Court Opinion

ID: 9941612
Source: CourtListenerOpinion
Date Created: 2024-02-16 17:00:59.860026+00
Date Added: 2024-06-11T13:46:48.136745
License: Public Domain

Appellate Case: 23-6067     Document: 010111001698   Date Filed: 02/16/2024   Page: 1
                                                                FILED
                                                    United States Court of Appeals
                     UNITED STATES COURT OF APPEALS         Tenth Circuit

                           FOR THE TENTH CIRCUIT                      February 16, 2024
                       _________________________________
                                                                     Christopher M. Wolpert
                                                                         Clerk of Court
  SHANNON SHARP; ERIC M.
  THURSTON,

           Plaintiffs - Appellants,

  v.                                                    No. 23-6067
                                                 (D.C. No. 5:22-CV-00854-R)
  STATE FARM MUTUAL                                     (W.D. Okla.)
  AUTOMOBILE INSURANCE
  COMPANY,

           Defendant - Appellee.
                        _________________________________

                             ORDER AND JUDGMENT *
                          _________________________________

 Before HARTZ, PHILLIPS, and CARSON, Circuit Judges.
                  _________________________________

       Shannon Sharp and Eric M. Thurston (claimants) appeal the district

 court’s dismissal of their putative class action against State Farm Mutual

 Automobile Insurance Company (State Farm) alleging breach of contract.

 According to claimants, State Farm breached its uninsured motorist (UM)

 coverage policy by failing to provide claimants the full UM coverage limits

 available to insureds, resident relatives, and guest passengers, even though

       *
         This order and judgment is not binding precedent, except under the
 doctrines of law of the case, res judicata, and collateral estoppel. It may be
 cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
 and 10th Cir. R. 32.1.
Appellate Case: 23-6067   Document: 010111001698     Date Filed: 02/16/2024   Page: 2

 claimants paid UM coverage premiums on each policy. State Farm moved to

 dismiss the action on the ground that claimants failed to state plausibly how

 State Farm breached or otherwise acted contrary to the policy language. The

 district court granted State Farm’s motion. Because claimants indeed fail to

 state a plausible breach-of-contract claim, we affirm.

                                  BACKGROUND

 I.    Factual Background

       Claimants are Oklahoma residents and customers of State Farm. 1 State

 Farm sold them UM coverage through multiple auto insurance policies on

 several vehicles. Claimants paid separate premiums on each policy, including a

 separate premium for UM coverage. Each policy offered UM coverage that

 protected three groups of potential vehicle passengers: named insureds, resident

 relatives, and guest passengers. 2

       1
         We cabin our discussion to the facts contained in the amended
 class-action petition as presented to the district court. More detailed facts
 surrounding the auto accidents claimants experienced and the UM benefits they
 recovered appear in their prior related state court actions. See Thurston v. State
 Farm Mut. Auto. Ins. Co. (Thurston I), 478 P.3d 415 (Okla. 2020); Am.
 Petition, Sharp v. Fennell, No. CJ-2018-2720 (Okla. D. Ct. Okla. Cnty. filed
 Feb. 18, 2020). But those details are missing from the petition, and so we do
 not include or address them.
       2
         State Farm’s UM coverage promised to “pay compensatory damages for
 bodily injury,” meaning an injury to an “insured . . . caused by an accident that
 involves the operation, maintenance, or use of an uninsured motor vehicle.”
 App. 129 (emphases omitted). Under the policy, “insured” includes (1) “you”;
 (2) “resident relatives”; and (3) “any other person while occupying . . . your
 car,” whom we call guest passengers. Id. (emphases omitted).

                                         2
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       By law, State Farm is required to offer this tripartite UM coverage for

 every policy it issues. See Okla. Stat. tit. 36, § 3636(A), (H). Before 2014, UM

 coverages provided under multiple policies with separate premiums would add

 together, or “stack.” Thurston v. State Farm Mut. Auto. Ins. Co. (Thurston I),

 478 P.3d 415, 419 (Okla. 2020) (“[W]e previously required insurers to stack, or

 aggregate, coverage when they charged multiple UM premiums for multiple

 vehicles, either on the same or separate policies.”). But since 2014, UM

 coverage in Oklahoma no longer stacks automatically. See § 3636(B) (“Policies

 issued, renewed or reinstated after November 1, 2014, shall not be subject to

 stacking or aggregation of limits unless expressly provided for by an insurance

 carrier.”). 3 So for people who buy multiple auto insurance policies, the UM

 coverage limits on each policy do not aggregate to create a singular UM

 recovery benefit, unless the insurance company says so explicitly. 4 See id.

