UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK
February 10, 2009
ANNE K. CHERNISH, PLAINTIFF,
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, DEFENDANT.
The opinion of the court was delivered by: George H. Lowe, United States Magistrate Judge
1. The Complaint
According to the Complaint (Dkt. No. 1-2), on or about March 16, 1987, Defendant Massachusetts Mutual Life Insurance Company ("Mass Mutual") sold to Plaintiff Anne K. Chernish a disability income insurance policy that was to expire 30 years later. In or about 1988 Plaintiff became ill, ultimately developing a chronic, permanent and untreatable medical condition diagnosed as orthostatic hypotension, autonomic dysfunction, and complete AV block, and, more recently, Crohn's Disease. This illness includes a disorder of the nervous system, chronic migraine headaches and chronic fatigue, among other disabling sequelae.
Dkt. No. 1-2, at ¶5.
In 1988 Plaintiff filed a claim for benefits under the policy, and, "after an unsuccessful contest, [Mass Mutual] paid benefits." Id. at ¶7. For reasons that are not clear from the Complaint, benefit payments apparently were stopped, and in 2001 and 2004 Plaintiff renewed her claim for benefits. Mass Mutual has not denied these claims nor has it renewed the payment of benefits. The Complaint alleges that throughout this period Plaintiff "has been disabled within the meaning of the policy, and is entitled to full benefits." Id. at ¶12.
In her First Cause of Action Plaintiff asserts a breach of contract, and claims to have been damaged by, inter alia, "loss of benefits under the policy; loss of premiums; obligation for legal fees and other consequential damages as allowed by law; expenses." Id. at ¶20.
In her Second Cause of Action Plaintiff asserts a breach of the covenant of good faith and fair dealing. She alleges that:
The systematic and exclusionary misconduct on the part of the defendant includes but is not limited to: delaying the payment of claims; requiring unreasonable and repeated production of documents; making unreasonable settlement offers before engagement of counsel; engaging in unlawful surveillance; denying coverage of legitimate claims; and otherwise acting in bad faith.
Id. at ¶24. In this regard she alleges that she has been damaged by, inter alia, loss of the benefit of the bargain; loss of insurance benefits including peace of mind, the comfort and knowledge of protection against disaster and loss; pain, suffering, inconvenience and mental anguish; loss of enjoyment of life; loss of dignity; expenditure of unreasonable amounts of time in pursing [sic] her claims herein.
Id. at ¶26.
In her Third Cause of Action Plaintiff alleges that Mass Mutual has violated New York General Business Law ("GBL") § 349, which prohibits deceptive acts and practices.
2. The Motion
Mass Mutual has moved, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for dismissal of the Complaint's Second and Third Causes of Action, "and to strike plaintiff's request for attorney's fees." Dkt. No. 4-5, at 3. Plaintiff opposed the motion (Dkt. No. 6), and Mass Mutual filed a reply memorandum of law. Dkt. No. 7.
3. Legal Standards Governing Motion To Dismiss
Under Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). It has long been understood that a defendant may base such a motion on either or both of two grounds: (1) a challenge to the "sufficiency of the pleading" under Federal Rule of Civil Procedure 8(a)(2);*fn1 or (2) a challenge to the legal cognizability of the claim.*fn2
Rule 8(a)(2) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2) [emphasis added]. By requiring this "showing," Rule 8(a)(2) requires that the pleading contain a short and plain statement that "give[s] the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests."*fn3 The main purpose of this rule is to "facilitate a proper decision on the merits."*fn4 A complaint that fails to comply with this rule "presents far too heavy a burden in terms of defendants' duty to shape a comprehensive defense and provides no meaningful basis for the Court to assess the sufficiency of [plaintiff's] claims."*fn5
The Supreme Court has long characterized this pleading requirement under Rule 8(a)(2) as "simplified" and "liberal," and has repeatedly rejected judicially established pleading requirements that exceed this liberal requirement.*fn6 However, it is well established that even this liberal notice pleading standard "has its limits."*fn7 As a result, several Supreme Court and Second Circuit decisions exist, holding that a pleading has failed to meet this liberal notice pleading standard.*fn8
Most notably, in the recent decision of Bell Atlantic Corporation v. Twombly, the Supreme Court, in reversing an appellate decision holding that a complaint had stated an actionable antitrust claim under 15 U.S.C. § 1, "retire[d]" the famous statement by the Court in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 127 S.Ct. 1955, 1968-69 (2007).*fn9 Rather than turning on the conceivability of an actionable claim, the Court clarified, the Rule 8 "fair notice" standard turns on the plausibility of an actionable claim. Id. at 1965-74.
