895 F.2d 279 (7th Cir. 1989), 88-1540, R.J.R. Services, Inc. v. Aetna Cas. and Sur. Co.

Docket Nº:88-1540.
Citation:895 F.2d 279
Party Name:R.J.R. SERVICES, INC., individually, and d/b/a Ron Russell and Associates, and Ronald J. Russell, Plaintiffs-Appellants, v. AETNA CASUALTY AND SURETY COMPANY, et al., Defendants-Appellees.
Case Date:February 16, 1989
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 279

895 F.2d 279 (7th Cir. 1989)

R.J.R. SERVICES, INC., individually, and d/b/a Ron Russell

and Associates, and Ronald J. Russell, Plaintiffs-Appellants,

v.

AETNA CASUALTY AND SURETY COMPANY, et al., Defendants-Appellees.

No. 88-1540.

United States Court of Appeals, Seventh Circuit

February 16, 1989

Argued Sept. 28, 1988.

Page 280

Michael Baird, Stotis, Chionis Craven & Baird, Chicago, Ill., for plaintiffs-appellants.

Jean Faulhaber, Tressler Soderstrom Maloney & Priess, Chicago, Ill., for defendants-appellees.

Before CUDAHY, POSNER, and EASTERBROOK, Circuit Judges.

CUDAHY, Circuit Judge.

Plaintiffs-appellants R.J.R. Services, Inc., doing business as Ron Russell and Associates, and Ronald J. Russell (collectively "Russell") commenced this diversity suit against a group of insurance companies (collectively "Aetna"), 1 alleging that Aetna committed the torts of malicious prosecution and abuse of process by filing a prior action against the plaintiffs in Michigan state court. Pursuant to Aetna's motion, the district court dismissed the action for failure to state a claim upon which relief could be granted. We affirm.

I.

This matter arises out of a fire which damaged several commercial buildings in Iron Mountain, Michigan in February of 1982. The owners of those buildings that were insured against fire loss received certain sums from their respective insurance companies, including Aetna. One of the buildings, the Ace Drug Building, was insured by C.N.A. Insurance Company ("CNA"), which retained the fire investigative firm of Ron Russell and Associates to ascertain the cause and origin of the fire. Subsequently, Aetna, through its attorney James A. Morrison, instituted an action against Renee Savoie, the owner of the Ace Drug Building, alleging that Mr. Savoie was responsible for the fire. CNA assumed the defense of the suit pursuant to its insurance policy with Mr. Savoie.

On February 6, 1985, after the litigation had been pending for more than a year, Morrison wrote to CNA requesting payment of $423,085 to settle the action. The letter threatened that if settlement could not be obtained soon, Aetna might add Russell as a defendant in the Michigan action for committing fraud and tortiously interfering with property rights while conducting the fire investigation. Shortly thereafter, on February 11, 1985, Aetna filed the threatened suit alleging, inter alia, that Russell had fraudulently removed and altered physical evidence necessary to the fire investigation.

The parties to the Michigan action eventually reached a settlement agreement in which CNA agreed to pay Aetna $160,000. Pursuant to this agreement, Morrison, on behalf of Aetna, released all claims (including those claims against Russell). Additionally, Morrison and counsel for Russell executed a stipulation and order of dismissal with prejudice.

Thereafter, Russell commenced this lawsuit charging Aetna with malicious prosecution and abuse of process in connection with the Michigan action. The district court dismissed the action on the merits in accordance with Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim under Michigan law. We affirm.

II.

