Black Magic, LLC v. Hartford Fin. Servs. Grp.
| Decision Date | 12 March 2021 |
| Docket Number | Civil Action No. 2:20-cv-1743-BHH |
| Parties | BLACK MAGIC, LLC d/b/a BLACK MAGIC CAFE, on behalf of itself and all others similarly situated, Plaintiffs, v. THE HARTFORD FINANCIAL SERVICES GROUP, INC.; HARTFORD FIRE INSURANCE COMPANY; and TWIN CITY FIRE INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — District of South Carolina |
This matter is before the Court on Defendants The Hartford Financial Services Group, Inc.("HFSG") and Hartford Fire Insurance Company's ("HFIC") motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6). (ECF No. 14.) For the reasons set forth in this Order, the motion is granted.
Plaintiff Black Magic, LLC ("Black Magic") operates two restaurants in Charleston, South Carolina. On March 17, 2020, Governor Henry McMaster signed an Executive Order in response to the novel coronavirus (SARS-CoV-2) and the disease caused by this virus, COVID-19 (the "Virus"). The Executive Order, and other government regulations at the state and local level, had the effect of closing Black Magic for dine-in service. Black Magic alleges that it suffered business income losses as a result.
Defendant Twin City Fire Insurance Company ("Twin City") issued Spectrum Business Owner's Policy, No. 22 SBA AD5441 DV, effective July 16, 2019 to July 16, 2020, to Black Magic (the "Policy"). A copy of the Policy is attached to HFSG and HFIC's (collectively "Non-Writing Defendants") motion to dismiss as Exhibit A.1 (ECF No. 14-1.)
The Policy does not contain Form CP-01-40-07-06 ("EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA") (the "Virus Exclusion"), an exclusion commonly found in small business, commercial property insurance policies in South Carolina. (Id. ¶¶ 41-42.) The Virus Exclusion comprehensively bars coverage for virus-related claims, including business income interruption claims. Rather, the Policy contains Form SS-40-93-07-05 ("LIMITED FUNGI, BACTERIA, OR VIRUS COVERAGE") (the "Virus Coverage Form"). (Id. ¶ 43; ECF No. 14-1 at 133-135). The Virus Coverage Form provides coverage for certain virus related losses, including business income interruption claims. (Am. Compl. ¶ 48.) The Virus Coverage Form was included in the "Restaurant Stretch" (Form SS-04-11) purchased by Black Magic, a series of endorsements marketed as enhanced coverage for commercial property insurance. (Am. Compl. ¶¶ 30, 44.)
With respect to the Non-Writing Defendants, Black Magic alleges that "Twin City is a wholly owned subsidiary of HFIC, which is, in turn, a wholly owned subsidiary of HFSG." (Am. Compl. ¶ 5.) It further alleges that Twin City, HFSG, and HFIC are Indiana, Delaware, and Connecticut corporations, respectively. (Id. ¶¶ 2-4.) Thus, the amended complaint recognizes that the three Defendants are distinct corporate entities. It does not include any factual allegations designed to show that corporate separateness should be disregarded. Black Magic concedes that Twin City is listed as the insurer on the Policy'sSpectrum Policy Declarations page (id. ¶ 31), but cites references to "The Hartford" in the Policy and related letters to support its allegation that it believed "The Hartford" was its insurer (id. ¶¶ 32-37).
Black Magic submitted a claim under the Policy for its alleged business income losses due to the Virus and the claim was denied. The denial letter stated it was from "The Hartford Cat Claim Office" and contained a Hartford logo. (Id. ¶ 50.) Black Magic filed the instant lawsuit against Twin City, HFIC, and HFSG, asserting breach of contract and declaratory judgment claims. Black Magic seeks to represent a class of similarly situated policy holders who (1) purchased a "Spectrum Business Owner's Policy" with the Virus Coverage Form and (2) were denied business income interruption claims due to the Virus.
HFSG and HFIC filed their motion to dismiss for lack of standing, lack of personal jurisdiction, and failure to state a claim on July 14, 2020. (ECF No. 14.) The motion is fully briefed, the matter is ripe for disposition, and the Court now issues the following ruling.
When a party challenges the factual basis for a federal court's subject matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of proving the district court possesses subject matter jurisdiction. Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982)). In considering a Rule 12(b)(1) motion to dismiss, the district court is to regard the pleadings as mere evidence on the issue of subject matter jurisdiction and may consider evidence outside the pleadings without converting the proceeding intoone for summary judgment. Id. (citing Adams, 697 F.2d at 1219; Trentacosta v. Frontier Pacific Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987)). Federal district courts have original jurisdiction over all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States. 28 U.S.C. § 1332(a)(1). However, even if the jurisdictional requirements of complete diversity and amount in controversy are satisfied, subject matter jurisdiction is lacking if a plaintiff's allegations do not demonstrate Article III standing to sue the defendant. See S. Walk at Broadlands Homeowner's Ass'n, Inc. v. OpenBand at Broadlands, LLC, 713 F.3d 175, 185 (4th Cir. 2013) (). The "irreducible constitutional minimum of" of Article III standing has three elements. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016), as revised (May 24, 2016) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).). "The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Id.
When personal jurisdiction is challenged by a defendant, the plaintiff bears the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997). If the court addresses the issue of jurisdiction on the basis of pleadings and supporting legal memoranda without an evidentiary hearing, "the burden on the plaintiff is simply to make a prima facie showing of a jurisdictional basis in order to survive the jurisdictional challenge." Combs v. Bakker, 886 F.2d 673, 675 (4th Cir. 1989). In deciding such a motion, "the court must construe all relevant pleading allegations in the light mostfavorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Id. at 676.
Specific jurisdiction over a cause of action arising from a defendant's contacts with the State is granted pursuant to South Carolina's long arm statute, S.C. Code Ann. § 36-2-803. South Carolina's long-arm statute has been construed to extend to the constitutional limits imposed by the due process clause of the U.S. Constitution. Young v. Jones, 816 F. Supp. 1070, 1073 (D.S.C. 1992) (citing Triplett v. R.M. Wade & Co., 200 S.E.2d 375, 379 (S.C. 1973)). The specific jurisdiction inquiry under the due process clause "focuses on the relationship among the defendant, the forum, and the litigation." Walden v. Fiore, 571 U.S. 277, 283-84 (2014) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)) (quotation marks omitted). "For a State to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State." Id. at 284. "[T]he relationship [between the suit-related conduct and the forum] must arise out of contacts that the 'defendant [it]self' creates with the forum State." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)) (emphasis in original). "[T]he plaintiff cannot be the only link between the defendant and the forum." Id. at 285.
A corporation is subject to general personal jurisdiction where its "affiliations with the State are so 'continuous and systematic' as to render [it] essentially at home in the forum State." Daimler AG v. Bauman, 571 U.S. 117, 138-39 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). The "paradigm" forums for general jurisdiction are a corporation's place of incorporation and principal place of business. Id. at 137. General jurisdiction over a corporation in a forum other thanits formal place of incorporation or principal place of business would be an "exceptional case." See id. at 139 n.19 ().
A motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) "challenges the legal sufficiency of a complaint, considered with the assumption that the facts alleged are true." Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (internal citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Twombly, 550 U.S. at 556)). Although the allegations in a complaint generally must be accepted as true, that principle "is inapplicable to legal conclusions," and the Court is "not bound to accept as true a legal conclusion couched as a...
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