       3
        Because claimants’ policies renewed after November 1, 2014, the
 amendment prohibiting automatic stacking applied to each of their policies with
 State Farm. See § 3636(B).
       4
         Take this example. Say an insured owns three auto policies with State
 Farm covering three vehicles—one with a UM coverage limit of $25,000; one
 with $50,000; and one with $75,000. With nonstacking coverage, if the insured
 crashes with an uninsured motorist while riding in the first vehicle (carrying
 $25,000 of UM), then the insured will still recover the highest amount available
 among the three policies: $75,000.
       But with stacked coverage, the insured could have combined all three UM
 benefits to recoup the largest possible sum: $150,000.
                                         3
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       Claimants’ auto policies with State Farm contain an Amendatory

 Endorsement that provides nonstacking coverage. The Amendatory

 Endorsement reads:

       UNINSURED MOTOR VEHICLE COVERAGE . . .

              If Other Uninsured Motor Vehicle Coverage Applies

              1.    If Uninsured Motor Vehicle Coverage provided by this
                    policy and one or more other vehicle policies issued to
                    you or any resident relative by the State Farm
                    Companies apply to the same bodily injury, then:

                    a.    the Uninsured Motor Vehicle Coverage
                          limits of such policies will not be added
                          together to determine the most that may be
                          paid; and

                    b.    the maximum amount that may be paid from
                          all such policies combined is the single
                          highest applicable limit provided by any
                          one of the policies. We may choose one or
                          more policies from which to make payment.

 App. 106 (emphases added).

       In plainer English, this Amendatory Endorsement lets an insured recover

 UM benefits once per accident in the highest amount available among the

 insured’s policies. Because the coverage is nonstacking, insureds and resident

 relatives derive no extra coverage from additional auto policies that carry lower

 (or the same) UM coverage than those the insured already owns because

 insureds and resident relatives will recover the highest amount anyway. But

 guest passengers only qualify as “insured[s] . . . while occupying” the vehicle

 covered by the UM policy. Id. at 129 (defining the third type of “insured” as

                                         4
Appellate Case: 23-6067   Document: 010111001698     Date Filed: 02/16/2024   Page: 5

 “any other person while occupying . . . your car”). So buying another UM

 policy for an additional vehicle carries some benefit because the new policy

 will protect guest passengers riding in that vehicle who would not otherwise

 have been covered by the insured’s existing policies on other vehicles.

 II.   Procedural History

       Based on State Farm’s accepting full UM coverage premiums for

 nonstacking UM coverage, claimants filed a putative class-action petition in

 Oklahoma state district court against State Farm for breach of contract. 5 State

 Farm removed the case to federal district court under the Class Action Fairness

 Act (CAFA), 28 U.S.C. § 1332(d), based on diversity, asserted class size, and

 aggregated amount in controversy. 6 Soon after, State Farm moved to dismiss

 claimants’ breach-of-contract claim.

       In claimants’ petition, they alleged that “for the first vehicle, State Farm

 provided UM coverage”—meaning the full, tripartite coverage for insureds,

       5
         Claimants filed their initial class-action petition on March 11, 2022. But
 claimants never served that petition on State Farm, so they filed an amended
 petition later, on September 7, 2022. The amended petition is the one we
 discuss throughout this order.
       6
         “CAFA permits a class action to be brought in or removed to federal
 court if the proposed classes include at least 100 persons with claims, the
 aggregate amount in controversy on all claims exceeds $5 million, [and] at least
 one proposed plaintiff and one defendant have diverse citizenship . . . .” Speed
 v. JMA Energy Co., LLC, 872 F.3d 1122, 1126 (10th Cir. 2017). Claimants are
 Oklahoma residents and State Farm is incorporated and holds its principal place
 of business in Illinois; so, the minimal diversity required under CAFA is met.

