable expectation that coverage will not be defeated on arbitrary procedural grounds.
In our judgment, a proper balance between the interests of the insurer and the insured requires a factual inquiry into whether, in the circumstances of a particular case, an insurer has been prejudiced by its insured's delay in giving notice of an event triggering insurance coverage. If it can be shown that the insurer suffered no material prejudice from the delay, the nonoccurrence of the condition of timely notice may be excused because it is not, in Restatement terms, 'a material part of the agreed exchange.' Literal enforcementof notice provisions when there is no prejudice is no more appropriate than literal enforcement of liquidated damages clauses when there are no damages.
Roberts Oil,
According to Roberts Oil, Sanchez correctly "undertook this same type of analysis," but it distinguished Esquibel's policy analysis regarding cooperation clauses by relying on policy "considerations [that] either duplicate those underlying a cooperation clause (preventing fraud or collusion and protecting the insurer's interests) or replicate policies behind the statute of limitations (encouraging prompt assertion of legal claims and cutting off stale claims)." Roberts Oil,
An argument can be made that Roberts Oil requires a showing of substantial prejudice whenever an insured fails to satisfy a condition precedent to suit, including an insurance policy's EUO and document production requirements.
Second, the Court does not think that the Supreme Court of New Mexico would apply Roberts Oil so broadly in this case, because requiring a showing of substantial prejudice every time a plaintiff failed to satisfy the particular conditions precedent to bring suit might get close to gutting the conditions precedent to bring suit altogether, because prejudice, much less substantive prejudice, may be rare. Further, in most situations, strict application of the EUO and production document requirement conditions precedent to bring suit will be highly beneficial and preferred by enabling parties to resolve claims outside the courtroom.
Nonetheless, Roberts Oil's unwillingness to enforce-absent substantial prejudice to the insurer-a provision to void a policy for the insured's provision violation leads the Court to believe that the Supreme Court of New Mexico would, in this case and under these circumstances, not dismiss the Complaint for Value Inn's failure to satisfy the Contract's conditions precedent to suit. Although Liberty Mutual does not ask the Court to void the Contract nor to bar Value Inn from filing another claim against it in the future, granting Liberty Mutual's motion to dismiss would likely achieve effectively the same result. The Contract's time-to-sue provision states that Value Inn cannot bring legal action against Liberty Mutual unless that action is brought within two years of the damage date. See Contract ¶ D, at 10. Here, Value Inn allegedly suffered property damage on October 23, 2015. See Complaint ¶ 7, at 2-3. Thus, the two-year window has closed. If the time-to-sue provision is enforceable, dismissing the Complaint-even without prejudice-would mean that Value Inn could not sue on his Contract, in which case there would be nothing stopping Liberty Mutual from not performing. Value Inn's only hope would be to fashion a clever cause of action that, somehow, falls outside the time-to-sue provision's scope, or for Value Inn to convince a court that applying the time-to-sue provision violates public policy. The Court can imagine potential arguments why the time-to-sue provision is not enforceable,
An affirmative defense succeeds on a rule 12(b)(6) motion if the complaint has a "built-in defense and is essentially self-defeating." 5B C. Wright & A. Miller, Federal Practice and Procedure § 1357, at 713 (3d. ed. 2004). Here, there is nothing in the Complaint or in the Contract indicating that Liberty Mutual suffered substantial prejudice as a result of Value Inn's failure to satisfy conditions precedent before filing this legal action. Therefore, Liberty Mutual's affirmative defense that Value Inn failed to satisfy conditions precedent before filing suit fails.
II. VALUE INN STATES A CLAIM FOR BREACH OF CONTRACT, INSURANCE BAD FAITH, AND UIPA VIOLATIONS, BUT NOT FOR UPA VIOLATIONS OR NEGLIGENT MISREPRESENTATION.
Value Inn states a claim for breach of contract, insurance bad faith, and some UIPA violations. Value Inn does not properly allege a cause of action for UPA violations or negligent misrepresentation. The Court also dismisses Value Inn's injunctive and declaratory relief requests as moot, because, according to the parties' briefings, Value Inn has achieved the requested relief.
A. VALUE INN STATES A CLAIM FOR BREACH OF CONTRACT.
In its Complaint, Value Inn first alleges that Liberty Mutual breached its Contract. See Complaint ¶¶ 15-18, at 6-7. Value Inn alleges that Liberty Mutual breached its contractual obligations by performing one or more of fifteen actions that appear to have been lifted verbatim from UIPA's list of unfair insurance practices. Compare Complaint ¶ 17, at 6-7, with N.M. Stat. Ann. § 59A-16-20(A)-(O). Value Inn adds no facts to this list of actions, see Complaint ¶ 17, at 6 ("Liberty Mutual breached its contractual obligation to Plaintiff by ... attempting to settle claims on the basis of an application that was altered without notice, or knowledge or consent of, the insured...."), and so these generic allegations do not, on their own, establish plausible facts for the Court
Value Inn, however, alleges facts elsewhere in the Complaint supporting a breach-of-contract claim. It asserts, for instance, that its Contract contains a clause stating that, if they disagree on the amount of loss, either party may request an appraisal. See Complaint ¶ 11, at 4. The appraisal clause states:
If we and you disagree on the value of the property or the amount of loss, either may make a written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.
