Opinion
Case No. 1:00-CV-238-LC
July 26, 2000
ORDER
THIS CAUSE comes before the Court on several pending motions, including Defendants' motion to dismiss and Plaintiffs motion to strike (docs. 4, 13). The parties filed appropriate responses (docs. 12, 17-18). For the reasons stated below, Plaintiffs motion to strike is GRANTED. Defendants' motion to dismiss is GRANTED in part and DENIED in part. Counts II and III are DISMISSED without prejudice and with leave to amend.
I. BACKGROUND
For purposes of ruling on Defendants' motion to dismiss, the following facts are assumed true or viewed in a light most favorable to the Plaintiff. Defendant Martha Crumpton, acting as an agent for Defendants American Medical Security Insurance Company ("American Medical") and United Wisconsin Life Insurance Company (UWLI), sold Plaintiff Fontaine R. Howard a group health insurance policy by American Medical and UWLI effective November 1, 1995 (doc. 1, Exh. A ¶¶ 3-4) Under this policy, Plaintiff obtained family coverage with an agreed upon premium of $448.69 per month ( Id. ¶ 4). During the sales presentation, United Wisconsin made the following representations to the Plaintiff: (1) the insurance being sold to the Plaintiff was a group policy. (2) the premiums charged to the Plaintiff were the same premiums charged to the group, (3) the premiums were based upon the table of premium rates filed by United Wisconsin with the Alabama Department of Insurance ("ADI"), (4) the premiums were calculated on a group basis, and (5) the Plaintiff would be called upon to pay for her insurance in a manner consistent with that charged to the entire group ( Id. ¶ 5).
For the sake of simplicity, the Court will refer to the Defendants collectively as "United Wisconsin."
It is unknown at this time whether the insurance policy is governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001-1461.
In 1996, Plaintiff's three-year-old son Radcliff Howard was diagnosed with a life threatening brain tumor which required intense medical treatment ( Id. ¶ 6). On November 1, 1997, United Wisconsin increased Plaintiff's insurance premiums to $798.14 per month ( Id. ¶ 7). On November 1, 1998, United Wisconsin increased her premiums to $1,396.77 per month ( Id. ¶ 8). Thereafter, Plaintiff contacted United Wisconsin and inquired as to the basis for the premium increases (doc. 1, Exh. A ¶ 10). On November 30, 1998, United Wisconsin represented to Plaintiff that the premium increases were (1) the result of three standard adjustments made to the basic premium as applicable to the entire group and (2) were consistent with its table of premium rates filed with the ADI ( Id. ¶ 10-11). United Wisconsin finally increased Plaintiff's premiums to $2,807.06 per month on October 4, 1999 ( Id. ¶ 9).
Plaintiff originally filed this class-action lawsuit in state court on behalf of herself and others similarly situated alleging breach of contract (Count I), breach of duty (Count II), fraud (Count III), unconscionability (Count IV) and injunction (Count V). United Wisconsin filed a notice of removal pursuant to 28 U.S.C. § 1446(a), and this Court accepted jurisdiction. It now moves to dismiss Plaintiffs complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure.
II. MOTION TO STRIKE
Plaintiff argues the Court should strike all references to exhibits attached to United Wisconsin's motion to dismiss because the evidentiary materials are outside the bounds of a Rule 12(b)(6) motion. United Wisconsin maintains Plaintiff's motion is unwarranted because this Court can consider matters outside the pleadings by treating its motion to dismiss as a motion for summary judgment.
According to Rule 12(b), if a court considers matters that are outside a pleading, then a motion to dismiss for failure to state a claim must be treated and disposed of as if it were a motion for summary judgment under Rule 56. See FED. R. CIV. P. 12(b). However, it is well established in the Eleventh Circuit that, prior to taking such action, a district court must notify all parties that it intends to treat such motion as a motion for summary judgment and that it will take the motion under advisement on a specific date. See Donaldson v. Clark, 819 F.2d 1551, 1555 (11th Cir. 1987); Marine Coatings of Ala., Inc. v. United States, 792 F.2d 1565, 1567-68 (11th Cir. 1986); Griffith v. Wainwright, 772 F.2d 822, 825-26 (11th Cir. 1985).
In the case sub judice, United Wisconsin did not caption its motion as "Defendants' Motion to Dismiss and/or Motion for Summary Judgment," nor did it expressly move in the alternative for summary judgment. Moreover, this Court did not issue an advisory order notifying the parties that it intends to treat United Wisconsin's motion as a motion for summary judgment. Without such notice, Plaintiff would be denied an opportunity to present all material pertinent to United Wisconsin's motion. Therefore, the Court elects to treat United Wisconsin's motion as a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs motion to strike is GRANTED.
