UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK
March 31, 2006
ALBERT CHAFFEE AND DEBORAH CHAFFEE, PLAINTIFFS,
FARMERS NEW CENTURY INSURANCE COMPANY, DEFENDANT.
The opinion of the court was delivered by: Scullin, Senior Judge
MEMORANDUM-DECISION AND ORDER
Plaintiffs Albert and Deborah Chaffee brought this action against Defendant Farmers New Century Insurance Company under New York's contract law and its General Business Law § 349 in relation to a Homeowners Insurance Policy that Defendant sold to Plaintiffs. Plaintiffs contend that Defendant failed to satisfy its obligation under the policy and, therefore, breached the contract between them and violated New York's General Business Law.*fn1 As a result, Plaintiffs contend that they have been damaged in an amount exceeding $150,000.
Currently before the Court are Defendant's motion to dismiss Plaintiffs' complaint and proposed amended complaint in their entirety pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and Plaintiffs' cross-motion for leave to amend their complaint pursuant to Rule 15(a) of the Federal Rules of Civil Procedure.
Defendant is an insurance company licensed by the New York Department of Insurance to conduct the business of insurance in New York State and regularly does so in Tompkins County, New York.*fn3 Plaintiffs are residents of Tompkins County, New York.
On August 24, 2003, Plaintiffs entered into a Homeowners Insurance agreement (the "insurance agreement" or "contract") with Defendant.*fn4 Under the terms of the insurance agreement, Defendant agreed to pay Plaintiffs a certain amount of money, calculated in accord with the insurance agreement's terms, in the event of a loss to Plaintiffs' property.
On December 28, 2003, Plaintiffs suffered a loss to their insured property.*fn5 Thereafter, they submitted a claim to Defendant for those losses. The parties failed to reach an agreement as to the actual value of Plaintiffs' claim. As a result, on December 28, 2004, Plaintiffs commenced this action against Defendant for breach of contract and for a violation of New York General Business Law § 349. On October 14, 2005, in response to Defendant's motion to dismiss, Plaintiffs sought leave to amend their complaint.
A. Standards of Review
1. Leave to Amend
Rule 15(a) requires that "leave [to amend] shall be freely given when justice so requires." See Fed. R. Civ. P. 15(a). In this Circuit, a court should grant leave to amend unless the party seeking leave has acted in bad faith or the nonmoving party will be prejudiced by the amendment. See Shade v. Hous. Auth. of City of New Haven, No. 3:94-CV-00774, 1998 WL 351473, *1 (D. Conn. June 12, 1998) (citations omitted). However, "the Court shall not permit amendment where the new claim cannot withstand a motion to dismiss." Riordan v. Nationwide Mut. Fire Ins. Co., 756 F. Supp. 732, 737 (S.D.N.Y. 1990) (citing Forman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed. 2d 222 (1962)).
Plaintiffs' proposed amended complaint contains claims for (1) breach of contract and (2) a General Business Law § 349 violation. Defendant does not argue that it would suffer prejudice from the timing of the proposed amendment, and there is none apparent. Moreover, Defendant does not allege that Plaintiffs are acting in bad faith. Against this backdrop, the Court will "consider the amended claims' ability to survive defendant's motion to dismiss dispositive of both the motion" and Plaintiff's cross-motion for leave to file an amended complaint.*fn6 Id.
2. Motion to Dismiss
Under Rule 12(b)(6), a court has authority to dismiss a complaint for failure to state a claim for which relief can be granted. See Fed. R. Civ. P. 12(b)(6). When evaluating a motion to dismiss, the court construes the pleadings in the light most favorable to the pleader and accepts all alleged facts as true. See Desiano v. Warner-Lambert Co., 326 F.3d 339, 347 (2d Cir. 2003) (citation omitted). Moreover, a court should only dismiss a complaint when "'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id. (quotation omitted). Nonetheless, a court should dismiss a complaint that "'consists of conclusory allegations unsupported by factual assertions . . . .'" Americorp Fin., Inc. v. St. Joseph's Hosp. Health Ctr., 180 F. Supp. 2d 387, 390 (N.D.N.Y. 2001) (quoting De Jesus v. Sears, Roebuck & Co., 87 F.3d 65, 70 (2d Cir. 1996)). Finally, when assessing the merits of a motion to dismiss, the court is limited to the facts stated in the complaint, "to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit." Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993) (citation omitted).