Contract ¶ E(2), at 8. Value Inn avers that it "demanded appraisal per the policy" and named an appraiser, but the "Defendants have refused to comply with the appraisal process," so no umpire has been selected. Complaint ¶ 13, at 5. According to Value Inn, the appraisal clause holds that, once Value Inn requests an appraisal, both Value Inn and Liberty Mutual must select "a competent and impartial appraiser." Contract at 8. Value Inn asserts that Liberty Mutual has not selected an appraiser, as the Contract requires. Assuming these facts as true, Value Inn states a claim to relief that is plausible on its face. Value Inn also asserts that it suffered contract-related damages. See Complaint ¶ 32, at 11. Consequently, Value Inn asserts facts that raise a right to relief above a speculative level.
B. VALUE INN STATES A CLAIM FOR INSURANCE BAD FAITH.
The Court's analysis whether Value Inn states a claim for insurance bad faith unfolds roughly as does its analysis for Value Inn's breach-of-contract claim. Although Value Inn asserts that Liberty Mutual and Robinson acted in bad faith by listing, once again, UIPA's list of unfair insurance practices verbatim, compare Complaint ¶ 20, at 7-8, with N.M. Stat. Ann. § 59A-16-20(A)-(O), Value Inn, elsewhere in the Complaint, asserts facts establishing a plausible claim for insurance bad faith. New Mexico's insurance bad-faith cause of action derives from "an implied covenant of fair dealing which creates an obligation between the parties to act in good faith." Ambassador Ins. Co. v. St. Paul Fire & Marine Ins. Co.,
Liberty Mutual argues that Value Inn's insurance bad-faith claim is premature, because Value Inn "refuses to allow Liberty Mutual to conduct its investigation" by not submitting to an EUO or providing requested documents. MTD at 14. Liberty Mutual contends that "[c]ourts that have addressed the issue of whether a bad faith claim can be maintained when the insured refuses to submit to an EUO have dismissed the bad faith claim." MTD at 14 (citing West v. State Farm Fire & Cas. Co.,
C. VALUE INN STATES A CLAIM FOR A UIPA VIOLATION.
Value Inn alleges that Liberty Mutual and Robinson violated the UIPA § 59A-16-4 specifically, by
knowingly misrepresenting to Plaintiff[ ] the benefits, advantages, conditions or terms of the Policy; knowingly using any name or title of any policy or class of policies misrepresenting the true nature of the Policy to Plaintiffs and by knowingly failing to disclose material facts to the Plaintiffs reasonably necessary to prevent other statements made from being misleading.
Complaint ¶ 23, at 9. These allegations mirror § 59A-16-4(A), (E), and (G). Value Inn also alleges that Liberty Mutual and Robinson violated § 59A-16-20
by knowingly committing the following acts: (i) misrepresenting to Plaintiff's pertinent facts or policy provisions relating to coverages at issue; (ii) failing to adopt and implement reasonable standards for the prompt investigation and processing of Plaintiffs' claims arising under the Liberty Mutual insurance policy; and, (iii) not attempting in good faith to effectuate prompt, fair and equitable settlements of Plaintiffs' claims in which liability has become reasonably clear.
Complaint ¶ 24, at 9. These allegations mirror § 59A-16-20(A), (C), and (E).
These generic accusations mirroring the statutes' language do not, on their own, state a claim upon which relief can be granted. See Iqbal,
Consequently, Value Inn states a claim for a UIPA violation pursuant to § 59A-16-20(C) ("failing to adopt and implement reasonable standards for the prompt investigation and processing of insureds' claims arising under policies"). Value Inn also states a claim for a UIPA violation pursuant to § 59A-16-20(E) ("not attempting in good faith to effectuate prompt, fair and equitable settlements of an insured's claims in which liability has become reasonably clear"). The Court dismisses all other UIPA allegations and theories.
D. VALUE INN DOES NOT STATE A CLAIM FOR A UPA VIOLATION.
Value Inn alleges that Liberty Mutual and Robinson's conduct violated the UPA by
[k]nowingly making false, misleading oral and written statements, visual descriptions and other representations in connection with the sale of Liberty Mutual's goods and services, namely insurance policies, which may, tends to and did deceive and mislead any person, including Plaintiff, and includes:
1. causing confusion or misunderstanding as to the source, sponsorship, approval, and certification of Liberty Mutual'[s] goods and services;
2. representing that Liberty Mutual's goods and services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have;
3. using exaggeration, innuendo or ambiguity as to a material fact or failing to state a material fact when doing so deceives or tends to deceive;
4. stating that a transaction involves rights, remedies or obligations that it does not involve; and
5. failing to deliver the quality or quantity of goods or services contracted for by the parties.