III. MOTION TO DISMISS
A. Standard
A motion to dismiss, under Rule 12(b)(6), is designed to eliminate counts or complaints that fail to state a claim upon which relief may be granted. As such, this Court must accept all allegations in the complaint as true and construe those allegations in the light most favorable to the plaintiff. See Lopez v. First Union Nat'l Bank of Fla., 129 F.3d 1186, 1189 (11th Cir. 1997). A complaint may not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of her claim which would entitled her to relief. See Id. "The threshold of sufficiency that a complaint must meet to survive a motion to dismiss is exceedingly low." Quality Foods de Centro Am. v. Latin Am. Agribusiness Dev. Corp., 711 F.2d 989, 994 (11th Cir. 1983).
B. Discussion
1. Count III-Fraud
United Wisconsin argues that, on the face of Plaintiff's complaint her claim for fraud is barred by Alabama's two-year statute of limitations unless it was tolled. It claims Plaintiff has failed to allege facts explaining how and when she discovered the alleged fraud with particularity. Consequently, it argues that, because Plaintiff received notice of a premium increase on October 20, 1996, her fraud claim is barred. Plaintiff argues, however, that her complaint adequately alleges repose. In the alternative, Plaintiff contends she should be granted leave to amend her complaint to plead repose with more particularity.
United Wisconsin cites the Court to evidentiary material in support of this argument. However, the Court did not consider this material. The Court has limited its inquiry to the four corners of Plaintiffs complaint.
As an aside, the Court notes that Rule 15 states "[a] party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served." Fed.R.Civ.P. 15(a). A motion to dismiss is not a responsive pleading. See 6 CHARLES ALAN WRIGHT ET. AL. FEDERAL PRACTICE AND PROCEDURE § 1475 (2d ed. 1990). As such, Plaintiff could have amended her complaint at any time without leave of court.
Alabama law provides an individual who has been the victim of fraud with a right of action. See, e.g., ALA. CODE §§ 6-5-100 to-104 (WESTLAW through 1999 2nd Sp. Sess.). A fraud claim does not accrue until the aggrieved party has discovered, or should have discovered, "the fact constituting the fraud." Id. § 6-2-3; see also McGowan v. Chrysler Corp., 631 So.2d 842, 845 (Ala. 1993). The aggrieved party must then bring forth a claim within two years of this date. See ALA. CODE §§ 6-2-3, 6-2-38(1). Generally, it is for the jury to decide "when a party discovered or should have discovered fraud which would toll the statute of limitations." McGowan, 631 So.2d at 845. However, a court can decide this issue as a matter of law where the evidence shows that an aggrieved party actually knew of facts that would have put a reasonable person on notice of fraud. See Sexton v. Liberty Nat'l Life Ins. Co., 405 So.2d 18, 21 (Ala. 1981) (citing Seybold v. Magnolia Land Co., 376 So.2d 1083, 1087 (Ala. 1979)); Nolan v. Melton, 740 So.2d 1096, 1098 (Ala.Civ.App. 1999). Documentary evidence- e.g., the terms of an insurance policy or the correspondence exchanged between parties-may provide such notice. See Jarzen v. Wright, 679 So.2d 1086, 1088-90 (Ala.Civ.App. 1996). "Documents that are vague or that do not reasonably indicate that a fraud has occurred, however, will not `warrant a finding that the fraud claim is barred as a matter of law.'" Id. at 1088 (quoting Kelly v. Connecticut Mutual Life Ins. Co., 628 So.2d 454, 458 (Ala. 1993) (alteration in original)).
For example a court can enter "judgment as a matter of law in a fraud case where the undisputed evidence indicates that the party or parties claiming fraud in a particular transaction were fully capable of reading and understanding their documents, but nonetheless made a deliberate decision to ignore written contract terms." Foremost Ins. Co. v. Parham, 693 So.2d 409, 421-22 (Ala. 1997).
