Court Opinion

ID: 6317837
Source: CourtListenerOpinion
Date Created: 2022-02-26 01:00:30.059002+00
Date Added: 2024-06-11T09:01:33.229162
License: Public Domain

Case: 20-10940     Document: 00516218557         Page: 1     Date Filed: 02/25/2022

              United States Court of Appeals
                   for the Fifth Circuit
                                                                      United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                      February 25, 2022
                                  No. 20-10940                          Lyle W. Cayce
                                                                             Clerk

   Charles Howley,

                                                           Plaintiff—Appellant,

                                       versus

   Bankers Standard Insurance Company,

                                                           Defendant—Appellee.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                            USDC No. 3:19-cv-2477

   Before Smith, Elrod, and Oldham, Circuit Judges.
   Per Curiam:*
          Charles Howley filed a claim with his insurance company, and the
   insurer denied the claim. Howley sued. The allegations in Howley’s
   complaint failed Rule 12(b)(6) muster. So the district court granted the
   insurer’s motion to dismiss. We affirm.

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-10940      Document: 00516218557           Page: 2     Date Filed: 02/25/2022

                                     No. 20-10940

                                           I.
           Our summary of the facts is based on Howley’s complaint. Charles
   Howley bought an insurance policy from Bankers Standard Insurance
   Company (“Bankers”) to cover his Dallas home. The policy was a
   “replacement cost policy,” meaning the coverage was designed to cover
   “the cost of a substitute asset that is equivalent to [the] asset currently held.”
   See Ferguson v. State Farm Ins. Co., 2007 WL 1378507, at *1 (E.D. La. May 9,
   2007) (alteration omitted). In June of 2019, a severe storm damaged the
   insured home. Howley filed a claim with Bankers.
          The complaint is unclear about what happened next. At the very least,
   it seems that Bankers sent a claims adjuster to investigate. The complaint
   says the adjuster told Howley the damage was not caused by the storm and
   gave Howley a “lowball offer.” But it also says the adjuster “closed” and
   “denied” the claim without diligent investigation. In still another place, the
   complaint says Bankers “breached the contract by denying or underpaying
   the claim.” The complaint contains a smattering of other allegations, which
   we address in more detail below.
          Howley sued in Texas state court, and Bankers removed to the
   Northern District of Texas. Howley v. Bankers Standard Ins. Co., 2020 WL
   4731968, at *1 (N.D. Tex. Aug. 14, 2020). After Bankers moved to dismiss
   under Federal Rule of Civil Procedure 12(b)(6), Howley amended his
   complaint. Id. The amended complaint brought six claims. See id. Bankers
   again moved to dismiss. The district court granted that motion, dismissing
   all claims with prejudice. Id. Howley appealed.
          Howley now contests the district court’s dismissal of four of six
   claims—each of which arises under Texas law. They are: (1) breach of
   contract; (2) breach of the common-law duty of good faith and fair dealing;

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   (3) breach of the Texas Prompt Payment of Claims Act (“PPCA”); and
   (4) fraud. Id.
                                           II.
          We begin by assessing our own jurisdiction. Then we lay out the
   applicable pleading standards and apply them to the four claims at issue.
   Then we conclude. Howley’s complaint omits key factual allegations, and it
   is full of naked legal conclusions. In short, it fails “to state a claim upon which
   relief can be granted.” Fed. R. Civ. P. 12(b)(6).
                                           A.
          At the motion-to-dismiss stage, “[t]he party asserting diversity
   jurisdiction must distinctly and affirmatively allege the citizenship of the
   parties.” Smith v. Toyota Motor Corp., 978 F.3d 280, 282 (5th Cir. 2020)
   (quotations omitted). For corporations, that requires setting out “the
   principal place of business of the corporation as well as the state of its
   incorporation.” Id. (quotation omitted). For individuals, it means alleging
   domicile. See, e.g., Midcap Media Fin., LLC v. Pathway Data, Inc., 929 F.3d
   310, 313 (5th Cir. 2019) (“For individuals, citizenship has the same meaning
   as domicile.” (quotation omitted)).
          Bankers’ notice of removal satisfied both requirements. It alleged
   Howley is domiciled at a specific Texas address. And it alleged Bankers is
   incorporated in Pennsylvania and has its principal place of business there.
   Because the amount in controversy is more than $75,000, see 28 U.S.C.
   § 1332(a), the district court had diversity jurisdiction. And we have
   jurisdiction under 28 U.S.C. § 1291 to review its final order dismissing the
   complaint. See, e.g., Rollerson v. Brazos River Harbor Navigation Dist., 6 F.4th
   633, 638 (5th Cir. 2021).