Complaint ¶ 26, at 9-10. Value Inn adds that Liberty Mutual and Robinson "took advantage of his lack of knowledge, ability, experience, or capacity to a grossly unfair degree that resulted in a gross disparity between the value received by Plaintiff and the price paid by Liberty Mutual's goods and services." Complaint ¶ 27, at 10. Value Inn's UPA allegations closely track language from UPA's unfair practices definitions without adding additional facts. Compare Complaint ¶¶ 27-28, at 9-10, with
E. VALUE INN DOES NOT STATE A CLAIM FOR NEGLIGENT MISREPRESENTATION.
Value Inn alleges that Liberty Mutual and Robinson
made false representations of fact or representations of fact that, while literally true, were misleading, Liberty Mutual and Robinson did not exercise ordinary care in obtaining or communicating the information conveyed, Liberty Mutual and Robinson should reasonably have foreseen Plaintiff would be harmed if the information conveyed was incorrect or misleading, and that Plaintiff justifiably relied on the information to each of his detriment.
Complaint ¶ 29, at 10-11.
A negligent misrepresentation claim in New Mexico requires showing: "(1) the defendant made a material representation to plaintiff, (2) the plaintiff relied upon the representation, (3) the defendant knew the representation was false or made it recklessly, and (4) the defendant intended to induce reliance by the plaintiff." Robey v. Parnell,
F. THE COURT DISMISSES VALUE INN'S DECLARATORY AND INJUNCTIVE RELIEF REQUEST AS MOOT.
In its Complaint, Value Inn asks that the Court "order that an EUO is not appropriate in this matter and that this claim proceed through the appraisal process in the policy." Complaint ¶ 38(a), at 12. The Court determines that this claim is moot,
III. THE COURT WILL NOT ABATE THIS ACTION.
In its Response, Value Inn asks the Court to abate this case so that the parties can complete the EUO and appraisal processes. See Response ¶¶ 11-12, at 5 (citing Vanguard Underwriters Ins. Co. v. Smith,
Courts have abated legal actions in similar circumstances to permit appraisal to proceed. See, e.g., Hallak v. Allstate Vehicle & Prop. Ins. Co., No. 4:17-CV-00237-O-BP,
IV. THE COURT WILL NOT AWARD ATTORNEYS FEES FOR VALUE INN'S DISMISSED UIPA AND UPA CLAIMS.
Liberty Mutual asks the Court to award it attorneys' fees for defending against Value Inn's UIPA and UPA claims. According to Liberty Mutual, Value Inn knew those claims were groundless but brought them anyway. See MTD at 23; Reply at 12. The Court will not award attorneys' fees for Value Inn's UIPA or UPA claims, because there is no sound basis for the Court to conclude that Value Inn brought those claims knowing them to be groundless or to conclude that the claims are in fact groundless.
The UIPA states that a court may award attorneys' fees to the prevailing party if "the party complaining of the violation of that article has brought an action that he knew to be groundless." N.M. Stat. Ann. § 59A-16-30(A). To the extent that Liberty Mutual requests attorneys' fees incurred in defending against the UIPA claims that the Court dismisses, see supra § II.C, at 61-62, the Court will not award those attorneys' fees, because there is no sound basis for the Court to determine that Value Inn alleges UIPA claims that it knows are baseless. In its Complaint, Value Inn does not allege facts supporting its UIPA-based allegations that Liberty Mutual and/or Robinson made misleading statements or withheld important information regarding Value Inn's policy. See supra § II.C, at 61-62. The lack of facts is a reason to conclude that Value Inn fails to state a claim; it is not, however, a sound reason upon which to conclude that Value Inn brought those claims knowing they were baseless.
The UPA states that courts "shall award attorney fees and costs to the party charged with an unfair or deceptive trade practice or an unconscionable trade practice
IT IS ORDERED that Defendants Ohio Security Insurance Company and Liberty Mutual Insurance Company's Motion to Dismiss and for Declaratory Judgment and Supporting Authority, filed August 22, 2017 (Doc. 6), is granted in part and dismissed in part.
Notes
The Plaintiff's name is captioned as Naresh Raja, but the Court understands that his surname name is Naresh, because he refers to himself as "Mr. Naresh" in his pleadings. E.g., Complaint ¶ 10, at 3; Plaintiff's Response to Defendants' Motion to Dismiss and Plaintiff's Plea in Abatement ¶ 5, at 2, filed August 28, 2017 (Doc. 9)("Response").