                                         5
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 resident relatives, and guest passengers—but “for all other vehicles, it provided

 ‘guest passenger’ coverage,” only. App. 97–98 ¶ 6. Yet despite this “different,

 lesser coverage,” State Farm “charge[d] and accept[ed] full premiums” on each

 policy. Id. at 98 ¶¶ 6, 9. On this basis, claimants raised a breach-of-contract

 claim against State Farm for “refus[ing] to provide UM coverage protecting the

 named insured and their resident relatives” on all covered vehicles and sought

 “recovery of premiums charged by State Farm for vehicles other than the first

 insured vehicle.” Id. at 99 ¶ 16, 101 ¶ 24.

       State Farm moved to dismiss the action on several grounds. In part, State

 Farm asserted that claimants failed to state a claim for relief under federal civil

 pleading standards and Oklahoma state law. 7 Under Federal Rules of Civil

 Procedure 8 and 12(b)(6), State Farm argued that claimants failed to plead a

 valid breach-of-contract claim because their petition “fail[ed] to indicate what

 policy provision State Farm purportedly breached, and [it] fail[ed] to explain

 what State Farm did to allegedly violate such provision.” App. 166. And under

 Oklahoma precedent, State Farm contended, claimants’ theory for recovery

       7
         State Farm additionally submitted that claimants’ claims were barred by
 claim preclusion and issue preclusion, and that the claims offended Oklahoma’s
 rule against claim-splitting due to Thurston’s prior state court action against
 State Farm that arose from the same set of facts. See Thurston I, 478 P.3d at
 417.
                                          6
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 “was rejected by the Oklahoma Supreme Court” in the related state action,

 Thurston I. 8 App. 160.

       Largely in light of Thurston I, the district court granted State Farm’s

 motion to dismiss. After mining Thurston I for the findings and conclusions

 relevant to claimants’ petition, the court observed that “this case presents the

 same issues as Thurston I, packaged in a slightly different form.” Sharp v. State

 Farm Mut. Auto. Ins. Co., No. Civ-22-854, 2023 WL 2816856, at *4 (W.D.

 Okla. Apr. 6, 2023). Given the sufficient “crossover” with the previous state

 court action, the district court determined that issue preclusion barred

 claimants’ action in federal court. 9 Id. at *3.

       8
         In Thurston I, Thurston sued State Farm in Oklahoma state court for
 fraud, breach of contract, bad faith, and failure to procure appropriate coverage
 because, he contended, State Farm’s accepting multiple premiums on separate
 UM policies constituted an “express[] provi[sion] for stacking,” under
 § 3636(B). 478 P.3d at 418. Reviewing an interlocutory summary adjudication
 ruling for State Farm, the Oklahoma Supreme Court analyzed the Amendatory
 Endorsement in Thurston’s policy (the same one before us) and concluded that
 the language unambiguously prohibited stacking. Id. at 421. At the outset, the
 court rejected Thurston’s argument under the reasonable-expectations doctrine
 because it found no ambiguity in State Farm’s policy language. Id. Then,
 regarding the premiums, the court held that “[a]cceptance of separate premiums
 alone is not an express provision for stacking.” Id. The court recognized that
 Oklahoma law mandated State Farm to offer full UM coverage under each auto
 policy it issued to Thurston. Id. (citing § 3636(A)).
       9
         Though Sharp was not a party in Thurston I, the court reasoned that “the
 legal rationale” behind Sharp’s allegations were “parallel” to Thurston’s, and
 so “the findings of the court in Thurston I apply equally to [both] claims.”
 Sharp, 2023 WL 2816856, at *4.
                                           7
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       Claimants then filed a timely notice of appeal asking this court to review

 the district court’s decision to grant State Farm’s motion to dismiss. We have

 jurisdiction under 28 U.S.C. § 1291.

                            STANDARD OF REVIEW

       We review de novo the district court’s decision on a Rule 12(b)(6)

 motion, applying the same standards as the district court. Sagome, Inc. v.

 Cincinnati Ins. Co., 56 F.4th 931, 934 (10th Cir. 2023). To survive a motion to

 dismiss, a plaintiff’s complaint “requires more than labels and conclusions,”

 and the “[f]actual allegations must be enough to raise a right to relief.” Bell Atl.

 Corp. v. Twombly, 550 U.S. 544, 555 (2007). So though “we accept the

 well-pleaded facts alleged as true,” we also “need not accept ‘threadbare

 recitals of the elements of a cause of action that are supported by mere

 conclusory statements.’” Clinton v. Sec. Benefit Life Ins. Co., 63 F.4th 1264,

 1275 (10th Cir. 2023) (brackets omitted) (quoting Ashcroft v. Iqbal, 556 U.S.

