Source: http://wakeforestlawreview.com/tag/tort/
Timestamp: 2019-04-22 00:27:09+00:00

Document:
In an opinion for the civil case, Marks v. Scottsdale Ins. Co., published June 29, 2015, the Fourth Circuit Court of Appeals held that a general liability insurer for a hunt club had no duty to indemnify or defend a club member who accidentally shot a passing driver while hunting on land the club leased.
Plaintiff Timothy B. Johnson (“Johnson”), a member of the Northumberland Hunt Club (“Hunt Club” or “Club”) was hunting deer on land leased by the Club when he took a shot that traveled towards an adjacent public highway. Pellets from Johnson’s gun struck Plaintiff-Appellant Danny Ray Marks, Jr. (“Marks”) in the head as he was driving. Marks filed a negligence claim against Johnson in Virginia state court, alleging that because Johnson was experienced with firearms and the location, he should have known his actions posed a risk to drivers on the highway. Marks also filed a negligence claim against the Hunt Club, alleging they failed to promulgate rules to protect the public. In a second complaint filed in Virginia state court, Marks sought a declaration that the Hunt Club’s insurer, Scottsdale Insurance Company (“Scottsdale”) had a duty to indemnify and defend Johnson due to an endorsement provision in the Club’s insurance policy. Scottsdale removed to federal court based on diversity jurisdiction and filed a counterclaim seeking an endorsement stating it does not have a duty to indemnify or defend Johnson. Johnson joined the district court litigation and the parties agreed to have a magistrate adjudicate the matter. On cross motions for summary judgment, the magistrate held that Scottsdale did not owe a duty to indemnify or defend Johnson, and granted Scottsdale’s motion.
To determine whether Johnson was an “insured” under the policy’s endorsement, the Court looked to the plain meaning of the language. Under Virginia common law, ambiguous policy language is to be construed against the insurer. However, a term is only deemed ambiguous if it is “capable of more than one reasonable meaning.” An insurer only owes a duty to indemnify and defend if the allegations in the complaint come within the scope of the policy’s coverage.
The Court analyzed the language of the two clauses in the endorsement to determine the scope the coverage. The first clause insured “any of [the Club’s] members, but only with respect to [member] liability for the Club’s activities.” Johnson argued that the language was clear, and that his actions were covered under this clause because he was hunting at the time of the incident and hunting is one of the Club’s activities. In the alternative, he argued that the language was ambiguous and should be construed in his favor. The Court disagreed, reasoning that the language was clear, and that this clause “restricts coverage to situations involving a member’s alleged vicarious liability for the activities of the Club as an entity, not for torts allegedly committed by members during a Club activity.
Johnson conceded that the second clause in the endorsement, covering “activities [members] perform on [the Club’s] behalf,” did not apply to him in this situation.
The Court reasoned that Johnson’s proposed interpretation of the first clause was flawed when the language of the endorsement was examined as a whole. The court determined that the first clause covered actions taken by the Club that a member might be held vicariously liable for, and the second clause covered actions taken by an individual on behalf of the Club. However, under Johnson’s interpretation, the second clause becomes redundant because all member actions in connection with the Club would be covered under the first clause.
Once the scope of coverage was established, the court looked to Marks’s complaint to determine if the allegations against Johnson came within the scope of the policy’s coverage. The court reasoned that because the complaint only alleged that Johnson was a member of the club and on land leased by the club when he shot Marks, the complaint rested only on “the recreational pursuits indulged in by members,” not on Johnson’s vicarious liability for the Club’s activities.
Because Scottsdale was not be liable for any of the allegations against Johnson in the complaint, Scottsdale did not have a duty to indemnify or defend Johnson. The Court affirmed the judgment of the magistrate judge.
In the civil case of Dan Ryan Builders, Inc. v. Crystal Ridge Development, Inc., Plaintiff, Dan Ryan Builders Inc., (“Ryan”) appealed the decision of the US District Court for the Northern District of West Virginia and sought additional damages from Defendant, Lang Brother’s Inc. (“Lang”). The Fourth Circuit affirmed the decision of the district court, finding that the “gist of the action” doctrine was properly applied and Plaintiff was not entitled to additional damages. The case was argued on December 10, 2014, and the decision was released on April 20, 2015.