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                                    No. 20-10940

                                         B.
          When a district court grants a Rule 12(b)(6) motion to dismiss, our
   review is de novo. Heinze v. Tesco Corp., 971 F.3d 475, 479 (5th Cir. 2020). A
   complaint cannot survive a motion to dismiss by stating facts “‘merely
   consistent with’” liability. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
   (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). Instead, the
   complaint must state “a plausible claim for relief.” Id. at 679 (citing Twombly,
   550 U.S. at 556).
          In assessing whether a complaint meets that bar, we will “accept all
   well-pleaded facts as true and construe the complaint in the light most
   favorable to the plaintiff.” In re Great Lakes Dredge & Dock Co., 624 F.3d 201,
   210 (5th Cir. 2010). But we do not accept as true “conclusory allegations,
   unwarranted factual inferences, or legal conclusions.” Id. (quotation
   omitted). And we must ignore those parts of the complaint before
   determining whether the remaining, well-pleaded factual allegations are up
   to snuff. See Iqbal, 556 U.S. at 679–80 (explaining such a process); Bosarge v.
   Miss. Bureau of Narcotics, 796 F.3d 435, 442–43 (5th Cir. 2015) (“We first
   identify the allegations that are not entitled to the assumption of truth. . . .
   We next consider [the plaintiff’s] well-pleaded factual allegations to
   determine if they plausibly support his claim.”).
                                          1.
          First is Howley’s breach-of-contract claim. In Texas, a claim for
   breach of contract has four elements: (1) a valid contract; (2) the plaintiff’s
   performance of her contractual obligations; (3) breach by the defendant; and
   (4) damages caused by the breach. USAA Tex. Lloyds Co. v. Menchaca, 545
   S.W.3d 479, 501 n. 21 (Tex. 2018). Bankers does not dispute elements (1) and
   (2). See Howley, 2020 WL 4731968, at *3 (explaining the parties’ agreement
   on these points).

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         For two independent reasons, both of which the district court
   correctly identified, Howley’s complaint does not plausibly allege Bankers
   breached the contract (element (3)). See id. First, the complaint fails to
   explain how Bankers breached the contract. The complaint, it’s true, asserts
   that Bankers breached the contract. But it does so in conclusory fashion:
   “Plaintiff submitted a valid claim for hail and windstorm damage within the
   policy period and Bankers Standard Insurance Company breached the
   contract by denying or underpaying the claim.” Most of the complaint’s
   remainder is even more conclusory. At most, the complaint describes the
   action Bankers took—it denied the claim or “underpa[id]” it. But the
   complaint offers no insight into how that amounts to breach. See Moore v.
   Allstate Texas Lloyd’s, 742 F. App’x 815, 818 (5th Cir. 2018) (per curiam)
   (addressing allegations that if anything were more factual than Howley’s;
   calling them “general assertions devoid of factual content”). Because of its
   failure to spell out how Bankers’ alleged actions amounted to breach, the
   complaint does not “give the defendant fair notice of what the claim is and
   the grounds upon which it rests.” Twombly, 550 U.S. at 555 (quotation
   omitted).
         Howley’s complaint fails to allege breach in a second way. The
   complaint says Bankers “breached the contract by denying or underpaying
   the claim,” but it does not specify which. That kind of ambiguous boilerplate
   leaves defendants without “fair notice of what the claim is and the grounds
   upon which it rests.” Twombly, 550 U.S. at 555 (quotation omitted).
                                        2.
          Next is Howley’s claim for breach of the common-law duty of good
   faith and fair dealing. Under Texas law, an insured plaintiff bringing such a
   claim “must establish (1) the absence of a reasonable basis for denying or
   delaying payment of the benefits of the policy, and (2) that the carrier knew

