Court Opinion

ID: 39946
Source: CourtListenerOpinion
Date Created: 2010-04-25 20:37:34+00
Date Added: 2024-06-11T17:16:23.489598
License: Public Domain

United States Court of Appeals
                                                                                  Fifth Circuit
                                                                               F I L E D
                     IN THE UNITED STATES COURT OF APPEALS
                                                                               October 18, 2005
                              FOR THE FIFTH CIRCUIT
                                                                           Charles R. Fulbruge III
                               __________________________                          Clerk

                                      No. 05-60038
                                   Summary Calendar
                               __________________________

TRACY BERRY AND CRAIG BERRY,
                                                                     Plaintiffs-Appellants,

versus

ANGELA HARDWICK, ET AL.,

                                                                              Defendants,
DAVID PREHN AND DAN PAYNE
                                                                   Defendants-Appellees.

                 ___________________________________________________

                       Appeal from the United States District Court
                         For the Northern District of Mississippi
                                  (No. 1:04cv245-D-D)
                 ___________________________________________________

Before BARKSDALE, STEWART, and CLEMENT, Circuit Judges.
                 *
PER CURIAM:

         Tracy and Craig Berry appeal the district court’s dismissal of their claim against

David Prehn and Dan Payne. Finding no error, we affirm.

         *
        Pursuant to 5th Cir. R. 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not be published and is not precedent except under the limited circumstances set forth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 Cir. R. 47.5.4.
                             I. FACTS AND PROCEEDINGS

       Tracy and Craig Berry are citizens of Mississippi. They owned a 2001 Chevrolet

Malibu which was insured by Safeco Insurance Company of America (“Safeco”). Safeco

is a corporation organized and existing under the laws of Washington and has its principal

place of business in Washington. On November 27, 2001, the Berrys’ car was stolen from

the parking lot of a retail store and destroyed by fire. They reported the loss to their local

Safeco insurance agent, Dan Payne, a citizen of Mississippi. Payne allegedly advised the

Berrys to stop making payments against their car loan in order to expedite the claim.

Payne also allegedly told the Berrys not to file a claim for personal effects in the car as

Safeco would likely cancel their policy if they filed an additional claim. The Berrys

followed Payne’s alleged advice. Before receiving any proceeds of their Safeco policy, they

purchased a new car for which they purchased a more expensive policy from another

insurer.

       Safeco investigator David Prehn, also a Mississippi citizen, investigated the claim,
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a process which lasted almost a year. The Berrys allege that over this time period, efforts

to contact Prehn, Payne, and Safeco adjuster Angela Hardwick were unsuccessful. The

Berrys also allege that Safeco agents, while investigating the claim, intimated to

acquaintances of the Berrys that the Berrys may have been involved with the theft.

       On June 21, 2004, the Berrys filed suit in the Circuit Court of Lee County,

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       After eleven months, in October 2003, the claim in the amount of $14,672.20
was paid to the bank that financed the car.

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Mississippi, seeking compensatory and punitive damages arising from Safeco and its

agents’ handling of the claim. The defendants timely removed the action to federal court

on August 12, 2004, arguing that since Payne and Prehn, the in-state defendants, had been

fraudulently joined, there was complete diversity. The Berrys neither contested the

petition for removal nor filed a motion to remand. Payne and Prehn then moved for

dismissal or, in the alternative, for summary judgment.

       On November 22, 2004, the district court granted the motion to dismiss Payne and
                                                                                              2
Prehn from the suit pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Citing Travis v. Irby, 326 F.3d 644, 647–49 (5th Cir. 2003), the court explained that in order

to prove that a plaintiff seeking to defeat diversity jurisdiction has fraudulently joined a

non-diverse party, a removing party must prove outright fraud in the pleading of

jurisdictional facts or that there is no reasonable possibility that the plaintiff will be able

to establish a cause of action against the in-state defendant in state court. Because the

defendants did not allege fraud in the pleading, the court analyzed whether there was a

reasonable possibility that the Berrys could sustain a cause of action against Payne and

Prehn in state court.