The events of this case took place in West Virginia. Lang sought to build a housing development, Crystal Ridge, on a seventy acre tract of land. In 2005, pursuant to a Lot Purchase Agreement (“LPA”), Lang subdivided the land and contracted to sell all 143 lots to Ryan, a Maryland corporation. The LPA detailed the responsibilities of each party. The parties also entered into a number of other written contracts, including a contract to do a “fill of slope.” Lang was responsible for all of the infrastructure, including the fill slope, which was done by an independent contractor. In March 2007, cracks appeared in the basement slab and the foundation walls of a partially constructed house. Ryan contracted an engineering firm to fix the issue – but the relationship between Lang and Ryan had soured after the incident and the parties “divorced.” In December 2007, the slope behind the lot that had exhibited cracks in the foundation began sliding downhill towards a nearby highway. A geotechnical study concluded that the slope had failed due to its natural composition as well as poor construction. Ryan also experienced other difficulties with the development, including the storm water management system, the development permits, and the entrance drive.
In December 2009, Ryan filed a lawsuit against Lang seeking monetary damages. Ryan asserted three causes of action. First, negligence on the part of Lang in connection to the construction of the fill slope. Second, a breach of several contractual duties stated in the LPA and a subsequent amendment to the LPA made after the parties had “divorced.” Third, fraudulent misrepresentation. The third and final cause of action was abandoned at trial. The court held a five-day bench trial and awarded Ryan $175,646.25 in damages and $77,575.50 in pre-judgment interest for breach of contract with respect to repairs of the road leading to Crystal Ridge. Ryan failed to carry its burden of proof with other asserted breaches, including the entrance easement, storm water management, and the erosion control system. Lastly, the court rejected Ryan’s negligence claim because it failed under West Virginia’s “gist of the action” doctrine, which bars recovery in tort when the duty that forms the basis of the asserted tort claim arises solely from a contractual relationship. It requires plaintiffs seeking relief in tort to identify a non-contractual duty breached by the alleged tortfeasor. Ryan appealed.
The Fourth Circuit used a mixed standard of review following a bench trial. Factual findings may only be reversed if clearly erroneous. Conclusions of law, including contract construction, are examined de novo.
Ryan offers two reasons why the district court erred in the “gist of action” holding. The court considered both of them separately.
Ryan contends that the “principles of party presentation” ought to have prevented the district court from relying on the “gist of the action” doctrine. The party presentation principle cautions a federal court to consider only the claims and contentions raised by the litigants before it – and neither Ryan nor Lang raised the “gist of action” doctrine in district court. The Fourth Circuit rejected this argument, stating that a party’s failure to identify the applicable legal rule does not diminish a court’s responsibility to apply that rule. Additionally, the Supreme Court has long recognized that “a court may consider an issue ‘antecedent’ to … and ultimately ‘dispositive of’ the dispute before it, even an issue the parties fail to identify and brief.” U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc. 508 U.S. 439, 447 (1993). Here, the “gist of the action” doctrine is just such an “antecedent” and “dispositive” issue since it goes to the duty element of any West Virginia tort claim. Therefore, Ryan’s contention that the party presentation principle barred the district court is rejected.
The Fourth Circuit found that the district court did not err in its application of the “gist of the action” doctrine. Because Ryan’s tort claim rests on Lang’s asserted negligence in performing the two contracts, the LPA and its Amendment, and not on any duty independent of those contracts, the “gist of action” doctrine bars the claim. The Fourth Circuit found that this is precisely the type of simple breach of contract claim that is masqueraded as a tort claim. Therefore, the court found that Ryan’s negligence claim fails as a matter of law.
Alternatively, Ryan sought damages under claims he had not alleged at the district court level. Specifically, he alleges that he should have been awarded damages for the “fill of slope” contract. The Fourth Circuit found that the district court is not responsible for searching through the case in pursuit of potential basis for awarding relief. In fact, The Fourth Circuit stated that the district court did an excellent job of identifying Ryan’s meritorious claims.
The Fourth Circuit affirmed the decision of the district court. The Fourth Circuit did not agree with Ryan on either of his two arguments about the district court’s application of the “gist of the action” doctrine. Additionally, the Fourth Circuit rejected Ryan’s contention that he should have been awarded damages for the “fill of slope” contract. Arguing that Ryan should have been able to recover for the “fill of slope” contract, Circuit Judge Gregory dissented in part.
On March 25, the Fourth Circuit released a published opinion in the civil case of Johnson v. American Towers, LLC. In its decision, the court affirmed a ruling from the District of South Carolina, declaring that court had properly determined it had jurisdiction over the matter on multiple grounds and had also properly dismissed the claim on the merits.
Plaintiff Robert Johnson worked as a prison guard. He was attacked in his home and shot six times. He survived the attack, and a subsequent investigation revealed that the attack was ordered by an inmate at the prison where he worked, using a contraband cell phone.
