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State Farm Fire and Casualty Co. v. Gates, Shields & Ferguson, Pa.

United States District Court, D. Kansas

April 9, 2015

STATE FARM FIRE AND CASUALTY COMPANY, and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiffs,
v.
GATES, SHIELDS & FERGUSON, PA, Defendant.

MEMORANDUM AND ORDER

GERALD L. RUSHFELT, Magistrate Judge.

The Court here considers two motions: Defendant's Motion for Leave to File Amended Pleading, Including Counterclaims, Third-Party Claims and Punitive Damages (ECF 32); and Plaintiffs' Motion for Protective Order (ECF 44). For the following reasons the Court grants in part and denies in part the Defendant's motion. It denies the motion for protective order as moot.

I. Defendant's Motion for Leave to File Amended Pleading, Including Counterclaims, Third-Party Claims and Punitive Damages (ECF 32).

With its motion for leave to file an amended pleading, Defendant invokes Fed.R.Civ.P. 15(a)(2) and D. Kan. Rule 15.1. It has appended to its motion its proposed amended pleading, consisting of 32 pages and 134 numbered paragraphs. It thereby seeks to allege additional counterclaims and third-party claims, entitled as follows: Count VI Breach of Contract; Count VII Tortious Interference; Count VIII Fraud; Count IX Fraud-Promise of Future Events; Count X Fraud-Fraudulent Misrepresentation; Count XI Punitive Damages. The proposed amended pleading would also add John Fuchs and Jill Earley as third party defendants against each of these counts. The briefing describes Mr. Fuchs and Ms. Earley as employees of Plaintiffs and that they engaged in the activity alleged in these additional counts.

Plaintiffs oppose the motion in its entirety. They contend that the additional claims would be futile, primarily for failure of the proposed amended pleading to allege sufficient facts to support them. More specifically Plaintiffs argue the absence of any pleaded facts that Mr. Fuchs or Ms. Earley were parties to any contract with Defendant or that they committed any fraudulent or otherwise tortious conduct. Plaintiffs further suggest that the relevant contract between State Farm and Defendant precludes or limits claims for damages, such as Defendant proposes.

Numerous cases-from the United States Supreme Court, the Tenth Circuit Court of Appeals, the Supreme Court of Kansas, and the District of Kansas-have addressed the question of adequacy and inadequacy of pleadings: A "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted; underscoring added). This principle of pleading holds true for a counterclaim and third-party claim, as well as for a complaint. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice, " and the Courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Id. The question is whether the allegations actually entitled to the assumption of truth "plausibly support a legal claim for relief." Kay v. Bemis, 500 F.3d 1214, 1218 (10th Cir. 2007). A party who provides only "conclusory allegations without supporting factual averments" has failed to discharge his burden. Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991).

With these principles as guidance, the Court will address the several counterclaims and third-party claims proposed by the instant motion, first Count VI Breach of Contract. The Court will grant the motion for leave to assert against Plaintiffs State Farm the counterclaim for breach of contract. The facts alleged in the proposed pleading indicate the relevant contract to be the one asserted by Plaintiffs as Exhibit A to their Complaint for Declaratory Judgment (ECF 1). The Court finds nothing of consequence to deny the addition of this counterclaim. Quoting provisions of the contract that arguably may bar or limit Defendant from obtaining the damages it seeks, Plaintiffs oppose the claim for damages. Upon the instant motion for amendment of a pleading, however, the Court declines to determine whatever the contract may provide to limit or bar the requested damages. If appropriate, the parties can better address that issue by a subsequent, dispositive motion.

The Court overrules the motion with respect to the proposed third-party claim against John Fuchs and Jill Earley. Notwithstanding the numerous assertions by Defendant that its amended pleading states a claim for breach of contract against these two individuals, the Court finds no adequate, proposed pleading to that effect. To state a claim for breach of contract in Kansas, a party must plead "(1) the existence of a contract between the parties; (2) sufficient consideration to support the contract; (3) the plaintiff's performance or willingness to perform in compliance with the contract; (4) the defendant's breach of the contract; and (5) damages to the plaintiff caused by the breach." Stechschulte v. Jennings, 298 P.3d 1083, 1098 (Kan. 2013).

