Young v. Liberty Mutual Group Incorporated et al - Document 34

Court Description:

ORDER that Defendant Mike Dumas's Motion to Dismiss (Doc. 5 ) is granted. Signed by Senior Judge James A Teilborg on 3/6/2013.(KMG)

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 No. CV-12-2302-PHX-JAT Dawn Young, Plaintiff, 10 11 v. 12 ORDER Liberty Mutual Group, Inc.; et al., 13 Defendants. 14 15 Pending before the Court is Defendant Mike Dumas’s Motion to Dismiss 16 Plaintiff’s Complaint against him pursuant to Federal Rule of Civil Procedure 12(b)(6). 17 (Doc. 5). 18 I. Background 19 Plaintiff Dawn Young suffered an on-the-job injury and filed a claim with 20 Defendant Liberty Mutual Group, Inc. (“Liberty Mutual”) for worker’s compensation 21 benefits. Defendant Mike Dumas handled Ms. Young’s worker’s compensation claim as 22 Liberty Mutual’s claims adjuster. Although she eventually received at least some of the 23 compensation to which she was entitled, Ms. Young experienced a great deal of difficulty 24 working with Liberty Mutual. 25 Ms. Young brought this action in Arizona state court alleging a breach of the duty 26 of good faith and fair dealing that resulted in wrongfully denied and unreasonably 27 delayed benefit payments. (Doc. 1-1). She named Liberty Mutual and Mike Dumas as 28 defendants, as well as several fictitious John Does and XYZ Corporations. (Id. at 2). Mr. 1 Dumas removed the action to this Court based on diversity of the parties. (Doc. 1). 2 The Complaint alleges three claims for relief. The first claim is alleged only 3 against Liberty Mutual for breach of the duty of good faith and fair dealing. (Doc. 1-1 at 4 8–10). The second claim is alleged only against Mr. Dumas for aiding and abetting 5 Liberty Mutual’s breach of the duty of good faith and fair dealing. (Id. at 10–11). The 6 third claim1 alleges both Defendants are liable for punitive damages. (Id. at 11–12). The 7 Complaint alleges Liberty Mutual is vicariously liable for the acts of its employees or 8 agents such as Mr. Dumas, and that Liberty Mutual is directly liable for a breach of the 9 duty of good faith and fair dealing. (Id. at 3–4). As for Mr. Dumas, the Complaint 10 alleges only that he is “personally liable for his own acts and omissions insofar as he 11 aided and abetted Defendant LIBERTY MUTUAL in its violations of the Arizona 12 Worker’ [sic] Compensation Act and the duties of good faith and fair dealing owed to 13 Ms. Young.” (Id. at 4). The only factual allegations in the Complaint are that an 14 adequate investigation was not conducted and that Ms. Young’s claims for payment were 15 delayed and denied without any reasonable basis. (Id. at 6–7). 16 Mr. Dumas filed the present Rule 12(b)(6) Motion to Dismiss. (Doc. 5). Mr. 17 Dumas argues he should be dismissed from this lawsuit because his actions are the sole 18 basis for Plaintiff’s claims against Liberty Mutual, and he took those actions as Liberty 19 Mutual’s agent. Even if Liberty Mutual breached its duty of good faith and fair dealing 20 via Mr. Dumas’s actions, he argues, one actor performing one set of actions cannot 21 simultaneously form the basis for both primary and secondary liability. In other words, 22 Mr. Dumas argues one cannot aid and abet one’s self. 23 II. Federal Pleading Requirements 24 The Court may dismiss a complaint for failure to state a claim under Federal Rule 25 of Civil Procedure 12(b)(6) for two reasons: (1) lack of a cognizable legal theory; or 26 27 28 1 In the Complaint, the three claims are labeled “First Claim,” “Second Claim,” and “Fourth Claim.” (Doc. 1-1 at 8, 10, 11). Because there are only three claims, the Court will refer to the claim labeled “Fourth Claim” as the third claim. -2- 1 (2) insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police 2 Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To survive a 12(b)(6) motion for failure to 3 state a claim, a complaint must meet the requirements of Federal Rule of Civil Procedure 4 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the claim showing that the 5 pleader is entitled to relief,” so that the defendant has “fair notice of what the . . . claim is 6 and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 7 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). 