B. Breach of Contract Claim
Under New York law, "to establish a claim for breach of contract, a plaintiff must prove the following elements: (1) the existence of a contract; (2) breach by the other party; and (3) damages suffered as a result of the breach." Americorp Fin., 180 F. Supp. 2d at 390 (citing Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir. 2000)). At the pleading stage, a "plaintiff must provide specific allegations as to an agreement between the parties, the terms of that agreement, and what provisions of the agreement were breached as a result of the acts at issue." Id. (citation omitted).
In this case, although the existence of a contract between the parties is not in dispute, Plaintiffs' proposed amended complaint fails to provide Defendant with notice of the contractual provision(s) that it allegedly breached. Rather, Plaintiffs merely allege that "Farmers has breached the Homeowners Policy issued to Chaffee by refusing to pay the amounts due Chaffee under the terms of the policies." See Plaintiffs' Proposed Amended Complaint at ¶ 17. Without the required specifics, Plaintiffs' proposed amended complaint cannot withstand Defendant's motion to dismiss, and the Court could deny Plaintiffs' request for leave to amend their breach of contract claim on this ground alone. See Riordan, 756 F. Supp. at 737 (citation omitted).
Alternatively, the Court notes that Plaintiffs' proposed amendment to their breach of contract claim is deficient because the factual allegations supporting that claim are conclusory.
Plaintiffs simply assert that Defendant breached the contract by refusing to pay the amounts due Plaintiffs, by unreasonably delaying the review, evaluation, and adjustment of Plaintiffs' claim, by making misrepresentations regarding benefits, and by breaching various agreements with Plaintiffs. See Plaintiffs' Proposed Amended Complaint at ¶¶ 17-20. These conclusory allegations, unsupported by factual assertions, are insufficient to withstand Defendant's motion to dismiss and provide an alternative ground for the Court to deny Plaintiffs' motion for leave to amend this claim.*fn7
Nonetheless, in light of the fact that the Court will grant Plaintiffs' motion for leave to amend their General Business Law § 349 claim, see infra, the Court will also allow Plaintiffs to amend their breach of contract claim, but not in the form that they propose. In this regard, the Court instructs Plaintiffs that, in any amended complaint that they file, they must allege the specific provision(s) of the insurance agreement that they claim Defendant breached and the specific damages that they suffered as a result of that breach.
C. General Business Law § 349 Claim
Under New York's General Business Law, "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service" are illegal. N.Y. Gen. Bus. Law § 349(a) (McKinney 1988). As a threshold matter, "a plaintiff must demonstrate that the § 349 claim implicates 'consumer oriented' conduct by the defendant." Shapiro v. Berkshire Life Ins. Co., 212 F.3d 121, 126 (2d Cir. 2000) (citation omitted). In order to be considered consumer-oriented, the defendant's conduct must have ""'a broader impact on consumers at large . . . ."'" Id. (citation omitted). "Although this requirement has been construed fairly liberally, . . . 'private contract disputes unique to the parties . . . [do] not fall within the ambit of the statute." Sichel v. Unum Provident Corp., 230 F. Supp. 2d 325, 330 (S.D.N.Y. 2002) (quoting New York Univ., 87 N.Y.2d at 320, 639 N.Y.S.2d 283, 662 N.E.2d 763).
If a plaintiff can satisfy this threshold requirement, the plaintiff must then plead "'that the defendant has engaged in an act or practice that is deceptive or misleading in a material way and that plaintiff has been injured by reason thereof.'" Shapiro, 212 F.3d at 126 (quotation omitted). New York law defines a "'deceptive act or practice' . . . as a representation or omission 'likely to mislead a reasonable consumer acting reasonably under the circumstances.'" Id. (quoting Oswego Laborers', 623 N.Y.S.2d at 533, 647 N.E.2d 741).
As an initial matter, the Court must determine whether Defendant's alleged acts were consumer-oriented or directed at Plaintiffs alone. Plaintiffs allege that Defendant advertised, promoted and sold insurance policies "to the public at large [and represented] that these policies provide exceptional and enhanced insurance coverage and claim adjustment proceedings, thereby lulling the consumers in the public at large with a sense of greater and comprehensive insurance protection." See Plaintiffs' Proposed Amended Complaint at ¶ 31. Moreover, Plaintiffs allege that Defendant sold these policies to the public at large and that these policies were "misleading . . . in that the policies contain contradictory, false, and misleading terms and provisions that permit Farmers to deny or delay insurance coverage rather than provide exceptional and enhanced insurance coverage . . . ." See id. at ¶ 36.