In performing its Erie-mandated duty to predict what a state supreme court would do if faced with a case, see Comm'r v. Estate of Bosch,
The Supreme Court of the United States of America has addressed what the federal courts may use when there is not a decision on point from the state's highest court:
The highest state court is the final authority on state law, but it is still the duty of the federal courts, where the state law supplies the rule of decision, to ascertain and apply that law even though it has not been expounded by the highest court of the State. An intermediate state court in declaring and applying the state law is acting as an organ of the State and its determination, in the absence of more convincing evidence of what the state law is, should be followed by a federal court in deciding a state question. We have declared that principle in West v. American Telephone and Telegraph Co. ,[ 311 U.S. 223 , 61 S.Ct. 179 ] (1940), decided this day. It is true that in that case an intermediate appellate court of the State had determined the immediate question as between the same parties in a prior suit, and the highest state court had refused to review the lower court's decision, but we set forth the broader principle as applicable to the decision of an intermediate court, in the absence of a decision by the highest court, whether the question is one of statute or common law. 85 L.Ed. 139
... We have held that the decision of the Supreme Court upon the construction of a state statute should be followed in the absence of an expression of a countervailing view by the State's highest court, and we think that the decisions of the Court of Chancery [the New Jersey trial court] are entitled to like respect as announcing the law of the State.
....
The question has practical aspects of great importance in the proper administration of justice in the federal courts. It is inadmissible that there should be one rule of state law for litigants in the state courts and another rule for litigants who bring the same question before the federal courts owing to the circumstance of diversity of citizenship. In the absence of any contrary showing, the rule [set forth by two New Jersey trial courts, but no appellate courts] appears to be the one which would be applied in litigation in the state court, and whether believed to be sound or unsound, it should have been followed by the Circuit Court of Appeals.
Fid. Union Trust Co. v. Field,
In determining the proper weight to accord Tenth Circuit precedent interpreting New Mexico law, the Court must balance the need for uniformity between federal court and state court interpretations of state law with the need for uniformity among federal judges. If the Court adheres too rigidly to Tenth Circuit case law, ignoring changes undergone by a state's law in the ensuing years, then parties litigating state-law claims will be subject to a different body of substantive law, depending on whether they litigate in state court or federal court. This result frustrates the purpose of Erie, which held that federal courts must apply state court interpretations of state law, rather than their own, in part so that parties achieve a consistent result regardless of the forum. This consideration pulls the Court toward according Tenth Circuit precedent less weight, and according state court decisions issued in the ensuing years more weight. On the other hand, when the state law is unclear, it is desirable for there to at least be uniformity among federal judges as to its proper interpretation. Otherwise, different federal judges within the same circuit-or even the same district, as district courts' decisions are not binding, even upon themselves-would be free to adopt differing interpretations of a state's law. This consideration pulls the Court towards a stronger respect for vertical stare decisis, because a Tenth Circuit decision on point-regardless whether it accurately reflects state law-at least provides consistency at the federal level, so long as federal district judges are required to follow it.
The Court must decide how to weigh Tenth Circuit case law against more-recent state court decisions, choosing a point on the spectrum between the two extremes: rigidly adhering to Tenth Circuit precedent unless there is intervening case law directly on point from the state's highest court, on one end; and independently interpreting the state law, regarding the Tenth Circuit precedent as no more than persuasive authority, on the other. In striking this balance, the Court notes that it is generally more concerned about systemic inconsistency between the federal courts and the state courts than it is about inconsistency among federal judges. Judges, even those within a jurisdiction with ostensibly identical governing law, sometimes interpret and apply the law differently from one another; this inconsistency is part and parcel of a common-law judicial system. More importantly, litigants seeking to use forum selection to gain a substantive legal advantage cannot easily manipulate such inconsistency: cases are assigned randomly to district judges in this and many federal districts; and, regardless, litigants cannot know for certain how a given judge will interpret the state law, even if they could determine the identity of the judge pre-filing or pre-removal. All litigants know in advance is that whomever federal district judge they are assigned will look to the entirety of the state's common law in making his or her determination-the same as a state judge would. Systemic inconsistency between the federal courts and state courts, on the other hand, not only threatens the principles of federalism, but litigants may more easily manipulate the inconsistency. When the Tenth Circuit issues an opinion interpreting state law, and the state courts subsequently shift away from that interpretation, litigants-if the district courts strictly adhere to the Tenth Circuit opinion-have a definite substantive advantage in choosing the federal forum over the state forum, or vice versa.