 662, 678 (2009)).

       Further, this court is “entitled to affirm a district court on alternative

 grounds” so long as “those grounds are adequate, apparent in the record, and

 sufficiently illuminated by counsel on appeal.” Walton v. Powell, 821 F.3d

 1204, 1212 (10th Cir. 2016).

                                   DISCUSSION

       Claimants implore that “[t]his case is simple.” Principal Br. at 4. We

 agree. Claimants have not met their burden under Rule 12(b)(6) to allege a

                                          8
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 plausible claim for breach of contract. And so we affirm the district court on

 that alternate ground, without reaching the preclusion issues or arguments. 10

 See Walton, 821 F.3d at 1212.

       State Farm and claimants agree that State Farm’s UM coverage is

 nonstacking. Their disagreement springs from State Farm’s accepting premiums

 for what claimants call “different, less valuable” coverage: the coverage on

 additional policies that provide an added UM benefit for guest passengers,

 only. App. 98 ¶ 6. Claimants perceive this imbalance between the premiums

 charged and coverage extended as a breach of State Farm’s policy. State Farm

 disagrees and resolves that its policy language unambiguously forbids stacking

 and by extension provides the “three-pronged” UM coverage that claimants say

 was promised. Resp. Br. at 23. So according to State Farm, the UM coverage

 was delivered exactly as promised, and thus claimants fail to articulate a valid

 breach-of-contract claim. We agree.

       10
           Much of claimants’ briefing to this court focuses on issue preclusion
 and their argument that the district court erred in concluding that the claim
 alleged in this litigation is barred by Thurston I. In Thurston I, Thurston
 claimed that State Farm’s accepting the premiums created an express provision
 for stacking. Thurston I, 478 P.3d at 418. Before this court, claimants allege
 that State Farm’s accepting multiple premiums on separate policies constituted
 a breach of contract. Claimants highlight the difference between the state and
 federal actions by distinguishing the recovery sought in each case. Claimants
 explain that had Thurston “prevailed in Thurston I, he would have had access to
 $75,000 in additional stacked coverage,” whereas here, “if Thurston prevails
 . . . he will individually recover several hundred dollars in [premium]
 overcharges collected by State Farm.” Principal Br. at 14.
         Because claimants fail to allege a plausible breach-of-contract claim, we
 decline to address issue preclusion or the attendant arguments.
                                         9
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        Because this is a diversity action, Oklahoma’s contract law applies.

  Automax Hyundai S., L.L.C. v. Zurich Am. Ins. Co., 720 F.3d 798, 804 (10th

  Cir. 2013). In Oklahoma, a breach-of-contract claim requires a claimant to

  show “(1) formation of a contract; (2) breach of the contract; and (3) damages

  as a result of that breach.” Morgan v. State Farm Auto. Ins. Co., 488 P.3d 743,

  748–49 (Okla. 2021). Under the second element, claimants have not sufficiently

  alleged that State Farm in fact breached the policy.

        Claimants argue that their claim relies on “the express terms of the

  insurance contract,” which they “extensively quote[]” in the petition. Principal

  Br. at 15. From the policy, claimants note that the UM provision purportedly

  covers “you,” “resident relatives,” and “any other person while occupying . . .

  your car”; for the first two groups, they argue, “State Farm refuses to provide

  for any UM coverage purchased after the coverage on the first insured vehicle.”

  App. 99 ¶ 14. Though claimants acknowledge that “State Farm does provide

  coverage for subsequent vehicles for . . . guest passenger[s],” they maintain

  that they “would not have paid for ‘UM’ coverage if they had known they were

  actually purchasing only [guest passenger] UM.” Id. ¶¶ 14–15.

        The narrower coverage that State Farm provides on “subsequent

  vehicles,” to which claimants object, is a byproduct of the policy’s nonstacking

  arrangement. On the stacking point, claimants allege that, “[b]ased on the

  parties’ express contractual relations and their prior course of dealing,” they

  “had a reasonable expectation that paying a separate premium for UM coverage

                                          10
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  under multiple policies would stack.” App. 98 ¶ 11. But claimants also

  acknowledge that “State Farm disclosed in an ‘Amendatory Endorsement’ that

  the ‘[UM coverage] limits of such policies will not be added together to

  determine the most that may be paid.’” Id. Then, they repeat the policy’s

  guarantee that “the amount paid will be the ‘single highest applicable limit

  provided by any one of the policies.’” Id.