In reviewing a Rule 12(b)(6) motion to dismiss for failure to state a claim, we, of course, accept as true all well-pleaded factual allegations and inferences reasonably

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drawn from those facts. Kush v. American States Ins. Co., 853 F.2d 1380, 1382 (7th Cir.1988) (citing Forys v. United Food & Commercial Worker's Int'l Union, 829 F.2d 603, 604 (7th Cir.1987)). However, we are not obliged to ignore any facts set forth in the complaint that undermine the plaintiff's claim or to assign any weight to unsupported conclusions of law. Gray v. County of Dane, 854 F.2d 179, 182 (7th Cir.1988) (citations omitted). Dismissal is proper if it appears beyond doubt that the plaintiff could prove no set of facts in support of his claim that would entitle him to the relief requested. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Dunn v. Peabody Coal Co., 855 F.2d 426, 427 (7th Cir.1988) (citing Pryzina v. Ley, 813 F.2d 821, 822 (7th Cir.1987) (per curiam) (citing Fromm v. Rosewell, 771 F.2d 1089, 1091 (7th Cir.1985), cert. denied, 475 U.S. 1012, 106 S.Ct. 1188, 89 L.Ed.2d 304 (1986))). If the complaint fails to allege a requisite element necessary to obtain relief, dismissal is in order. See Powe v. City of Chicago, 664 F.2d 639 (7th Cir.1981); Cannon v. Univ. of Chicago, 648 F.2d 1104 (7th Cir.), cert. denied, 454 U.S. 1128, 102 S.Ct. 981, 71 L.Ed.2d 117 (1981); 2A J. Moore, Moore's Federal Practice p 12.07[2.-5], at 12-68 & n. 19 (2d ed. 1987). In the instant case, Russell contends that the court below relied improperly on facts beyond the pleadings in deciding to dismiss pursuant to Rule 12(b)(6). 2 Indeed, if matters outside the pleadings are presented to and considered by the court in connection with a motion to dismiss, the district court is required to treat the motion to dismiss as a summary judgment motion. Beam v. IPCO Corp., 838 F.2d 242, 244 (7th Cir.1988) (citing National Family Ins. Co. v. Exchange Nat'l Bank, 474 F.2d 237, 239 (7th Cir.), cert. denied, 414 U.S. 825, 94 S.Ct. 129, 38 L.Ed.2d 59 (1973); Fed.R.Civ.P. 12(b)). Failure to make this conversion and to provide litigants with appropriate notice to permit supplementation of the record can constitute reversible error. Id. (citing Carter v. Stanton, 405 U.S. 669, 671, 92 S.Ct. 1232, 1234, 31 L.Ed.2d 569 (1972)). A dismissal without the proper conversion, however, may be approved if the standards for a Rule 12(b)(6) dismissal are met without reference to the extrinsic material. 2A J. Moore, Moore's Federal Practice p 12.09 at 12-82 n. 8 (citing Medina v. Rudman, 545 F.2d 244 (1st Cir.1976), cert. denied, 434 U.S. 891, 98 S.Ct. 266, 54 L.Ed.2d 177 (1977); O'Brien v. DiGrazia, 544 F.2d 543 (1st Cir.1976), cert. denied, 431 U.S. 914, 97 S.Ct. 2173, 53 L.Ed.2d 223 (1977); Gordon v. Nat'l Youth Work Alliance, 675 F.2d 356 (D.C.Cir.1982)). Therefore, even if the court below relied improperly on facts beyond the pleadings (which is not altogether clear), we can affirm the court's order because the face of the complaint itself meets the standards for dismissal under Rule 12(b)(6). 3

  1. Malicious Prosecution

    The parties agree apparently with the district court's determination that Michigan

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    law applies to Russell's claims. 4 Under Michigan law, the essential elements of a malicious prosecution action include: (1) termination of the prior proceedings in favor of the present plaintiff; (2) absence of probable cause for the prior proceeding; (3) malice, defined as a purpose other than that of securing the proper adjudication of the claim; and (4) a special injury that flows directly from the prior proceedings. Kauffman v. Shefman, 169 Mich.App. 829, 426 N.W.2d 819, 821 (1988) (citing Young v. Motor City Apartments Ltd., 133 Mich.App. 671, 675, 350 N.W.2d 790 (1984) (citing Friedman v. Dozorc, 412 Mich. 1, 48, 312 N.W.2d 585 (1981))).

    Recently, Michigan courts have reaffirmed their adherence to the above-noted "special injury" requirement--otherwise called the "English Rule." Although the precise definition of "special injury" is an enigma, the Michigan Supreme Court has instructed...

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