       The Berrys’ complaint claimed that Payne and Prehn were liable for the torts of bad

faith through delay and refusing to explain reasons for delay, negligent infliction of

emotional distress, negligent delay in processing of a claim, and negligent investigation

       2
         While Payne and Prehn moved in the alternative for summary judgment, the
district court treated the motion as a motion to dismiss and did not consider matters
outside the pleadings.

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of a claim. The district court relied on the Mississippi Supreme Court’s recent opinion in

Gallagher Bassett Servs. v. Jeffcoat, 887 So. 2d 777 (Miss. 2004), holding that “an insurance

adjuster, agent or other similar entity may not be held independently liable for simple

negligence in connection [with] its work on a claim.” Id. at 783. Jeffcoat further held that

“[s]uch an entity may be held independently liable for its work on a claim if and only if

its acts amount to any one of the following familiar types of conduct: gross negligence,

malice, or reckless disregard for the rights of the insured.” Id.

       The district court concluded that because Payne and Prehn were acting within the

scope of their authority as agents of Safeco and the Berrys had failed to allege facts

supporting gross negligence, Payne and Prehn were fraudulently joined. The court

accordingly granted the motion dismissing the charges against Payne and Prehn. The

court also denied the Berry’s motion for a continuance to permit additional discovery

pursuant to Rule 56(f) of the Federal Rules of Civil Procedure. The court reasoned that the

discovery sought would show only ordinary negligence, not the gross negligence required

to sustain a claim against Payne and Prehn.

       On December 20, 2004, the court granted the defendants’ motion to amend its order

pursuant to Rule 54(b) of the Federal Rules of Civil Procedure to enter final judgment

dismissing, with prejudice, the claims against Prehn and Payne. The Berrys timely

appealed.

       3
        The Berrys also included a defamation claim, but later conceded that it was
barred by statute of limitations.

                                              4
                               II. STANDARD OF REVIEW

       The district court’s dismissal of the claims against Payne and Prehn pursuant to Fed.

R. Civ. P. 12(b)(6) was based on its determination that the Berrys lack a reasonable

probability of recovery under state law. We review this question of law de novo. Gray ex

rel. Rudd v. Beverly Enters.-Miss., Inc., 390 F.3d 400, 405 (5th Cir. 2004).

                                     III. DISCUSSION

       The Berrys submit that the record contains evidence, Tracy Berry’s affidavit, from

which a jury could find that the actions of Payne and Prehn constituted gross negligence.

They argue that the district court erred in not considering the affidavit, citing Gray’s

holding that in deciding, for purposes of a motion to remand, whether a plaintiff can

establish a cause of action against the non-diverse defendant in state court, “the court may

‘pierce the pleadings’ and consider summary judgment-type evidence to determine

whether the plaintiff truly has a reasonable possibility of recovery in state court.” 390 F.3d

at 405 (citing Travis v. Irby, 326 F.3d 644, 648–49 (5th Cir. 2003)).

       This argument is unavailing for two reasons. First, before us is an appeal not from

a decision on a motion to remand that was opposed based on fraudulent joinder, but from

a decision on a motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6). Gray’s holding

regarding the proper scope of inquiry for a motion to remand is therefore inapposite. “For

Rule 12(b)(6) motions, a district court may only consider the allegations in the complaint

and any attachments.” Travis, 326 F.3d at 648 (citing Great Plains Trust Co. v. Morgan

Stanley Dean Witter & Co., 313 F.3d 305, 313 (5th Cir. 2002)).

                                              5
       Second, the portion of Gray cited by the Berrys is taken out of context. In Gray, the

plaintiffs moved to remand and the defendants opposed on grounds of fraudulent joinder.