8 Although a complaint attacked for failure to state a claim does not need detailed 9 factual allegations, the pleader’s obligation to provide the grounds for relief requires 10 “more than labels and conclusions, and a formulaic recitation of the elements of a cause 11 of action will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). Rule 12 8(a)(2) “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief. 13 Without some factual allegation in the complaint, it is hard to see how a claimant could 14 satisfy the requirement of providing not only ‘fair notice’ of the nature of the claim, but 15 also ‘grounds’ on which the claim rests.” Id. (citing 5 C. Wright & A. Miller, Federal 16 Practice and Procedure §1202, pp. 94, 95 (3d ed. 2004)). Thus, Rule 8’s pleading 17 standard demands more than “an unadorned, the-defendant-unlawfully-harmed-me 18 accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 19 555). 20 In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the 21 facts alleged in the complaint in the light most favorable to the drafter of the complaint 22 and the Court must accept all well-pleaded factual allegations as true. See Shwarz v. 23 United States, 234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have 24 to accept as true a legal conclusion couched as a factual allegation. Papasan v. Allain, 25 478 U.S. 265, 286 (1986). 26 III. A Secondary Act is Required to Aid and Abet a Primary Act 27 In her first claim, Plaintiff alleges Liberty Mutual breached its duty of good faith 28 and fair dealing via the actions of Mr. Dumas, who was acting as Liberty Mutual’s claims -3- 1 adjuster. For purposes of this Motion, the Court accepts that allegation as true. Her 2 second claim alleges that Mr. Dumas, in his individual capacity, aided and abetted 3 Liberty Mutual in breaching its duty of good faith and fair dealing to Ms. Young. In 4 order to state a claim against Mr. Dumas, Plaintiff must allege facts sufficient to show 5 that Mr. Dumas, as an individual, met the legal elements of aiding and abetting. 6 As a federal court sitting in diversity, this Court is bound to apply Arizona 7 substantive law. McClaran v. Plastic Indus., 97 F.3d 347, 356 (9th Cir.1996); Kabatoff v. 8 Safeco Ins. Co. of Am., 627 F.2d 207, 209 (9th Cir.1980) (citing Erie R.R. Co. v. 9 Tompkins, 304 U.S. 64, 78 (1938)); Yazzie v. Olney, Levy, Kaplan & Tenner, 593 F.2d 10 100, 103 n. 4 (9th Cir.1979). “Arizona recognizes aiding and abetting as embodied in 11 Restatement [(Second) of Torts] § 876(b), that a person who aids and abets a tortfeasor is 12 himself liable for the resulting harm to a third person.” Wells Fargo Bank v. Ariz. 13 Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 14 23 (Ariz. 2002). In order for there to be harm to a “third person,” there must be at least 15 two tortfeasors. See Restatement (Second) of Torts § 876 cmt. a (1977) (“Whenever two 16 or more persons commit tortious acts in concert, each becomes subject to liability for the 17 acts of the others, as well as for his own acts.”); see also Gibson-Jones v. Berkel & Co. 18 Contractors, Inc., 2008 WL 782568 (N.D. Cal. 2008) (“[A] single actor (as a matter of 19 legal tautology) cannot aid and abet (or conspire with) itself.”). 