Although Plaintiffs' allegations are more general than specific, the Court finds that Plaintiffs allege sufficient facts to demonstrate that Defendant's conduct was consumer-oriented. In Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., the New York Court of Appeals reasoned that the plaintiff satisfied the consumer-oriented threshold where defendant Bank dealt with plaintiffs' representative as any customer entering the bank to open a savings account, furnishing the Funds with standard documents presented to customers upon the opening of accounts. The account openings were not unique to these two parties, nor were they private in nature or a "'single shot transaction.'"
85 N.Y.2d 20, 26 (1995) (quotation omitted).
As with Oswego Laborers' Local, Plaintiffs do not allege that their insurance agreement with Defendant was a single shot transaction. Rather, they allege that Defendant misled them and the public by promoting deceptive and misleading insurance policies. Moreover, there is nothing in the record to suggest that the insurance agreement between Plaintiffs and Defendant was anything other than a standard insurance agreement and one which any member of the public could have entered into with Defendant.*fn8 Under Rule 12(b)(6)'s liberal pleading requirements, Plaintiffs have sufficiently alleged that Defendant's conduct had ""'a broader impact on consumers at large . . . ."'" Shapiro, 212 F.3d at 126 (quotation omitted).
Having satisfied the threshold requirement to proceed on a § 349 claim, the Court must consider whether Defendant's alleged misrepresentations were material. As previously noted, New York law defines a "'deceptive act or practice' . . . as a representation or omission 'likely to mislead a reasonable consumer acting reasonably under the circumstances.'" Shapiro, 212 F.3d at 126 (quoting Oswego Laborers', 623 N.Y.S.2d at 533, 647 N.E.2d 741). Plaintiffs have alleged, in essence, that Defendant lured them into purchasing this insurance agreement by promoting the policy as "exceptional and enhanced insurance coverage." However, when it came time to enjoy the benefit of the policy, Plaintiffs discovered that it contained false and misleading terms. Accepting Plaintiffs' facts as true, it appears that Plaintiffs are alleging that they bought Defendant's policy for the "exceptional and enhanced insurance coverage" but that they have not been able to benefit from the policy's protection because of Defendant's alleged protracted campaign to deny or delay their claim which is due, in part, to false and misleading terms in the policy.*fn9 In light of these allegations, the Court finds that Plaintiffs have adequately pled materiality under § 349.
As to actual injury, Plaintiffs assert that Defendant's alleged misrepresentations have injured them and the public. Specifically, Plaintiffs allege that they have suffered actual injury because Defendant has not yet paid them for the damages to their home which, they contend, is covered under the insurance agreement, and that they have incurred substantial costs by retaining an attorney to pursue this claim. In essence, Plaintiffs assert that, because they bought the insurance agreement due to Defendant's alleged misrepresentations and later discovered false and misleading terms in the insurance agreement which have prevented them from receiving the benefit of the contract, they have been damaged. Having shown a causal connection between the alleged deceptive acts and the injury sustained, the Court finds that Plaintiffs have properly pled injury as a result of Defendant's misrepresentations.*fn10
Accordingly, the Court concludes that the allegations regarding the § 349 claim in Plaintiffs' proposed amended complaint are sufficient to withstand Defendant's motion to dismiss; and, thus, the Court grants Plaintiffs' motion to amend this claim as they propose.
After carefully reviewing the entire file in this matter, the parties' submissions, and the applicable law, and for the reasons stated herein, the Court hereby
ORDERS that Plaintiffs' motion to amend their complaint pursuant to Rule 15(a) of the Federal Rules of Civil Procedure is GRANTED;*fn11 and the Court further
ORDERS that Plaintiffs shall file an amended complaint consistent with the terms of this Order within thirty (30) days of the date of this Order;*fn12 and the Court further
ORDERS that Defendant's motion to dismiss pursuant to Rule 12(b)(6) is DENIED without prejudice and with leave to renew after it has had an opportunity to review Plaintiffs' amended complaint.
IT IS SO ORDERED.