The Court further notes that district courts may be in a better position than the Tenth Circuit to be responsive to changes in state law. Tenth Circuit decisions interpreting a particular state's law on a specific issue are further apart in time than the collective district courts' decisions are. More importantly, the Tenth Circuit does not typically address such issues with the frequency that the state's courts themselves do. As such, Tenth Circuit precedent can lag behind state law developments-developments that the district courts may be nimble enough to perceive and adopt. Additionally, much of the benefit of having a consistent Tenth Circuit-wide interpretation of a particular state's law is wasted. Other than Oklahoma, every state encompassed by the Tenth Circuit contains only one federal judicial district, and there is relatively little need for federal judges in Wyoming and Kansas to have a uniform body of New Mexico law to which to look. Last, the Court notes, respectfully, that district courts may be in a better position than the Tenth Circuit to develop expertise on the state law of the state in which they sit. Every federal judicial district in the nation, except the District of Wyoming, covers at most one state. It is perhaps a more workable design for each district court to keep track of legal developments in the state law of its own state(s) than it is for the Tenth Circuit to monitor separate legal developments in eight states. The Tenth Circuit used to follow this rationale in applying a clearly erroneous standard of review to district judge decisions of state law with no controlling state Supreme Court precedent. See Weiss v. United States,
Having outlined the relevant considerations, the Court thinks the proper stance on vertical stare decisis in the context of federal court interpretations of state law is as follows: the Tenth Circuit's cases are binding as to their precise holding-what the state law was on the day the opinion was published-but lack the positive precedential force that its cases interpreting a federal statute or the Constitution of the United States of America possess. A district court considering a state law issue after the publication of a Tenth Circuit opinion on point may not come to a contrary conclusion based only on state court cases available to and considered by the Tenth Circuit, but it may come to such a conclusion based on intervening state court cases.
When interpreting state law, the Tenth Circuit does not and cannot issue a case holding that x is the law in New Mexico; it holds that the proper interpretation of New Mexico law, at the time the opinion is released, is x . Its holdings are descriptive, not prescriptive-interpretive, not normative. Because federal judicial opinions lack independent substantive force on state law issues, but possess such force regarding federal law issues, the Court thinks the following is not an unfair summary of the judicial interpretive process: (i) when interpreting federal law, the federal appellate courts consider the existing body of law, and then issue a holding that both reflects and influences the body of law; that holding subsequently becomes a part of the body of law; but (ii) when interpreting state law, the federal appellate courts consider the existing body of law, and then issue a holding that only reflects the body of law; that holding does not subsequently become a part of the body of law. The federal district courts are bound to conclude that the Tenth Circuit's reflection of the then-existing body of law was accurate. The question is whether they should build a doctrine atop the case and use the existence of the Tenth Circuit's case to avoid any responsibility to independently consider the whole body of state law that exists when the time comes that diversity litigants raise the issue in their courtrooms. Giving such effect to the Tenth Circuit's interpretations of state law is at tension with Erie, giving independent substantive effect to federal judicial decisions-i.e., applying federal law-in a case brought in diversity.
The purpose of Erie is well-known and simple, and the Court should not complicate it beyond recognition: it is that the same substantive law governs litigants' cases regardless whether they are brought in a federal or state forum. For simplicity's sake, most courts have settled on the formulation that "the federal court must attempt to predict how the states' highest court would rule if confronted with the issue." Moore's § 124.22[3] (citing Comm'r v. Estate of Bosch,
The Erie doctrine results in federal cases that interpret state law withering with time. While cases interpreting federal law become more powerful over time-forming the groundwork for doctrines, growing upward from one application (Congress may create a national bank) to many (Congress may set quotas on wheat-growing for personal consumption), expanding outward from the general (states must grant criminal jury trials) to the specific (the jury need not be twelve people, nor must it be unanimous)-federal cases interpreting state law often become stale. New state court cases-even when not directly rebuking the federal court's statement of law-alter the common-law legal landscape with their dicta, their insinuations, and their tone. The Supreme Court, which picks its cases sparingly and for maximum effect, almost never grants certiorari to resolve issues of state law.
The Court's views on Erie, of course, mean little if the Tenth Circuit does not agree. In Wankier v. Crown Equipment Corp., the Tenth Circuit said that,
[w]here no controlling state decision exists, the federal court must attempt to predict what the state's highest court would do. In performing this ventriloquial function, however, the federal court is bound by ordinary principles of stare decisis . Thus, when a panel of this Court has rendered a decision interpreting state law, that interpretation is binding on district courts in this circuit, and on subsequent panels of this Court, unless an intervening decision of the state's highest court has resolved the issue.