20 The Complaint alleges two “persons” are tortfeasors: Liberty Mutual and Mr. 21 Dumas. The only factual allegations in the Complaint are that an adequate investigation 22 was not conducted and that Ms. Young’s claims for payment were delayed and denied 23 without any reasonable basis. (Doc. 1-1 at 6–7). Taken as true, these facts could amount 24 to a breach of the duty of good faith and fair dealing, which is a “tortious act.” See 25 Restatement (Second) of Torts § 876 cmt. a. Plaintiff explicitly alleges this tortious act 26 was committed by Liberty Mutual—not by Mr. Dumas. (Doc. 1-1 at 8) (first claim for 27 relief alleged only against Liberty Mutual); (Doc. 11 at 2) (“The only cause of action 28 alleged against Dumas is for aiding and abetting Liberty Mutual’s breach of the duty of -4- 1 good faith and fair dealing.”). In order for Mr. Dumas and Liberty Mutual to have 2 committed “tortious acts in concert,” there must be some factual allegation showing a 3 separate tortious act was committed by Mr. Dumas. Because the Complaint alleges no 4 such facts, Plaintiff has failed to state a claim against Mr. Dumas. 5 In her Response, Plaintiff relies on Morrow v. Boston Mutual Life Insurance 6 Company, CIV. 06-2635PHXSMM, 2007 WL 3287585 (D. Ariz. Nov. 5, 2007), for the 7 proposition that an insurer’s agent may be held liable for aiding and abetting the insurer. 8 Although Morrow supports that proposition, that proposition does not support Plaintiff’s 9 claim against Mr. Dumas. The plaintiff in Morrow was receiving monthly disability 10 payments from his insurer. Id. at *1. The Morrow plaintiff claimed his insurer 11 committed the tort of bad faith by purposefully hiring a biased medical examiner as part 12 of a “claim termination scheme.” Id. The Morrow plaintiff alleged the medical examiner 13 committed the tort of aiding and abetting “by providing a biased and unsubstantiated 14 opinion” of the plaintiff’s health. Id. at *5. Thus, in Morrow, there were two tortious 15 acts alleged: (1) purposefully hiring a biased examiner in bad faith; and (2) aiding and 16 abetting the bad faith by providing a biased and unsubstantiated medical opinion. Each 17 act was alleged against a different defendant. Here, Plaintiff alleges only one tortious act: 18 failing, in bad faith, to conduct an adequate investigation and make timely benefits 19 payments. 20 Plaintiff additionally relies on Warner v. Southwest Desert Images, LLC, 180 P.3d 21 986 (Ariz. Ct. App. 2008), for the proposition that an agent is not excused from 22 responsibility for a tort merely because he is acting on behalf of his employer. Again, 23 that proposition does not support Plaintiff’s claim against Mr. Dumas. In Warner, a pest 24 control company’s employee sprayed chemicals that caused injury to the plaintiff. Id. at 25 991. On summary judgment, the trial court found the employee was negligent and the 26 pest control company was vicariously liable under respondeat superior. Id. The issue of 27 damages went to trial. Before the end of the trial, the trial court entered a directed verdict 28 in favor of the employee on the basis that the company was clearly liable for the -5- 1 employee’s actions. Id. at 991–92. The Arizona Court of Appeals reversed the trial 2 court’s directed verdict against the employee, holding that respondeat superior liability is 3 joint and several. Id. at 992; see Ariz. Rev. Stat. § 12-2506(D)(2); Restatement (Third) of 4 Agency § 7.01 (2006). Unlike respondeat superior, which is a theory of vicarious 5 liability, aiding and abetting is a theory of secondary liability. The Warner plaintiff 6 claimed both the employer and the employee were liable for the employee’s negligence. 7 Plaintiff here claims only Liberty Mutual is liable for breach of the duty of good faith and 8 fair dealing. Plaintiff’s separate aiding and abetting claim against Mr. Dumas requires 9 Plaintiff to allege Mr. Dumas took separate action “in concert” with the actions giving 10 rise to Plaintiff’s claim against Liberty Mutual. Plaintiff alleges no such action. 