In this instance the proposed Count VI Breach of Contract, after incorporating 96 preceding paragraphs, adds the following: "98. A contract existed between the parties, " that it was amended, that "Sufficient consideration existed to support the Contract and all amendments by the parties, " that Defendant "was willing to perform" it, that "102. State Farm, Fuchs and Earley breached the Contract, " and that Defendant "sustained damages as a result of the Breach." The Court cannot find that this proposed claim asserts a breach of any contract aside the one asserted by Plaintiffs as Exhibit A in their complaint. Paragraph 18 of the proposed amended pleading itself refers to that contract. Neither Mr. Fuchs nor Ms. Earley is a party to it. The proposed amended pleading, moreover, contains virtually no facts to support a contention that either of them either initially was or later became a party to, or as a principal, breached any contract. Except for identifying them in paragraphs 6 and 7 as members of the management of State Farm, the amended pleading says virtually nothing about them for the next 95 paragraphs. Paragraph 102, part of the claim for breach of contract, then states, "102. State Farm, Fuchs and Earley breached the Contract."

In its reply memorandum (ECF 47) Defendant addresses the subject as follows:

"Plaintiffs' complain that Defendant has failed to specifically identify any contract which it contends existed between the parties. To the contrary, it is clear from the specific factual allegations that there are two contracts referred to in the Defendant's First Amended Pleading. The first contract is the "Agreement" which is attached to Plaintiffs' Complaint. State Farm, through its agents, including Fuchs and Earley, clearly breached this Agreement and contract between the parties. Discovery will reveal whether or not Fuchs and Earley were acting in their individual or representative capacities when they breached the Agreement. This agreement was amended from time to time by the Course of the Conduct of the parties, by the unilateral amendments issued by State Farm and by the selective enforcement of various provisions. However, an additional agreement and contract existed between the parties when the contract was amended and/or a new agreement was created on April 26, 2013, when State Farm, Fuchs and Earley committed to the promise that GSF would continue to handle the subrogation files currently in its inventory to conclusion. This agreement between the parties was confirmed in writing on May 3, 2013, when Fuchs wrote, either individually or on behalf of his employer, that the parties "agreed that [GSF] would continue to handle the subrogation files currently in its inventory to conclusion." See Exhibit 1, attached hereto and incorporated herein by reference. See also, Proposed First Amended Pleading at para. 23, 25, 99. This is a binding promise which was subsequently breached. Discovery will reveal whether or not Fuchs and Earley were acting in their individual or representative capacities when they breached this subsequent Agreement. Defendant's breach of contract claim is based upon various alleged breaches, all set forth in the First Amended Pleading at paras. 24, 27, 28, 29, 30, 37, 41, 44-52, 80, 102." ECF 47 at p. 9.

So far as the Court can determine, the foregoing text is Defendant's first suggestion that its claim for breach of contract by Fuchs and Earley involves the second of "two contracts, " as shown by Exhibit 1 to the memorandum. The Court has read the nineteen, above-designated paragraphs of the proposed First Amended Pleading, to which the memorandum thus refers. But it finds virtually nothing in their content to adequately support a claim for breach of contract by Fuchs or Earley.

The Court has also read Exhibit 1 of the memorandum. That exhibit is a letter dated May 3, 2013, from John Fuchs as Team Manager State Farm Subrogation Services to Mark Ferguson of Gates, Shield & Ferguson, P.A. The letter reports an agreement between State Farm and Defendant. But the Court finds nothing in its content to support any reasonable inference that "an additional agreement and contract" was thereby created or intended, to which Mr. Fuchs, in addition to or instead of State Farm, would be a principal. Much less that Ms. Earley, copied on the letter, would now become a principal to a second contract.

Defendant has not addressed an obvious question that arises from its argument. If indeed its allegation of breach of contract refers to a second contract, to which Fuchs and Earley are parties, why does its proposed Count VI Breach of Contract not designate the letter as a contract? As already noted, the Court finds in that Count an allegation ...


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