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Eye Style Optics, LLC v. State Farm Fire and Casualty Co.

United States District Court, D. Kansas

June 3, 2014

EYE STYLE OPTICS, LLC., SPENCER LOWE; LISA MCDERMOTT; Plaintiffs,
v.
STATE FARM FIRE AND CASUALTY COMPANY. Defendant.

MEMORANDUM AND ORDER

RICHARD D. ROGERS, District Judge.

This civil action is before the court primarily upon defendant's motion to dismiss pursuant to FED.R.CIV.P. 12(b)(1) and 12(b)(6). This action alleges a claim for declaratory judgment and claims for breach of contract and breach of duty of good faith and fair dealing. The focus of the arguments in the motion to dismiss concerns plaintiffs' claim for declaratory judgment. Defendant makes jurisdictional arguments and also asserts that plaintiffs have failed to state a claim. Upon review, the court rejects defendant's jurisdictional attacks, but agrees that plaintiffs have failed to state a claim.

I. RELATED MOTIONS

Before addressing the motion to dismiss, the court shall direct that plaintiffs' motion for leave to file a surreply in opposition to the motion to dismiss (Doc. No. 15) be granted. The court further finds that, in light of the action taken upon the motion to dismiss, plaintiffs' motion for summary judgment (Doc. No. 10) and defendant's motion to stay deadlines are moot (Doc. No. 13).

II. ALLEGATIONS IN THE COMPLAINT

The complaint alleges that plaintiff Eye Style is the insured on a "Businessowners Policy" issued by defendant effective August 9, 2013 through August 9, 2014. Plaintiff Lowe and plaintiff McDermott are individual members and managers of plaintiff Eye Style. The complaint refers to the plaintiffs collectively as "Eye Style." The court shall do the same for the remainder of this order.

According to the complaint, the policy requires defendant to defend and indemnify Eye Style in a lawsuit captioned Romanelli Optix, Inc. v. Eye Style Optics, LLC and Spencer Lowe and Lisa McDermott, Case No. 13CV6605 filed in the District Court of Johnson County, Kansas. Eye Style asserts in the complaint that defendant agreed to defend Eye Style in the lawsuit as of a letter dated September 30, 2013 and appointed counsel to do so. The same letter provided various grounds under which defendant reserved its right to deny defense and indemnity to Eye Style. Eye Style alleges that this letter created a potential conflict between Eye Style and defendant in the defense of the state court lawsuit.

Eye Style has notified defendant that it desires independent counsel of Eye Style's choosing to defend Eye Style in the lawsuit. Eye Style hired counsel from Lathrop & Gage LLP to represent Eye Style in the lawsuit shortly after it was filed. Eye Style asserts that defendant has wrongfully refused and continues to wrongfully refuse to reimburse defense costs incurred by Eye Style through Lathrop & Gage LLP after September 30, 2013. Defendant's position is that providing a defense through defendant's choice of counsel but still subject to a reservation of rights is appropriate under Kansas law. Defendant has reimbursed expenses and costs charged by Lathrop & Gage LLP for work done prior to September 30, 2013.

Eye Style seeks a "declaratory judgment that [defendant] is obligated to reimburse the reasonable and necessary defense costs and expenses incurred by independent counsel of Eye Style's] choosing in defense of Eye Style in the [u]nderlying [s]uit." Doc. No. 1, ¶ 9. Eye Style asserts that defendant's "failure and refusal to pay Eye Style's selected defense counsel is a breach of [defendant's] duty to defend Eye Style under Kansas law." Doc. No. 1, ¶ 46. Eye Style also alleges that defendant's conduct represents a breach of the insurance contract and a violation of defendant's duty of good faith and fair dealing.

III. MOTION TO DISMISS STANDARDS

Defendant makes largely a facial attack against this court's subject matter jurisdiction over Eye Style's claim for declaratory relief, arguing that under the facts alleged by Eye Style, there is no case or controversy for the court to consider and no prudential grounds for the court to exercise its discretion to consider Eye Style's claims for declaratory relief. Defendant bases these contentions in part upon the fact that the defense offered by defendant through counsel appointed by defendant has been refused by Eye Style. This "fact" is not directly alleged in the complaint, but it is readily inferred from the complaint and the parties' arguments in this matter. Defendant's other "jurisdictional" arguments appear to be based upon the facts as alleged in the complaint.

Accordingly, the court shall consider Eye Style's well-pleaded factual allegations as true and view them in the light most favorable to Eye Style in deciding defendant's arguments to dismiss this case under Rule 12(b)(1) and 12(b)(6). See Muscogee (Creek) Nation v. Oklahoma Tax Com'n , 611 F.3d 1222, 1227 n.1 (10th Cir. 2010). As for defendant's arguments under Rule 12(b)(6), the court must decide whether Eye Style has stated a claim that is plausible on its face. Casanova v. Ulibarri , 595 F.3d 1120, 1124 (10th Cir. 2010). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009).

IV. THE COURT SHALL CONSIDER EYE STYLE'S DECLARATORY JUDGMENT CLAIM.

Eye Style has filed this action for declaratory relief asking that the court declare that Eye Style is entitled to select its own counsel and that defendant should pay Eye Style compensatory damages for alleged ...


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