More specifically, the Court reasoned that, by requiring that a pleading "show that the pleader is entitled to relief," Rule 8(a)(2) requires that the pleading give the defendant "fair notice" of (1) the nature of the claim and (2) the "grounds" on which the claim rests. Id. at 1965, n.3 [citation omitted]. While this does not mean that a pleading need "set out in detail the facts upon which [the claim is based]," it does mean that the pleading must contain at least "some factual allegation[s]." Id. [citations omitted]. More specifically, the "[f]actual allegations must be enough to raise a right to relief above the speculative level [to a plausible level]," assuming (of course) that all the allegations in the complaint are true. Id. at 1965 [citations omitted]. What this means, on a practical level, is that there must be "plausible grounds to infer [actionable conduct]," or, in other words, "enough fact to raise a reasonable expectation that discovery will reveal evidence of [actionable conduct]." Id.
As have other Circuits, the Second Circuit has repeatedly recognized that the clarified plausibility standard that was articulated by the Supreme Court in Twombly governs all claims, not merely antitrust claims brought under 15 U.S.C. § 1 (as were the claims in Twombly).*fn10
It should be emphasized that Rule 8's plausibly standard, explained in Twombly, was in no way retracted or diminished by the Supreme Court's decision (two weeks later) in Erickson v. Pardus, in which the Court stated, "Specific facts are not necessary" to successfully state a claim under Fed. R. Civ. P. 8(a)(2). Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) [citation omitted]. That statement was merely an abbreviation of the often-repeated point of law--first offered in Conley and repeated in Twombly--that a pleading need not "set out in detail the facts upon which [the claim is based]" in order to successfully state a claim. Twombly, 127 S.Ct. 1965, n.3 (citing Conley v. Gibson, 355 U.S. 41, 47 ). That statement in no way meant that all pleadings may achieve the requirement of giving a defendant "fair notice" of the nature of the claim and the "grounds" on which the claim rests without ever having to allege any facts whatsoever.*fn11 There must still be enough facts alleged to raise a right to relief above the speculative level to a plausible level, so that the defendant may know what the claims are and the grounds on which they rest (in order to shape a defense).
Having said all of that, it should also be emphasized that, "[i]n reviewing a complaint for dismissal under Fed. R. Civ. P. 12(b)(6), the court must accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor."*fn12
4. The Second Cause of Action
Mass Mutual argues that the Second Cause of Action should be dismissed "because New York law does not recognize a breach of the covenant of good faith and fair dealing as a cause of action separate and distinct from a breach of contract claim when the conduct arises out of the administration of a contract of insurance." Dkt. No. 4-5, at 3. Assuming arguendo that this is an accurate statement of the applicable law as of February 18, 2008, the issue before this Court is the impact of the New York Court of Appeals' decisions of the following day in Bi-Economy Market Inc. v. Harleysville Insurance Company of New York, 10 N.Y.3d 187, 856 N.Y.S.2d 505, 886 N.E.2d 127 (2008), and Panasia Estates, Inc. v. Hudson Insurance Company, 10 N.Y.3d 200, 886 N.E.2d 135 (2008). In Panasia Estates, the Court of Appeals stated, in reliance on its decision in Bi-Economy Market, that "consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were 'within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.'" Id. at 203.