Because United Wisconsin has raised a statute of limitations defense pursuant to its Rule 12(b)(6) motion, the allegations of time and place have become material. See FED. R. Civ. P. 9(f); Hoover v. Langston Equip. Assocs., Inc., 958 F.2d 742, 744-45 (6th Cir. 1992). When viewed in a light most favorable to the Plaintiff, the Court cannot determine whether the statute of limitations has (or has not) run on her fraud claim as a matter of law. Stated somewhat differently, the face of the complaint fails to indicate whether or not Plaintiff filed her action within the two-year statute of limitations. Plaintiff's allegation that she did not discover United Wisconsin's fraudulent conduct until less than two years before the suit was filed, (doc. 1, Exh. A ¶ 17), is insufficient as a matter of law. Cf. LRL Properties v. Portage Metro Hous. Auth., 55 F.3d 1097, 1107 n. 6 (6th Cir. 1995) (stating that it was insufficient for a complaint to allege "nothing more than that they did not become aware of these facts until spring 1991").
In this case, fairness dictates that United Wisconsin should not be required to ponder when Plaintiff discovered the alleged fraud. Therefore, Count III of Plaintiff's complaint is DISMISSED without prejudice. Plaintiff shall be granted leave of Court to file an amended complaint in order to allege, with particularity, facts explaining how and when she discovered the alleged fraud.
2. Count II-Breach of Duty
In further support of its motion to dismiss, United Wisconsin asserts that Plaintiff's claim for breach of duty is barred for the same reason as her fraud claim. Plaintiff does not substantively respond to this argument. She only refers the Court to her motion to strike and argues that reference to evidentiary materials is totally outside the bounds of Rule 12(b)(6).
Under Alabama law, Plaintiffs claim for breach of duty accrues at the same time her fraud claim accrues and is subject to the same two-year statute of limitations. See Casassa v. Liberty Life Ins. Co., 949 F. Supp. 825, 828 n. 5 (M.D. Ala. 1996). Because the Court has dismissed Plaintiffs fraud claim, Count II of Plaintiffs complaint is DISMISSED without prejudice and with leave to amend.
3. Count I-Breach of Contract
Finally, United Wisconsin contends that Plaintiffs claim for breach of contract should be dismissed as to American Medical and Crumpton because they were not parties to the insurance contract. In support of this argument, it cites the Court to Ligon Furniture Co. v. O.M. Hughes Ins., Inc., 551 So.2d 283, 283 (Ala. 1989) and quotes language from the synopsis written by the West editorial staff. While the majority opinion in Ligon does indeed stand for the proposition that summary judgment is proper where the undisputed evidence reveals that certain entities or individuals are not parties to an insurance contract, it does not stand for the proposition that claims against insurance adjustors, insurance agents, or employees of the insurance company, arising out of an insurance contract between the insured and the adjuster's employer, fail to state a valid cause of action. The holding in Ligon merely affirmed a trial court's decision to enter summary judgment. See 551 So.2d at 285-86. It's decision was limited to the evidence presented at the trial level. See id.
United Wisconsin also cited the Court to a copy of Plaintiff's insurance policy. However, the Court did not consider this material.
Even though it is clear on the face of Plaintiff's complaint that Crumpton was dealing with Plaintiff only in her capacity as an insurance agent the Court cannot find as a matter of law that Crumpton was not a party to the insurance contract. It would be highly improper for the Court to make such a determination at this stage in the litigation. Likewise, the Court cannot find that American Medical was not a party to the insurance contract. Accordingly, United Wisconsin's motion to dismiss Count I as it pertains to American Medical and Crumpton is DENIED. Plaintiff should, however, consider whether American Medical and/or Crumpton are proper parties to the insurance contract when filing her amended complaint.
IV. SUMMARY
The Court's ruling in this matter may be summarized as follows, and IT IS HEREBY ORDERED:
1. Plaintiff's motions for extension of time (docs. 6, 10) are DENIED as MOOT.
2. To the extent Defendants have already filed a response to Plaintiff's brief in opposition to Defendants' motion to dismiss class allegations, Plaintiffs brief in opposition to Defendants' motion to dismiss and Plaintiffs motion to strike (docs. 17-19), Defendants' motion for opportunity to respond (doc. 15) is GRANTED. In all other respects, Defendants' motion is DENIED.
3. Plaintiffs motion to strike (doc. 13) is GRANTED.
4. Defendants' motion to dismiss (doc. 3) is GRANTED in part and DENIED in part. Counts II and III are DISMISSED without prejudice. In all other respects, Defendants' motion is DENIED.
5. Plaintiff shall have fourteen (14) days from the date this order is signed to file an amended complaint to correct the defects in pleading against Defendant. Failure to redress these deficiencies as is consistent with section III.B. of the Court's order may result in the striking of the non-corrected portions.