        These quotations represent the extent of claimants’ effort to identify a

  provision of the policy that State Farm breached. But fatal to their claim, not

  once do claimants show that State Farm violated any of the above-quoted terms

  or that State Farm ever failed to deliver claimants UM coverage in the “highest

  applicable limit provided,” as the policy promises. See id.

        The most claimants do is assert that (1) “State Farm failed and refused to

  advise [them] . . . that they were purchasing two different kinds of coverage,”

  which we understand to mean the pre-2014 stacking coverage and the post-2014

  nonstacking coverage; and that (2) “[b]y continuing to tender separate

  premiums for UM coverage to State Farm, [claimants] were requesting UM

  coverage, and State Farm was promising to deliver same.” Id. ¶¶ 6, 10. Even

  construing these claims liberally, we struggle to reconcile them with claimants’

  later admission that “State Farm disclosed in an ‘Amendatory Endorsement’

  that the ‘[UM coverage] limits . . . will not be added together.’” App. 98 ¶ 11.

  This statement reveals claimants’ understanding that their UM coverage no

  longer stacked after 2014. And though claimants may feel that they were

                                         11
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  overcharged for the UM premiums paid after this policy change, that grievance

  doesn’t fit within the elements of a breach-of-contract claim.

        Oklahoma law directs that “a breach occurs when a party fails to perform

  a duty arising under or imposed by agreement.” Fretwell v. Protection Alarm

  Co., 764 P.2d 149, 151 (Okla. 1988). Claimants argue that State Farm failed to

  perform its duty to deliver “the coverage promised,” App. 101 ¶ 25, which

  claimants consistently call “three-pronged UM coverage,” Principal Br. at 14.

  But practically, the “three-pronged UM coverage” claimants seek requires

  stacking. And as discussed above, all agree that the Amendatory Endorsement

  eliminated stacking. So in implementing the Amendatory Endorsement, State

  Farm essentially revoked any promise that it would provide UM coverage the

  same as it had before 2014. Claimants cannot fault State Farm for failing to

  deliver something it never promised, especially when the Amendatory

  Endorsement advised them of the policy change and claimants continued to pay

  the premiums anyway. Based on the petition as alleged, we cannot ascertain a

  plausible breach-of-contract claim.

        Again, we suspect that claimants’ true quarrel lies with their feeling that

  they overpaid for guest passenger coverage on their later-purchased UM

  policies. See Principal Br. at 15 (arguing that “[w]hat State Farm provided was

  only the third prong of UM coverage . . . known as ‘guest passenger coverage’”

  which was “less valuable,” despite charging the same premium). And maybe

  they did. But the crux of that dispute lies with the consideration, not the

                                          12
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  performance, of the policy. Adequacy of consideration falls outside our

  bailiwick assuming the claimants consented freely to the policy terms. See

  Cassity v. Pitts, 839 P.2d 192, 195 (Okla. 1992) (“Even gross inadequacy of

  consideration, standing alone, is not enough upon which to cancel a contract.”

  (citation omitted)); Meadows v. Neal, 174 P. 753, 754 (Okla. 1918) (“In the

  absence of fraud or overreaching, the adequacy of the consideration is solely

  the business of the parties.” (citation omitted)). Seeing no allegation to the

  contrary, we assume consideration is adequate.

        At bottom, claimants agreed to pay the separate premiums despite State

  Farm’s “disclos[ure]” that the UM coverage would not stack. App. 98 ¶ 11.

  State Farm may have offered claimants a bad deal, but they agreed to it. And a

  bad deal, alone, does not amount to a breach of contract. 11

                                   CONCLUSION

        For these reasons, we affirm.

                                           Entered for the Court

                                           Gregory A. Phillips
                                           Circuit Judge

        11
           Claimants argue for the first time in their reply brief that the district
  court erred in declining to give them leave to amend their petition. We do not
  address this argument. See Butler v. Daimler Trucks N. Am., LLC, 74 F.4th
  1131, 1146 (10th Cir. 2023) (“The general rule in this circuit is that a party
  waives issues and arguments raised for the first time in a reply brief.” (citation
  omitted)).
                                          13