Wankier v. Crown Equip. Corp.,
It is difficult to know whether Judge McConnell's limitation of "intervening decision" to cases from the highest state court was an oversight or intentional. Most of the Tenth Circuit's previous formulations of this rule have defined intervening decisions inclusively as all subsequent decisions of "that state's courts," a term which seems to include trial and intermediate appellate courts. Even Koch v. Koch Industries, Inc.,
In the absence of intervening Utah authority indicating that a plaintiff is not required to prove a safer, feasible alternative design, we are bound to follow the rule of Allen [v. Minnstar, Inc. ,(10th Cir. 1993), a Tenth Circuit case interpreting an issue of Utah law], as was the district court. "Following the doctrine of stare decisis, one panel of this court must follow a prior panel's interpretation of state law, absent a supervening declaration to the contrary by that state's courts or an intervening change in the state's law." Koch v. Koch Indus., Inc., 8 F.3d 1470 . 203 F.3d at 1231
Wankier v. Crown Equip. Corp.,
Whether the decision to limit the intervening authority a district court can consider was intentional or not, the Tenth Circuit has picked it up and run with it. In Kokins v. Teleflex, Inc., the Tenth Circuit, quoting Wankier v. Crown Equipment Corp., refused to consider an opinion from the Court of Appeals of Colorado holding directly the opposite of an earlier Tenth Circuit interpretation of Colorado law. See Kokins v. Teleflex, Inc.,
The Tenth Circuit has set forth a stringent restriction on its district courts' ability to independently administer the Erie doctrine. More importantly, the Tenth Circuit's view may be at tension with the above-quoted Supreme Court precedent, as well as its own prior case law. Moore's lists the Tenth Circuit as having been, at one time, a "court[ that] hold[s] that a prior federal appellate decision [interpreting state law] is persuasive." Moore's § 124.22[4] (citing State Farm Mut. Auto. Ins. Co. v. Travelers Indem. Co.,
Although the Honorable William J. Brennan, Jr., Associate Justice of the Supreme Court of the United States, dissented in Celotex Corp. v. Catrett, this sentence is widely understood to be an accurate statement of the law. See 10A Charles Allen Wright & Arthur R. Miller, Federal Practice and Procedure § 2727, at 470 (3d ed. 1998) ("Although the Court issued a five-to-four decision, the majority and dissent both agreed as to how the summary-judgment burden of proof operates; they disagreed as to how the standard was applied to the facts of the case.").
Rhoads v. Miller is an unpublished Tenth Circuit opinion, but the Court can rely on an unpublished Tenth Circuit opinion to the extent its reasoned analysis is persuasive in the case before it. See 10th Cir. R. 32.1(A), 28 U.S.C. ("Unpublished opinions are not precedential, but may be cited for their persuasive value."). The Tenth Circuit has stated: "In this circuit, unpublished orders are not binding precedent, ... and ... citation to unpublished opinions is not favored.... However, if an unpublished opinion ... has persuasive value with respect to a material issue in a case and would assist the court in its disposition, we allow a citation to that decision." United States v. Austin,
The 2004 amendments to Uniform Instruction 13-305 eliminated the word "proximate" within the instruction. Use Note, N.M. Rul. Amend. Civ. UJI 13-305. The drafters added, however, that the change was "intended to make the instruction clearer to the jury and do[es] not signal any change in the law of proximate cause." Editor's Notes, N.M. Rul. Amend. Civ. UJI 13-305 (alteration added).
The Supreme Court of New Mexico has not expressly adopted this four-part negligent misrepresentation definition, but has stated that New Mexico follows the Restatement (Second) of Torts § 552 (1977) when it comes to negligent misrepresentation. See Garcia v. Rodey, Dickason, Sloan, Akin & Robb, P.A.,
(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.
Restatement (Second) of Torts § 552 (1977). The Court cannot discern a meaningful difference between the Court of Appeals of New Mexico's four elements and the Restatement (Second) of Torts § 552(1)-(2). Under those sections, a defendant is liable for negligent misrepresentation when he or she "supplies false information" to the plaintiff; the plaintiff "justifiabl[y] reli[es] upon the information"; the defendant "fail[ed] to exercise reasonable care or competence in obtaining or communicating the information"; and the defendant "intend[ed] the information to influence or knows that the recipient so intends" to use the information. Restatement (Second) of Torts § 552. Those elements mirror the Court of Appeals of New Mexico's negligent misrepresentation test.
The Restatement (Second) of Torts § 552 does, however, state that those with a public duty to give information may be liable for negligent misrepresentation for statements made to "the class of persons for whose benefit the duty is created in any of the transactions in which it is intended to protect them." Restatement (Second) of Torts § 552(3). The Court could not locate a New Mexico case applying negligent misrepresentation liability based on the public duty theory. New Mexico's Uniform Jury Instructions for negligent misrepresentation mirror Court of Appeals of New Mexico's test:
A party is liable for damages caused by his negligent and material misrepresentation.
A material misrepresentation is an untrue statement which a party intends the other party to rely on and upon which the other party did in fact rely.
A negligent misrepresentation is one where the speaker has no reasonable ground for believing that the statement made was true.
