United States Court of Appeals

For the Eighth Circuit

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No. 15-1475

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Michael Adams, on behalf of themselves and all others similarly situated; Colleen

Adams, on behalf of themselves and all others similarly situated

lllllllllllllllllllll Plaintiffs - Appellants

v.

American Family Mutual Insurance Company

lllllllllllllllllllll Defendant - Appellee

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Appeal from United States District Court 

for the Southern District of Iowa - Des Moines

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 Submitted: January 12, 2016

 Filed: February 24, 2016

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Before MURPHY, SMITH, and BENTON, Circuit Judges.

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MURPHY, Circuit Judge.

Michael and Colleen Adams owned a homeowners insurance policy issued by

American Family Mutual Insurance Company (American Family) at the time a pipe

burst in their home. The Adams couple (the Adams) believed that American Family

had not reimbursed them for all of the damage to their home, and they invoked their

right to appraisal under Iowa law. American Family did not participate in the
appraisal process, claiming that its policy did not allow for appraisals. The Adams

initially filed a state court petition seeking damages from American Family for their

individual claims, but later amended the petition to state a class action. American

Family then removed the class action to federal district court and moved to dismiss. 

After the district court granted American Family's motion and dismissed the case, the

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Adams moved to amend their complaint to reassert their individual claims. The

district court denied the motion to amend. The Adams appeal, and we affirm.

I.

At the time a pipe burst in their home, the Adams owned an American Family

homeowners insurance policy. American Family paid them for their structural

damage pursuant to the policy. After the Adams received this payment, they

discovered additional damage to their home and American Family refused to consider

the additional losses. The Adams attempted to invoke their right to appraisal under

Iowa Code § 515.109, but were informed by American Family that their contract only

provided for arbitration, not appraisal. 

The Adams then brought this claim against American Family in the Iowa

District Court for Polk County. Initially they alleged that American Family had

breached its duty of good faith, as well as their homeowners insurance contract, by

refusing to pay for the additional damage and by not participating in an appraisal

process. They sought punitive damages and a declaration that they had a right to

appraisal for their additional losses. The Adams later amended their petition to plead

a class action composed of all American Family insureds who had submitted claims

for benefits under insurance policies which had binding arbitration clauses, whether

for their homes, farms, or ranches. The class action petition sought a declaratory

The Honorable Robert W. Pratt, United States District Judge for the Southern 1

District of Iowa.

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judgment that American Family had illegally deprived the class members of their

statutory rights to appraisal under Iowa Code § 515.109 and breached its duty of good

faith. They also sought an injunction requiring American Family to advise all class

members of their right to appraisal. After the state district court certified the class,

American Family removed the lawsuit to federal court under the Class Action

Fairness Act, 28 U.S.C. § 1332(d). 

American Family moved to dismiss, arguing that the class claims for

declaratory and injunctive relief did not state claims because Iowa's appraisal statute

does not create a private right of action. The Adams responded that these claims were

premised on American Family's breach of the "conformity clause" in its homeowner

contracts, not on a direct violation of Iowa's appraisal statute. The policy's

conformity clause provides that if any part of a policy were found contrary to Iowa

law, American Family agrees "to alter that part of [the] policy and make it conform

with state law." The Adams argued that since the contract did not allow for

appraisals, it did not conform with state law so the right to appraisal had to be

inserted into the policy. When American Family did not honor the Adams' right to

appraisal, it thus breached the contract. 

The district court rejected this argument, concluding that the plaintiffs had

simply requested the court to find that American Family had violated Iowa's appraisal

statute, a statute which does not provide for a private right of action. The court

alternatively noted that the conformity clause had not been pled in the amended class

petition and concluded that this theory did not create a "case or controversy"

appropriate for resolution under the Declaratory Judgment Act, 28 U.S.C. § 2201. 

The Adams' declaratory judgment was dismissed as well as their request for an

injunction. The court also dismissed the bad faith claim because the Adams had not

alleged that American Family denied any of the class members' claims, a prerequisite

for a bad faith claim in Iowa. 

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After the district court dismissed all of the Adams' class action claims, the

court permitted them to file a Rule 15(a)(2) motion for leave to file an amended

petition. Their proposed second amended petition alleged a breach of contract claim

based upon American Family's failure to pay for the additional damage done to the

their home and a bad faith claim seeking damages for American Family's failure to

investigate, adjust, and pay for the additional losses. The district court denied the

motion, concluding that the new petition merely attempted to resurrect the individual

claims the Adams had initially asserted in state court and that such an amendment

would substantially prejudice American Family. The Adams appeal the dismissal of

their action and the denial of their motion to amend. 

II.

We review de novo a district court's grant of a motion to dismiss. Cormack v.

Settle-Beshears, 474 F.3d 528, 531 (8th Cir. 2007). On appeal the Adams' sole theory

of class liability is that American Family breached the "conformity clause" in the

insurance policies held by the class members. American Family argues that this

theory of liability was not pled in the amended class action petition and therefore was

properly dismissed. A theory of liability that is not alleged or even suggested in the

complaint would not put a defendant on fair notice and should be dismissed. See

Gomez v. Wells Fargo Bank, N.A., 676 F.3d 655, 665 (8th Cir. 2012). In order to

state a claim, a pleading must contain "a short and plain statement of the claim

showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The pleading

"must provide the defendant with fair notice of what the plaintiff's claim is and the

grounds upon which it rests." Gomez, 676 F.3d at 665 (internal quotations omitted). 

The conformity clause was never mentioned in the Adams' class action

petition. Instead, their petition alleged that American Family had illegally deprived

the class members of their statutory right to appraisal and sought a declaration from

the district court that the company had violated Iowa Code § 515.109. As the district

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court correctly noted, the first time the Adams brought up a breach of contract theory

of liability based on the conformity clause wasin their brief in resistance to American

Family's motion to dismiss. Since the Adams had failed to plead sufficient facts to

provide American Family with fair notice of this theory, the district court did not err

in dismissing that claim. See Gomez, 676 F.3d at 665. 

III.

We review the district court's denial of the Adams' motion to amend their

petition for abuse of discretion. See Briehl v. Gen. Motors Corp., 172 F.3d 623, 629

(8th Cir. 1999). A district court does not abuse its discretion when it denies plaintiffs

"leave to amend the pleadings to change the theory of their case after the complaint

has been dismissed under Rule 12(b)(6)." Id. at 629. The Adams argue that their

motion to amend did not change their theory of the case because "throughout the

course of this litigation . . . the Adamses' claim is, and always has been, a claim for

monetary damages." This argument is without merit. 

The Adams' motion to amend sought to change their theory of the case because

the class action petition had challenged the contents of all American Family insurance

policiesin a declaratory judgment pleading while the proposed second amended petition

claimed that American Family breached the contents of the insurance contract.

Additionally, the class action petition sought a class wide injunction, not individual

damages, while the proposed second amended petition sought individual damages

instead of a class wide injunction. The district courttherefore did not abuse its discretion

because the Adams' sought to change their theory of liability after their class action

petition had been dismissed.

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IV.

For these reasons we affirm the orders of the district court.

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