762 Fed.Appx. 256 (6th Cir. 2019), 18-1588, Waad v. Farmers Ins. Exchange

Docket Nº:18-1588
Citation:762 Fed.Appx. 256
Opinion Judge:SUHRHEINRICH, Circuit Judge.
Party Name:Maher WAAD; Marks One Car Rental, Incorporated; Marks One Collision, Plaintiffs-Appellants, v. FARMERS INSURANCE EXCHANGE, a California Corporation; Allen Keller; Thomas Berry, Defendants-Appellees.
Attorney:Patrick J. Drake, Plymouth, MI, for Plaintiffs-Appellants Robert Hugh Ellis, Dykema Gossett, Detroit, MI, Jill Margaret Wheaton, Dykema Gossett, Ann Arbor, MI, for Defendants-Appellees
Judge Panel:BEFORE: COLE, Chief Judge, SUHRHEINRICH and MOORE, Circuit Judges. KAREN NELSON MOORE, Circuit Judge, concurring in the judgment.
Case Date:January 30, 2019
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 256

762 Fed.Appx. 256 (6th Cir. 2019)

Maher WAAD; Marks One Car Rental, Incorporated; Marks One Collision, Plaintiffs-Appellants,

v.

FARMERS INSURANCE EXCHANGE, a California Corporation; Allen Keller; Thomas Berry, Defendants-Appellees.

No. 18-1588

United States Court of Appeals, Sixth Circuit

January 30, 2019

UNPUBLISHED

Editorial Note:

Please Refer Federal Rule of Appellate Procedure Rule 32.1. See also U.S.Ct. of App. 6th Cir. Rule 32.1.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN

Patrick J. Drake, Plymouth, MI, for Plaintiffs-Appellants

Robert Hugh Ellis, Dykema Gossett, Detroit, MI, Jill Margaret Wheaton, Dykema Gossett, Ann Arbor, MI, for Defendants-Appellees

BEFORE: COLE, Chief Judge, SUHRHEINRICH and MOORE, Circuit Judges.

OPINION

SUHRHEINRICH, Circuit Judge.

This appeal stems from the third of three cases filed by Maher Waad, Marks One Car Rental, Inc., and Marks One Collision (collectively, "Plaintiffs") against Farmers Insurance Exchange ("Farmers") after Farmers accused Plaintiffs of insurance fraud. The district court dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6) because Plaintiffs improperly split their claims among the three

Page 257

lawsuits and engaged in duplicative litigation. We AFFIRM.

I.

Waad owns Marks One Car Rental and Marks One Collision. Marks One Collision is an automobile collision repair business that specializes in repairing cars covered by insurance, including Farmers. After repairing a damaged vehicle, Plaintiffs would submit the repair bill directly to Farmers. Farmers employees Allen Keller and Scott Wood investigated Plaintiffs’ businesses for insurance fraud in late 2013. After reviewing Plaintiffs’ records and interviewing Plaintiffs’ customers, Keller and Wood produced a report concluding that Plaintiffs were indeed engaging in insurance fraud by submitting receipts for repair work not actually performed. Farmers sent the report to Macomb County, Michigan law enforcement, which it was authorized to do under MICH. COMP. LAWS § 500.4507. Macomb County law enforcement then conducted its own investigation, raided Plaintiffs’ businesses on April 23, 2014, and arrested Waad four days later. Waad was bound over for trial by the Macomb County district court, but the information against him was eventually quashed by Macomb County circuit court for lack of probable cause.

According to Plaintiffs, the investigation and report were merely an excuse to harm Waad— an Arab-American— and his businesses because of racial animus. Plaintiffs reacted to the Farmers investigation and Farmers’ coordination with Macomb County law enforcement by filing lawsuits in 2013, 2016, and 2017.

A.

In the first iteration— the "2013 Case"— Plaintiffs sued Farmers and six other insurance companies for tortious interference, defamation, violation of Michigan’s consumer protection act, civil conspiracy, and racial discrimination under 42 U.S.C. § 1981. Plaintiffs alleged that, during Farmers’ investigation, Farmers’ employees made direct contact with Plaintiffs’ customers and made defamatory comments accusing Plaintiffs of criminal activity in a concerted effort to harm Plaintiffs’ businesses.

On January 8, 2014, Plaintiffs first amended their 2013 complaint for reasons not relevant here. On April 23, 2014, Macomb County law enforcement raided Plaintiffs’ businesses. Waad was arrested four days later. On May 28, 2014, Plaintiffs filed a second amended complaint, adding factual allegations that Farmers and its employees, including Tom Berry, were cooperating with Macomb County law enforcement: Despite the Corporate level acknowledgement and clear notice ... of the racially motivated conduct of its employees ... Defendant Farmers Insurance continues to employ ... Tom Berry, who continue[s] to engage in overt acts of vengeful and racially motivated intimidation and tortious interference with Plaintiff Marks One Car Rental and Marks One Collision. The efforts of ... Berry have included such retaliatory acts as contacting the Plaintiff’s customer base and directly communicating with representatives of the Macomb County Auto Theft Task Force (MCATS) as a means of attempting to deflect and cover up their racist and tortious conduct.