N.M.R.A., Civ. UJI 13-1632. Although this jury instruction does not mention the public duty theory of negligent misrepresentation, its omission is not determinative. See State v. Wilson,
The Court can consider the Contract-which Liberty Mutual attached to its MTD-in its analysis without converting the motion to dismiss to a motion for summary judgment under rule 56 of the Federal Rules of Civil Procedure, because Value Inn references the Contract through its Complaint, and the Contract is central to Value Inn's claim. The general rule for a motion to dismiss is that, if "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d). A court may, however, consider documents to which the complaint refers if the documents are central to the plaintiff's claim and the parties do not dispute the documents' authenticity. See Jacobsen v. Deseret Book Co.,
Value Inn references the Contract throughout its Complaint. See, e.g., Complaint ¶¶ 11-13, at 4-5 (discussing and quoting the Contract's appraisal clause); Complaint ¶ 14, at 5-6 (discussing and quoting the Contract's requirements for taking legal action against Liberty Mutual). The Contract is central to Value Inn's Complaint, because he seeks enforcement of its appraisal clause. See Complaint ¶ 38(a) (requesting that the Court order "that this claim proceed through the appraisal process in the policy"). Moreover, Value Inn does not dispute the Contract's authenticity.
Affirmative defenses can be considered on a motion to dismiss when the facts establishing the affirmative defense are apparent on the face of the complaint. See Miller v. Shell Oil Co.,
Federal courts sitting in diversity apply the state's substantive law and federal procedural law. See Am. Mech. Sols., L.L.C. v. Northland Process Piping, Inc.,
Although the distinction between substance and procedure is not always clear, we can distinguish a substantive rule from a procedural rule by examining the language and the policy of the rule in question. If these inquiries point to achieving fair, accurate, and efficient resolutions of disputes, the rule is procedural. If, however, the primary objective is directed to influencing conduct through legal incentives, the rule is substantive.
Sims v. Great Am. Life Ins. Co.,
Several courts have determined that similar language is unambiguous with regard to whether an insured's duty after a loss is a condition precedent of bringing action against the insurer. See, e.g., Armstead v. Allstate Prop. & Cas. Ins. Co., No. 1:14-CV-586,
A Mark V hearing refers to a hearing, required by the Supreme Court of New Mexico in Mark V., Inc. v. Mellekas,
Value Inn has not amended its Complaint or asked the Court to give it leave to do so. The Court will not, in any case, give Value Inn an opportunity to amend its complaint sua sponte. Although Value Inn may have satisfied the conditions precedent after it filed the Complaint but before the Contract's two-year limit barred its claim-the Contract states that a legal action must be brought within two years of the damage, see Contract ¶ D, at 10; the damage occurred on or about October 21, 2015, see Complaint ¶ 6, at 2; and Value Inn apparently submitted to an EUO on September 1, 2017, see Response ¶ 7, at 4 (stating, on August 28, 2017, that Value Inn had agreed to submit to an EUO on September 1, 2017); Reply at 3 (stating that the EUO occurred but that, as of September 11, 2017, Value Inn had not provided all requested documents)-amending the Complaint would not cure the Complaint's deficiency that existed at the time of its filing. Rule 15's plain language states that an amendment "relates back to the date of the original pleading." Fed. R. Civ. P. 15(c)(1) (emphasis added). In Reynolds v. United States, for example, a plaintiff filed a complaint before meeting a condition precedent for bringing legal action against the United States under the Federal Tort Claims Act,
The date of Ms. Reynolds' original pleading was August 10, 1982; Rule 15(c) gave the district court no authority to relate Ms. Reynolds' amended complaint back to any date except August 10, 1092. On that date, the court lacked subject matter jurisdiction of Ms. Reynolds' claim.... Filed on a date on which the court lacked jurisdiction, [the amended complaint] related back to a date on which the court also lacked jurisdiction.
Reynolds v. United States,
The Supreme Court of New Mexico dismissed, out of hand, the suggestion that Roberts Oil's no action clause materially altered Esquibel's analysis even though it was willing to read the no action clause as converting ordinary contract provisions into "an express condition to the insurer's obligations,"
The Supreme Court of New Mexico has shown no sign of reversing course. On the contrary, State Farm Mut. Auto. Ins. Co. v. Fennema,
Value Inn could at that time argue that the court should not enforce the Contract's time-to-sue provision because Liberty Mutual is not substantially prejudiced by its filing after the time-to-sue provision's two-year limit. Although Sanchez states that enforcing a time-to-sue provision does not require showing substantial prejudice, Roberts Oil strongly indicates that, given the chance, it would overrule Sanchez on that point. See Roberts Oil,
Value Inn might also argue that the Contract's time-to-sue provision is unenforceable, because it begins to run on the damage date and not the date of accrual. Liberty Mutual contends that time-to-sue provisions are enforceable in New Mexico. See Reply at 11 (citing State ex rel. Udall v. Colonial Penn Ins. Co.,
New Mexico courts have determined that time-to-sue provisions in uninsured/underinsured motorist ("UM/UIM") contracts violate public policy if their time limit begins running when the accident happens instead of when the claim accrues. See Whelan,
It is an open question whether a commercial property damage insurance policy's time-to-sue provision violates public policy when it begins running when the damage happens. The New Mexico cases concluding that time-to-sue provisions are not contrary to public policy do not address whether the moment the claims begin to run makes a difference. The cases to which Liberty Mutual cite also do not resolve the question. See State ex rel. Udall v. Colonial Penn Ins. Co.,
Whelan is thus the best resource for determining whether the Supreme Court of New Mexico would expand its reasoning with regards to a UM/UIM contract to one relating to commercial property damage. After a closer look, the Court concludes that the Supreme Court of New Mexico's UM/UIM-related reasoning in Whelan would not apply to Value Inn's commercial property insurance Contract, and, therefore, the Supreme Court of New Mexico would not void the Contract's time-to-sue provision.