The Johnsons sued several cellular phone service providers and owners of cell phone towers (including American Towers), seeking to recover under state law negligence and loss of consortium theories. The defendants fell into two groups: wireless service providers and owners of cellular towers. According to the Johnsons, these defendants were liable for Mr. Johnson’s injuries because they were aware that their services facilitated the illegal use of cellphones by prison inmates and yet failed to take steps to curb that use.
The defendants removed the case to federal court, citing federal question jurisdiction under 28 U.S.C. § 1331 and complete diversity under 28 U.S.C. § 1332. The Johnsons moved to remand to state court, and the District of South Carolina denied the motion on two grounds: (1) that federal question jurisdiction existed because the Federal Communications Act preempted their state law claims, and (2) that diversity jurisdiction existed because the only non-diverse defendants were fraudulently joined and the amount in controversy exceeded $75,000.
The defendants subsequently moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(6). The District Court granted the motion on three grounds: (1) that the Johnsons’ claims were barred by express and conflict preemption; (2) South Carolina law did not impose a duty on the defendants to prevent inmates from illegally using their cell phone services; and (3) the Johnsons’ claims were implausible and so did not meet pleading standards. The Johnsons appealed to the Fourth Circuit.
The plaintiffs brought forth two issues the Fourth Circuit considered on appeal.
First, they asked if the District Court had erred in concluding it had federal jurisdiction over the Johnsons’ state law claims. If the Fourth Circuit found federal jurisdiction was proper, they further argued the District Court had improperly dismissed the plaintiffs’ claims on the merits.
The District Court had found federal question jurisdiction existed because the plaintiffs’ state law claims were preempted by the Federal Communications Act. On appeal, the Fourth Circuit noted that this “complete preemption” is rare, and indeed there is a presumption against such preemption. The presumption exists because, in the court’s view, the principles of federalism dictate the judiciary should be careful to not draw an inference that Congressional actions are intended to wipe out wide swaths of state law (at least without some explicit statement as such from Congress).
While the court said the language of the Federal Communications Act constituted “ordinary preemption” it also noted that was not sufficient to create federal subject matter jurisdiction. Only complete preemption can do so. For complete preemption to exist, the preempting statute must provide the exclusive cause of action for claims in the area the statute preempts.
The Fourth Circuit said the Federal Communications Act does not provide the exclusive cause of action in this area, since that statute only permits recovery against common carriers, and the tower owners are not considered common carriers (since they do not provide wireless service). Even though the wireless providers can be sued under the Federal Communications Act, the court noted there was nothing in the Act that indicated Congress intended it to be the exclusive remedy for state law claims against such providers. Indeed, the language of the Act suggests the opposite — that it was not intended to supplant common law and state law remedies.
With respect to diversity jurisdiction, the Johnsons’ original complaint had named two non-diverse defendants. However, under the “fraudulent joinder doctrine” the District Court was free to remove those defendants and retain jurisdiction over the case. But to do so, there must be a showing that there could not be a claim against the defendants in question even if all questions of law and fact were resolved in plaintiffs’ favor. The standard is obviously plaintiff friendly — if even a “glimmer of hope” of recovery against the defendant at issue is found, it cannot be removed.
But these defendants met that lofty standard. One did not operate towers in the area of South Carolina in question, and so it could not have been found liable for any damages to Mr. Johnson. With regard to the other non-diverse defendant, the Fourth Circuit found that the Federal Communications Act preempted the Johnsons’ claims against it. Thus, it was also removed properly, and diversity jurisdiction was proper.
On three different grounds, the Fourth Circuit agreed with the decision of the District Court to dismiss the Johnsons’ claims.
First, it found that the Communications Act’s express language preempted the Johnson’s claims. The court indicated that the existence of a common law tort duty would obstruct or burden a wireless service provider’s ability to provide coverage. The providers would have to actively monitor their networks to prevent calls coming from inside South Carolina prisons, which would limit their ability to offer wireless service in those areas.
Second, it found the Johnsons’ claims were barred by conflict preemption. Conflict preemption applies to state law “when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” The court found that a state law obligation to block calls from inside South Carolina prisons would conflict with parts of the Communications Act which bar actions to block cell phone signals. The provision in question says that no person shall interfere with any radio communications, including his or her own. Thus, a state law obligation to block the signals inside of prisons would directly conflict with the federal law, making compliance with both impossible.
Finally, it found the Johnsons’ claims were implausible. The court indicated the allegations were “speculative” in nature. The Johnsons’ complaint merely asserted that “an inmate at the prison using a cellphone ordered a coconspirator outside of the prison to kill Captain Johnson.” The Fourth Circuit said the Johnsons failed to offer any further facts to support their claims. Their complaint did not identify the wireless service provider who carried the alleged call, or even when the alleged call occurred. Without more factual allegations, the Fourth Circuit said it would be impossible for a district court to assess the Johnsons’ claims.