Faced with these recent decisions, Mass Mutual argues that Plaintiff has failed to set forth in her Complaint "the allegations that a party must plead to sustain a cause of action to recover consequential damages." Dkt. No. 7, at 5. This Court disagrees, and finds that the allegations set forth in paragraphs "20" and "26" of the Complaint meet the "simplified" and "liberal" plausibility standard of Rule 8(a)(2). See Chaffee v. Farmers New Century Ins. Co., 2008 WL 4426620, at *4 (N.D.N.Y. Sept. 24, 2008) (finding as sufficient allegations of "consequential damages for distress, aggravation, inconvenience, and alternative living expenses").*fn13
In addition, the Court finds that these alleged consequential damages "were 'within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.'" Panasia Estates, 10 N.Y.3d at 203. To paraphrase the Court in Bi-Economy, "the very purpose of [disability income insurance] would have made [Mass Mutual] aware that if it breached its obligations under the contract to investigate in good faith and pay covered claims it would have to respond in damages to [Plaintiff] for [the damages alleged in paragraph "26"]." Bi-Economy Market, 10 N.Y.3d at 195.
Mass Mutual also argues that "plaintiff cannot recover consequential damages for emotional injury." Dkt. No. 7 at 6. However, all of the cases that it relies upon pre-date Bi-Economy Market, a decision which might not be "an extraordinary expansion of governing law" (Dkt. No. 6, at 5), but it certainly has changed the landscape. In addition, Mass Mutual argues that Plaintiff cannot in essence assert a new claim in its opposition papers. She has not done so, even assuming arguendo that she has used "familiar tort language." Dkt. No. 7 at 3, n.1.
Accordingly, Mass Mutual's motion to dismiss Plaintiff's Second Cause of Action is denied.
5. The Third Cause of Action
Mass Mutual asserts that Plaintiff's Third Cause of Action, for violation of GBL § 349, does not "allege the threshold requirements of 'consumer-oriented' behavior and 'a deceptive act or practice.'" Dkt. No. 4-5, at 3. Mass Mutual is correct.
The Second Circuit has held that "an action under § 349 is not subject to the pleading-with-particularity requirements of Rule 9(b), Fed. R. Civ. P., but need only meet the bare-bones notice-pleading requirements of Rule 8(a)." Pelman Ex Rel. Pelman v. McDonald's Corp., 396 F.3d 508, 511 (2d Cir. 2005). However, this "bare-bones" requirement, under Bell Atlantic Corporation v. Twombly, as discussed above, means that the pleading must contain at least "some factual allegations" that are "enough to raise a right to relief above the speculative level [to a plausible level]." Twombly, 127 S.Ct. at 1965. Here, Mass Mutual is correct that "plaintiff does not provide a single factual allegation" to support her conclusory allegations.*fn14
Accordingly, Mass Mutual's motion to dismiss Plaintiff's Third Cause of Action is granted, without prejudice. Plaintiff shall have twenty days from the date of this Order to serve and file an Amended Complaint.
6. Plaintiff's Entitlement to Attorney's Fees
In reliance upon caselaw that pre-dates the Court of Appeals' decision in Bi-Economy Market, Mass Mutual argues that "an insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy." Dkt. No. 4-5, at 19, citing Kantrowitz v. Allstate Indem. Co., 48 A.D.3d 753, 754 (2d Dept. 2008).*fn15 However, as noted above, Bi-Economy Market has changed the landscape. The pleading stage is too early in the litigation to resolve Plaintiff's entitlement to attorney's fees.
Accordingly, Mass Mutual's motion to have Plaintiff's claim for attorney's fees dismissed is denied.
Based upon the foregoing, it is
ORDERED, that Mass Mutual's motion to dismiss Plaintiff's Second Cause of Action and
Plaintiff's claim for attorney's fees is DENIED; and it is further
ORDERED, that Mass Mutual's motion to dismiss Plaintiff's Third Cause of Action is GRANTED, without prejudice, and Plaintiff shall have twenty days from the date of this Order to serve and file an Amended Complaint.