*** Immediately following the filing of this suit, ... Special Investigative Unit agent Tom Berry [ ] directly solicited members of law enforcement, including Detective John Willis of the Macomb County Auto Theft Task Force (MCATS), to threaten, intimidate and

Page 258 harass the Plaintiff’s customer base as a direct means of obstructing this Federal Court action and tampering with potential witnesses.

Curiously, however, Plaintiffs’ second amended complaint did not include any claims regarding the raid or Waad’s arrest.

The district court barred the filing of any further changes to the second amended complaint. Following months of motion practice, three things happened. One, the district court eventually dismissed the claims against the other insurance companies. Two, Plaintiffs’ counsel, Steven Haney, withdrew after the insurance companies filed numerous motions to disqualify him because he formerly served as legal counsel to Farmers. Three, the district court granted Farmers’ summary judgment motion, holding that Plaintiffs failed to establish any damages to their business or harm to their reputation due to Farmers’ actions. Plaintiffs appealed the grant of summary judgment on the defamation issue, and that appeal is also before this panel. See Marks One Car Rental, Inc. et al. v. Auto Club Ins. Co., et al., Case No. 18-1386.

B.

On December 5, 2014, while the 2013 Case was still pending, Waad was bound over for trial by a Michigan district court. On March 9, 2015, a Michigan circuit court quashed the information, holding that there was a lack of probable cause to prosecute Waad. The Michigan Court of Appeals affirmed the circuit court’s ruling. See People v. Waad, No. 326568, 2016 WL 3088182 (Mich. Ct.App. May 31, 2016). This led to the second iteration— the "2016 Case"— where Plaintiffs sued Farmers again under 42 U.S.C. § 1983 for false arrest, false imprisonment, and malicious prosecution, and other assorted state law charges based on the April 23, 2014 raid on Plaintiffs’ businesses and Waad’s arrest. This time, Plaintiffs added as defendants Farmers’ employee Allen Keller and various Macomb County law enforcement officials. Relevant here are allegations that Farmers and its employees were acting in concert with Macomb County law enforcement: [O]n or about the date of September 12th, 2013, the [Macomb Auto Theft Squad] ... was contacted by Defendant Keller of Farmers Insurance, who requested a meeting to discuss a potential fraud complaint on behalf of Farmers Insurance. The purpose of this meeting was for Defendant Farmers to propose criminal charges be brought against Plaintiff Waad based upon a contentious history with claims adjusters and the belief Plaintiff Waad had been paid too much money by Defendant Farmers Insurance.

*** At this same September 12th, 2013 meeting, representatives of Defendant Farmers Insurance advised [law officers], as well as the Macomb County Prosecutor’s Office, they suspected Plaintiff Waad of charging inflated and fictitious tow bills, extending the length of repairs to increase the charges for rental cars provided by Marks One Collision Shop and enhancing claims on vehicles that were being repaired at Plaintiff Waad’s collision shop.

*** At the conclusion of this initial September 12th, 2013 meeting, Defendants Farmers and Keller stated that they were going to conduct physical damage inspections on several of the vehicles that had been repaired by Marks One Collision.... Then, based on their findings, they would submit their investigative findings to the M.A.T.S. unit, as well

Page 259 as the Macomb County Prosecutor’s Office, for anticipated criminal prosecution. Undeniably, by all factual accounts, Defendant Farmers Insurance was the party which initiated the failed criminal prosecution of Plaintiff Maher Waad.

The district court dismissed Farmers and Keller sua sponte under Rule 12(b)(6) because Plaintiffs did not allege that Farmers and Keller were state actors or that they acted in concert with state actors, so Plaintiffs "[did] not plead plausible claims against [them] under § 1983." The district court did not reference the 2013 Case in its order.

C.

Seven-and-a-half months after Farmers and Keller were dismissed from the 2016 Case, Plaintiffs filed a third lawsuit, the "2017 Case." In this action, Plaintiffs again brought claims tracing back to the raid and Waad’s arrest. This time, Plaintiffs corrected their earlier failure and alleged that Farmers, Keller, and Berry, acting in concert with Macomb County law enforcement, violated the Fourth and Fourteenth Amendments by committing false arrest, false imprisonment, and unreasonable search and seizure; malicious prosecution under the Constitution and state law; civil conspiracy; and statutory and common-law conversion. The 2017 complaint differed from the 2016 complaint in two main respects: (1) the addition of Berry as a defendant and (2) allegations that Farmers, Keller, and Berry acted in concert with Macomb County law enforcement.

Farmers, Keller, and Berry moved to dismiss the 2017 Case under Rule 12(b)(6) for improper claim splitting, duplicative litigation, and res judicata. The district court granted the motion on claim-splitting and duplicative-litigation grounds and dismissed the 2017 Case in its entirety. Specifically, the district court held that the allegations in the 2013, 2016, and 2017 Cases were all based upon the same set of...

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