Today, in Beyond Systems, Inc. v. Kraft Foods, Inc., the Fourth Circuit held in a published decision that the established tort doctrine of volenti non fit injuria (“to a willing person it is not a wrong”) applies to internet service providers (an “ISP”) who set “spam traps” solely for the purpose of raising claims against those who send certain types of spam e-mails. The appellate court affirmed the decision of the District of Maryland in this civil case.
Defendant Kraft Foods argued successfully at the District Court level that the claims of plaintiff Beyond Systems and third-party plaintiff Hypertouch were barred because the plaintiffs’ actions before the filing of the action constituted consent. The plaintiffs appealed this issue in the hopes of receiving a new trial, since the District of Maryland never so much as reached the question of damages in this tort action.
Spam e-mail became an issue in the 1990s and 2000s, and 35 states responded by 2004 in passing legislation providing for a private right of action for ISPs for violations of provisions related to the sending of spam.
The plaintiff in this case, Beyond Systems, is a Maryland-based corporation which used certain tactics referred to as “spam traps.” In the code of various web sites, it hid e-mail addresses in a way that could not be seen by the typical end user, but instead were only visible to “spam crawlers” (programs which are used by spammers to look for e-mail addresses and subscribe them to e-mail lists). Beyond Systems did nothing to filter or block spam e-mails on the accounts in question, and actually increased its storage capacity to archive these e-mails and retain them for use in litigation.
The third-party plaintiff, Hypertouch, is a California-based corporation owned by the brother of the owner of Beyond Systems. It had engaged in similar tactics and sued Kraft Foods in 2005 over certain e-mails. The claim resulted in a settlement, which provided in part that Hypertouch agreed to cooperate with Kraft in identifying future e-mails that may violate California law. Such lawsuits were big business for both companies, accounting for 90 percent of Beyond Systems’ income in recent years.
In 2008, Beyond Systems sued Kraft and another company, Connexus, in the District of Maryland, bringing both Maryland and California state law claims. Many of the e-mails in question were the same ones that formed the basis for the Hypertouch suit in 2005. Partial summary judgment was granted on e-mails that had been part of the Hypertouch suit, e-mails in which Hypertouch did not notify Kraft of the violations in accordance with the settlement agreement, and (because of the applicable statute of limitations) e-mails which were sent more than one year before the suit.
The District Court bifurcated the trial into a “liability” proceeding and a “damages” proceeding. There were two phases to the liability proceeding: in the first, the court had to determine if Beyond Systems met the Maryland state law standard for being classified as an ISP; in the second, it then had to determine if it was a “bona fide” ISP. The jury found that Beyond Systems met the state law standard, but said because of its litigation activities and relationship to Hypertouch, it was not a “bona fide” ISP. It held that Beyond Systems had invited its own injury and was thus barred from recovery.
While the cause of action in this case is derived from state statutes, it is rooted deeply in the tort law tradition. Thus, common law rules are applicable in such cases. The Fourth Circuit held, accordingly, that the common law principle that one cannot recover damages flowing from conduct he consents to barred Beyond Systems from any recovery in this case. The appellate court agreed with the trial court that the actions of Beyond Systems constituted consent.
The Fourth Circuit held that in this case, there was “overwhelming” evidence that Beyond Systems consented to the harm it claims it suffered. It created fake e-mail addresses solely to gather spam, embedded those e-mail addresses in web sites in a way in which they could only be discovered by “spam crawler” programs, and even increased storage capacity to hold more spam e-mails.
The Fourth Circuit agreed with the District Court that Beyond Systems had consented to receive the spam e-mails in question in this case, and thus it was barred from any potential recovery.
In Wu Tien Li-Shou v. United States, a published civil opinion released on January 23rd, the Fourth Circuit considered whether the intentional sinking of a fishing boat and the accidental killing of its owner presents a justiciable claim. Wu Tien Li-Shou (Wu), a citizen of Taiwan, seeks damages from the United States for the killing of her husband and the destruction of his ship.
Since the summer of 2009, the North Atlantic Treaty Organization (NATO) has conducted Operation Ocean Shield in the Gulf of Aden and the Indian Ocean in response to the threat posed by Somali-based piracy on global shipping. On May 10, 2011, as part of Ocean Shield, the USS Groves engaged the Jin Chun Tsai (JCT), a Taiwanese fishing ship. More than a year earlier, the ship had been hijacked by Somali pirates who used the skiffs stored on board to launch attacks. More than two dozen pirates held three crew members hostage including the master and owner of the ship, Wu Lai-Yu (Master Wu). After almost an hour of firing on the JCT, the pirates indicated their surrender and a special team from the USS Groves boarded the ship. The team found three pirates dead along with Master Wu in his sleeping quarters “with the crown of his head shot off.” The next day that USS Groves intentionally sunk the JCT with Master Wu’s body on board.