11 Finally, Plaintiff alleges Liberty Mutual has a “non-delegable duty of good faith 12 and fair dealing,” (Doc. 1-1 at 3–4), and suggests that “under Arizona law it is unlikely 13 that Dumas could commit violations of the duty of good faith and fair dealing.” (Doc. 11 14 at 3) (emphasis in original). It is true that, under Arizona law, an insurance carrier may 15 not “escape liability” by delegating its duty of good faith and fair dealing to another. 16 Walter v. Simmons, 818 P.2d 214, 223 (Ariz. Ct. App. 1991). However, it does not 17 follow that Mr. Dumas must have committed the separate tort of aiding and abetting 18 merely because he was the agent through which Liberty Mutual breached its duty. 19 Indeed, Plaintiff argues that “[w]ithout Dumas’s inadequate investigation and his refusal 20 to make the required payments, Liberty Mutual would not have” committed a tort against 21 Plaintiff. (Doc. 11 at 4). Thus, under Arizona law, Mr. Dumas and Liberty Mutual were 22 acting as a single legal entity. See, e.g., Perry v. Apache Junction Elementary Sch. Dist. 23 No. 43 Bd. of Trustees, 514 P.2d 514, 517 (Ariz. Ct. App. 1973) (“[A]gents and 24 employees of a corporation cannot conspire with their corporate principal or employer 25 when acting in their official capacities on behalf of the corporation and not as individuals 26 for their individual advantage.”). Accordingly, because Plaintiff has failed to allege Mr. 27 Dumas took any actions in his individual capacity “in concert” with the actions giving 28 rise to Plaintiff’s claim against Liberty Mutual, her aiding and abetting claim against Mr. -6- 1 Dumas will be dismissed. 2 Alternatively, Plaintiff has failed to allege facts sufficient to satisfy the elements 3 of aiding and abetting. In Arizona, “a person who aids and abets a tortfeasor is himself 4 liable for the resulting harm to a third person” when three elements are met: (1) the 5 primary tortfeasor commits a tort that causes injury to the plaintiff; (2) the defendant 6 knows that the primary tortfeasor’s conduct constitutes a breach of duty; and (3) the 7 defendant substantially assists or encourages the primary tortfeasor in the achievement of 8 the breach. Wells Fargo, 38 P.3d at 23. Because Plaintiff’s claim for breach of the duty 9 of good faith and fair dealing is based entirely on Mr. Dumas’s conduct—not Liberty 10 Mutual’s—Mr. Dumas could not have known that the primary tortfeasor’s conduct 11 constituted a breach of duty. Mr. Dumas could not have known about conduct that did 12 not exist. 13 IV. Punitive Damages Require an Underlying Tort 14 Plaintiff alleges Liberty Mutual and Mr. Dumas are liable for punitive damages. 15 (Doc. 1-1 at 11–12). Mr. Dumas argues that he cannot be liable for punitive damages if, 16 as the Court has found, Plaintiff has not adequately alleged a tort against him. (Doc. 5 at 17 6–7). Plaintiff does not dispute this contention. 18 In Arizona, “before a jury may award punitive damages there must be evidence of 19 an ‘evil mind’ and aggravated and outrageous conduct.” Linthicum v. Nationwide Life 20 Ins. Co., 723 P.2d 675, 680 (Ariz. 1986). 21 “‘something more’ than the conduct necessary to establish the tort.” Rawlings v. 22 Apodaca, 726 P.2d 565, 577 (Ariz. 1986). Here, the only “conduct” alleged is against 23 Liberty Mutual. Mr. Dumas cannot be liable for punitive damages unless he committed 24 an underlying tort. Because Plaintiff has not adequately alleged a tort against Mr. 25 Dumas, her claim for punitive damages against him must be dismissed as well. 26 V. 27 /// 28 /// Conclusion -7- Punitive damages require evidence of 1 Based on the foregoing, 2 IT IS ORDERED that Defendant Mike Dumas’s Motion to Dismiss (Doc. 5) is 3 4 granted. Dated this 6th day of March, 2013. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8-