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   or should have known that there was not a reasonable basis for denying the
   claim or delaying payment of the claim.” Nat’l Union Fire Ins. Co. v.
   Dominguez, 873 S.W.2d 373, 376 (Tex. 1994) (workers’ compensation
   context); see also Arnold v. Nat’l Cnty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167
   (Tex. 1987) (laying out the same test for the first time, though with slightly
   less clear phrasing).
            Howley has not plausibly alleged Bankers lacked “a reasonable basis
   for denying or delaying payment.” Dominguez, 873 S.W.2d at 376. That is
   because, as described above, he has not plausibly alleged that Bankers
   violated the contract in any way. Without explaining that Bankers’ denial of
   the claim was wrongful, in other words, the complaint cannot establish that
   Bankers unreasonably denied the claim. For all we know—based on Howley’s
   sparse factual allegations—he never had a valid claim to payment in the first
   place. And it would be neither wrongful nor unreasonable to deny an invalid
   claim.
                                             3.
            Howley’s third claim is for breach of Texas’s PPCA. The Texas
   Supreme Court has explained the PPCA’s broad strokes as follows:
            The prompt-payment statute provides that an insurer, who is
            “liable for a claim under an insurance policy” and who does
            not promptly respond to, or pay, the claim as the statute
            requires, is liable to the policy holder or beneficiary not only for
            the amount of the claim, but also for “interest on the amount
            of the claim at the rate of eighteen percent a year as damages,
            together with reasonable attorney’s fees.”
   Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 16 (Tex. 2007)
   (quoting Tex. Ins. Code § 542.060(a)); see also GuideOne Lloyds Ins. Co.
   v. First Baptist Church of Bedford, 268 S.W.3d 822, 830–31 (Tex. App.—Fort
   Worth 2008, no pet.) (a PPCA plaintiff must show “(1) a claim under an

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                                    No. 20-10940

   insurance policy, (2) that the insurer is liable for the claim, and (3) that the
   insurer has failed to follow one or more sections of [the PPCA] with respect
   to the claim”).
          For the third time, the complaint’s failure to spell out Bankers’ breach
   defeats Howley’s claim. The complaint does not adequately allege that
   Howley had a valid claim. That entails the complaint has not adequately
   alleged Bankers is “liable for [the] claim.” Lamar Homes, 242 S.W.3d at 16
   (quotation omitted). That alone is fatal.
                                          4.
          Last and most straightforward is Howley’s fraud claim. The elements
   of fraud under Texas law are:
          (1) that a material representation was made; (2) the
          representation was false; (3) when the representation was
          made, the speaker knew it was false or made it recklessly
          without any knowledge of the truth and as a positive assertion;
          (4) the speaker made the representation with the intent that the
          other party should act upon it; (5) the party acted in reliance on
          the representation; and (6) the party thereby suffered injury.
   Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009)
   (quotation omitted).
          But fraud is subject to the heightened pleading requirements of
   Federal Rule of Civil Procedure 9(b). See id. (“In alleging fraud or mistake, a
   party must state with particularity the circumstances constituting fraud or
   mistake. Malice, intent, knowledge, and other conditions of a person’s mind
   may be alleged generally.”). To satisfy that Rule, a plaintiff must “specify
   the statements contended to be fraudulent, identify the speaker, state when
   and where the statements were made, and explain why the statements were
   fraudulent.” Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353,

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   362 (5th Cir. 2004) (quotation omitted). “Put simply, Rule 9(b) requires the
   complaint to set forth the who, what, when, where, and how of the events at
   issue.” Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008)
   (quotation omitted).
          The complaint has plenty of broad assertions about fraud. For
   example, it says Bankers “systematically denies hail and wind damage claims
   at the initial valuation stage and offers a low amount knowing that the initial
   valuations are fraudulent, inaccurate, unreliable,” etc. It says Bankers
   “promoted and advertised its products or services with no intent to sell them
   as advertised” by failing to disclose its policy of systematic claim-denial. And
   it says Bankers “duped Plaintiff into purchasing its policy but failed to
   disclose that it will never pay claims absent a lawsuit.”
          In no way does the complaint “set forth the who, what, when, where,
   and how of the events at issue.” Id. (quotation omitted). It does not “specify
   the statements contended to be fraudulent.” Southland, 365 F.3d at 362
   (quotation omitted). It does not “identify the speaker.” Id. (quotation
   omitted). It does not “state when and where the statements were made.” Id.
   (quotation omitted). It does not “explain why the statements were
   fraudulent.” Id. (quotation omitted). The complaint comes nowhere close to
   meeting Rule 9(b)’s heightened pleading standard. See Int’l Energy Ventures
   Mgmt., LLC v. United Energy Grp., Ltd., 818 F.3d 193, 209 (5th Cir. 2016)
   (surveying a similarly “conclusional” complaint and deciding, “[t]his is
   clearly not enough to meet the heightened federal pleading standard for
   fraud”).
          AFFIRMED.

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