The Fourth Circuit found that Wu’s suit presented a political question because it would require the court to intervene in the middle of a “sensitive multinational counter-piracy operation” and to “second-guess the conduct of a military engagement.” It claimed, “Wu would have us sit astride the top of the command pyramid and decree the proper counter-piracy strategies and tactics to the NATO and American commanders below.” The court declared that such an action would violate the doctrine of separation of powers by demanding the judicial branch intervene in a dispute which is best suited for resolution by a coordinate branch of government. Furthermore, it stated that matters of national security and defense are the most clearly marked areas for judicial deference.
Last Thursday, January 8th, in Weidman v. Exxon Mobil Corp., the Fourth Circuit affirmed the district court’s denial of Plaintiff’s motion to remand and also affirmed the dismissal of all but one of his tort claims. Because the dismissal of one of Plaintiff’s claims was reversed, the Circuit Court remanded the case for further proceedings.
In March 2013, Weidman filed suit against his former employer, ExxonMobil, and ten ExxonMobil employees. Plaintiff alleged that the Medical Department of ExxonMobil committed violations of the law by operating illegal pharmacies and illegally stockpiling large quantities of medication. He further alleged that after he reported the violations to ExxonMobil, an employee of the Medical Department initiated a campaign of retaliation against him. After reporting his colleague’s conduct, Plaintiff stated that ExxonMobil conducted a “sham” investigation concluding that Weidman had not been harassed and that the pharmacies were legal. During a second investigation, Plaintiff reported that one of the investigators admitted to him that ExxonMobil had been operating an illegal pharmacies for years.
Plaintiff then alleged that he was required to participate in a performance improvement plan, which lasted for over a year. Plaintiff contended that the purpose of the meetings was not to improve his performance, but to overburden him with the creation of new tasks meant to cause his failure to perform. He stated that during one of these performance meetings on October 24, 2012, he suffered a heart attack which was a direct result of the stress maliciously inflicted upon him. In mid-December 2012, ExxonMobil extended Plaintiff’s performance plan. ExxonMobil subsequently terminated Weidman’s employment at his next meeting in January 2013 for failing to cooperate with the plan.
Weidman then filed suit asserting four causes of action: (1) fraud based on Appellees alleged retaliation against him despite contrary assurance in the employee handbook and the CEO’s yearly videos; (2) intentional infliction of emotional distress; (3) personal injury based on damage to his heart; and (4) wrongful discharge. Defendant removed the case to the Eastern District of Virginia and moved to dismiss the case. Plaintiff moved to remand the case to state court. The district court dismissed all of Plaintiff’s claims and denied his motion to remand.
The district court denied Plaintiff’s motion to remand based on the “fraudulent joinder” doctrine, despite the fact that Weidman had named three non-diverse defendants in his complaint. The fraudulent joinder doctrine provides that diversity jurisdiction is not automatically defeated by naming non-diverse defendants. The district court may retain jurisdiction if the non-moving party shows that the plaintiff committed outright fraud in pleading jurisdictional facts, or that “there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.” Mayes v. Rapoport, 198 F.3d 457, 464 (4th Cir. 1999). The Fourth Circuit agreed that Weidman’s claims against the non-diverse defendants had no possibility of succeeding, and thus affirmed the district court’s denial of Weidman’s motion to remand.
The Circuit Court then performed a de novo review of the district court’s dismissal for failure to state a claim. According to Bell Atl. Corp. v. Twombly, a complaint “must contain sufficient facts to state a claim that is plausible on its face.” The Fourth Circuit held that Weidman failed to sufficiently plead his fraud claim by making vague referrals to statements from ExxonMobil’s CEO and members of the Human Resources Department. Moreover, the facts stated in his claim for intentional infliction of emotional distress did not reach the level of “outrageous and intolerable” conduct, and was therefore properly dismissed. The claim for personal injury was also properly dismissed because it only stated a “naked assertion devoid of further factual enhancement,” and thus failed to meet the requirement laid out in Ashcroft v. Iqbal.
Thus, the Fourth Circuit reversed the dismissal of Weidman’s wrongful discharge claim against ExxonMobil and remanded the case for further proceedings.

References: v. 
 v. 
 v. 
 v. 
 § 1331
 § 1332
 v. 
 v. 
 v. 
 v. 
 v. 
 v.