Whelan's time-to-sue provision analysis begins by identifying "the right that is being limited."
Brooks recognized that an insurer has the ability to protect itself from uncertainty caused by prejudicial delays in assertion of UM/UIM claims by including "appropriate time limitations" in its insurance contracts. But, significantly, it concluded that because "the date of accident is particularly extraneous to actions for specific performance of a contract to arbitrate involving UIM coverage," it would be "fundamentally unfair to time-bar an insured from compensation that was bargained for because an insured may not be aware until sometime after the accident.
Whelan,
Whelan later notes that New Mexico courts, in deciding UM/UIM-related cases, have "sought how to 'best balance[ ] the interests in permitting private contractual relations between parties, and honoring the broad intent of the [UM/UIM] statute.' " Whelan v. State Farm Mut. Auto. Ins. Co.,
held that a provision that barred suit one year after the date of the accident was not enforceable because it was shorter than the statutory limitations period for bringing a personal injury suit. Id. ¶¶ 23-24. The Court of Appeals reasoned that the purpose of the UM/UIM statute was to protect the insured from the uninsured, not the insurer from the insured, id. ¶ 16, stating that "[a]lthough many uninsured motorist statutes do not include a limitation period, the intent to protect the victim or the insured motorist from having to bear the total loss is obvious," id. ¶ 20.
Whelan v. State Farm Mut. Auto. Ins. Co.,
Whelan features some concern about the general fairness of a time-to-sue provision that begins to run before a claim accrues, see
The Court sees two significant differences between a UM/UIM-related automobile insurance policy and Value Inn's policy covering commercial property damage. First, a specific statutory regime-the UM/UIM statute-governs an automobile insurance policy, which demonstrates New Mexico's deliberate policy for protecting an insured from financial consequences from an accident with an uninsured or underinsured driver. Second, the UM/UIM statute's purpose is to protect individual drivers who may not be sophisticated insurance customers and may find themselves at the wrong end of a power disparity when purchasing an automobile insurance policy. Business owners who are in the market for insurance coverage for damage to commercial property are more likely to be on roughly equal footing with the insurer when negotiating a policy. In short, the reasons for voiding an unfavorable time-to-sue provision in a UM/UIM policy do not apply to a commercial property insurance contract like Value Inn's policy with Liberty Mutual. In light of the above, the Court concludes that the Supreme Court of New Mexico would enforce the Contract's time-to-sue provision. Moreover, because the Whelan reasoning depends on the statute governing the contract and not the claim's category, Whelan does not support UPA and UIPA claims prevailing over contractual time-to-sue defenses. See Ryan v. Liberty Mut. Fire Ins. Co.,
Liberty Mutual argues that "preserving a timely limitations defense is not a legal reason to decline to dismiss this case for failure to state a claim." Reply at 11. Liberty Mutual states that
[a]llowing a party to file suit in anticipation of a breach of contract that may not even occur is a dangerous precedent that would promote the filing of any premature lawsuit, regardless of whether or not a cause of action has accrued. Filing premature lawsuits would weigh against the interest of judicial economy and is unfair and, therefore, prejudicial to a defendant.
Reply at 10. Liberty Mutual's argument is sound, but many of Value Inn's claims' merits do not depend on the appraisal's outcome. For instance, its allegations that Liberty Mutual (i) breached its contract and committed insurance bad faith by not agreeing to the appraisal promptly; and (ii) violated the UIPA and UPA, and committed negligent misrepresentation by misleading him about its policy and not settling its claim in good faith, are true regardless what the appraisal concludes.
Liberty Mutual argues that Value Inn's breach-of-contract claim is premature, because the appraisal has not yet been performed. See Reply at 5. Value Inn alleges, however, breach-of-contract damages arising from the time that Liberty Mutual allegedly refused to proceed with the appraisal. See Complaint ¶ 32, at 11 ("Plaintiff incurred ... costs of delay in performance, costs of mitigation, [and] costs of substitute performance ..."). Therefore, Value Inn alleges harm not dependent on the appraisal's outcome.
To the extent that the Court dismisses Value Inn's declaratory and injunctive relief requests as moot based on what the post-Complaint pleadings raise, the Court may do so, because the mootness inquiry implicates the Court's subject-matter jurisdiction under rule 12(b)(1). See Doyle v. Midland Credit Mgmt., Inc.,