This Court held that in arguing that joinder was not fraudulent, “the plaintiffs may not

rely solely on the allegations in the complaint [to show that joinder was not fraudulent];

the court may ‘pierce the pleadings’ and consider summary judgment-type evidence to

determine whether the plaintiff truly has a reasonable possibility of recovery in state

court.” 390 F.3d at 400. Gray does not stand for the proposition urged by the Berrys, that

a district court should consider summary judgment-type evidence in deciding whether the

plaintiffs have stated a state law claim against the in-state defendants.

       In Smallwood v. Illinois Central Railroad, which was filed two months before Gray,

this Court articulated the method for predicting whether a plaintiff has a reasonable basis

of recovery under state law for purposes of fraudulent joinder analysis.

       A court may resolve the issue in one of two ways. The court may conduct
       a Rule 12(b)(6)-type analysis, looking initially at the allegations of the
       complaint to determine whether the complaint states a claim under state law
       against the in-state defendant. Ordinarily, if a plaintiff can survive a Rule
       12(b)(6) challenge, there is no improper joinder. That said, there are cases,
       hopefully few in number, in which a plaintiff has stated a claim, but has
       misstated or omitted discrete facts that would determine the propriety of
       joinder. In such cases, the district court may, in its discretion, pierce the
       pleadings and conduct a summary inquiry.

Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). Even if the

district court had decided the motion to dismiss the in-state defendants as if it were

considering a fraudulent joinder opposition to a motion to remand, it would have been

proper, based on Smallwood, to first consider only the allegations in the complaint. Only

                                             6
if the plaintiff had survived the Rule 12(b)(6)-type challenge should the court have

considered evidence outside the pleadings.

       For these reasons, we hold that the district court did not err in looking only to the

allegations of the complaint in deciding whether the Berrys had stated a claim under state

law against Payne and Prehn.

       We agree with the district court’s conclusion that, based on the complaint, there is

no reasonable basis for predicting that Mississippi state law would allow the Berrys to

recover against Payne and Prehn. It is not disputed that under Jeffcoat, insurance agents

such as Payne and Prehn may not be held liable under Mississippi law for improper acts

in adjusting a claim unless the plaintiff demonstrates that those acts amount to “gross

negligence, malice, or reckless disregard for the rights of the insured.” 887 So. 2d at 783.

This Court has reviewed the complaint, accepting all well-pleaded facts as true and

viewing the facts in the light most favorable to the Berrys. Baker v. Putnal, 75 F.3d 190, 196

(5th Cir. 1996) (citing McCartney v. First City Bank, 970 F.2d 45, 47 (5th Cir. 1992)). We

agree with the district court that on the face of their complaint, the Berrys do not allege a
                                                  4
gross negligence claim against Payne or Prehn.

       In addition to the fact that the complaint on its face fails to allege gross negligence,

       4
         The Berrys argue that the question of whether the acts alleged amounted to
gross negligence or simple negligence is a fact question for the jury and that dismissal
pursuant to Rule 12(b)(6) is therefore inappropriate. This argument is without merit.
“The central issue [in reviewing a motion to dismiss] is whether, in the light most
favorable to the plaintiff, the complaint states a valid claim for relief.” St. Paul Mercury
Ins. Co. v. Williamson, 224 F.3d 425, 440 n.8 (5th Cir. 2000). Because the Berry’s
complaint fails to state a valid claim of gross negligence, dismissal is appropriate.

                                              7
the Mississippi Supreme Court has held that similar factual claims did not constitute gross

negligence. The Jeffcoat court concluded that the insurance adjuster’s ten-month delay in

payment of benefits was “at the most, negligent.” 887 So. 2d at 783.

      Because the Berrys lack a reasonable probability of recovering against Payne and

Prehn under Mississippi law, the district court did not err in granting the motion to

dismiss the claims against Payne and Prehn.

                                  IV. CONCLUSION

      The decision of the district court is AFFIRMED.

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