Carroll v. Nationwide Prop. & Cas. Co.
| Decision Date | 08 June 2015 |
| Docket Number | Case No. 2:14-cv-02902-STA |
| Parties | JOHN CARROLL and KIMBERLY CARROLL, Plaintiffs, v. NATIONWIDE PROPERTY & CASUALTY CO., Defendant. |
| Court | U.S. District Court — Western District of Tennessee |
Before the Court is Defendant Nationwide Property & Casualty Insurance Company's Motion to Dismiss the Plaintiffs' Punitive-Damages Claim, filed April 6, 2015. (ECF No. 20). Plaintiffs John and Kimberly Carroll filed their Response on the same day (ECF No. 21), to which Nationwide filed its Reply on April 22, 2015. (ECF No. 24). For the reasons set forth below, Nationwide's Motion to Dismiss Plaintiffs' Punitive-Damages Claim is DENIED.
Plaintiffs John and Kimberly Carroll filed their Amended Complaint with the Court's leave on March 20, 2015. (Am. Compl., ECF No. 18). They allege that Nationwide "wrongfully failed and/or refused to fully and promptly pay Plaintiffs' claim for insurance proceeds." (Id. ¶ 14). The Carrolls state that they submitted a proof of loss to Nationwide indicating a net claim of $639,436.59. (Id. ¶ 15). Payment was due within 60 days, but the Carrolls allege that Nationwide breached its obligation to pay. (Id. ¶ 17). They seek the statutory bad-faith penalty under Tennessee Code section 56-7-105 and punitive damages "not to exceed $5,000,000." (Id.¶¶ 31-35, prayer for relief). In the instant Motion, Nationwide presents a narrow issue for the Court's review: whether, under Tennessee law, the Carrolls' statutory bad-faith claim under section 56-7-105 precludes punitive damages arising from the same conduct. Nationwide asserts that sections 56-7-105 and the recently enacted section 56-8-113 operate to preclude any claim for punitive damages in this lawsuit, and therefore the Court should grant Nationwide's motion to dismiss the Carrolls' punitive-damages claim. The Carrolls argue that both are available.
A defendant may move to dismiss a claim "for failure to state a claim upon which relief can be granted" under Federal Rule of Civil Procedure 12(b)(6). When considering a Rule 12(b)(6) motion, the Court must treat all of the well-pleaded allegations of the pleadings as true and construe all of the allegations in the light most favorable to the non-moving party.1 Legal conclusions or unwarranted factual inferences, however, need not be accepted as true.2 "To avoid dismissal under Rule 12(b)(6), a complaint must contain either direct or inferential allegations with respect to all material elements of the claim."3 Under Rule 8, a complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled to relief."4 Although this standard does not require "detailed factual allegations," it does require more than "labels and conclusions" or "a formulaic recitation of the elements of a cause ofaction."5 In order to survive a motion to dismiss, the plaintiff must allege facts that, if accepted as true, are sufficient "to raise a right to relief above the speculative level" and to "state a claim to relief that is plausible on its face."6 "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."7
The Sixth Circuit Court of Appeals held that "[w]hen construing questions of state law, '[i]f the state's highest court has not addressed the issue, [a] federal court must attempt to ascertain how that court would rule if it were faced with the issue.'"8 A court "may use the decisional law of the state's lower courts, other federal courts construing state law, restatements of law, law review commentaries, and other jurisdictions on the 'majority' rule in making this determination."9 More importantly here, "a federal court should not disregard the decisions of intermediate appellate state courts unless it is convinced by other persuasive data that the highest court of the state would decide otherwise."10
In Myint v. Allstate, the Tennessee Supreme Court held that this bad-faith penalty did not preclude plaintiffs in insurance cases from also pursuing claims for treble damages under the Tennessee Consumer Protection Act ("TCPA").12 In other words, the TCPA was "complementary legislation" to the insurance bad-faith statute: plaintiffs could seek both remedies.13 In 2011, however, the Tennessee General Assembly passed Tennessee Code section 56-8-113 in response to Myint, precluding certain remedies and sanctions in the insurance context:
The passage of this statute eliminated the availability of treble damages under the TCPA in a breach-of-insurance-contract action arising after April 29, 2011. Although it is clear that the passage of section 56-8-113 precluded statutory remedies outside titles 50 and 56, the instant question before the Court is different: does section 56-8-113 also preclude a plaintiff from seeking common-law punitive damages?
The Tennessee Supreme Court provides the template for interpreting the statutes before this Court:
When dealing with statutory interpretation, well-defined precepts apply. Our primary objective is to carry out legislative intent without broadening or restricting the statute beyond its intended scope. Houghton v. Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing legislative enactments, we presume that every word in a statute has meaning and purpose and should be given full effect if the obvious intention of the General Assembly is not violated by so doing. In re C.K.G., 173 S.W.3d 714, 722 (Tenn. 2005). When a statute is clear, we apply the plain meaning without complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004). Our obligation is simply to enforce the written language. Abels ex rel. Hunt v. Genie Indus., Inc., 202 S.W.3d 99, 102 (Tenn. 2006). It is only when a statute is ambiguous that we may reference the broader statutory scheme, the history of the legislation, or other sources. Parks v. Tenn. Mun. League Risk Mgmt. Pool, 974 S.W.2d 677, 679 (Tenn. 1998). Further, the language of a statute cannot be considered in a vacuum, but "should be construed, if practicable, so that its component parts are consistent and reasonable." Marsh v. Henderson, 221 Tenn. 42, 424 S.W.2d 193, 196 (Tenn. 1968). Any interpretation of the statute that "would render one section of the act repugnant to another" should be avoided. Tenn. Elec. Power Co. v. City of Chattanooga, 172 Tenn. 505, 114 S.W.2d 441, 444 (Tenn. 1937). We also must presume that the General Assembly was aware of any prior enactments at the time the legislation passed. Owens v. State, 908 S.W.2d 923, 926 (Tenn. 1995).15
Tennessee courts should "not apply a particular interpretation to a statute if that interpretation would yield an absurd result."16 Here, the plain meaning of the statutes as written, combined with the state of the law at the passage of section 56-8-113, require the Court's holding that punitive damages are available to the Carrolls.
In Heil Co. v. Evanston Insurance Co., the Sixth Circuit held that section 56-7-105 "precludes punitive damages . . . because it provides the exclusive extracontractual remedy for an insurer's bad faith refusal to pay on a policy."17 Because Heil involved claims predating the effective date of the new section 56-8-113, the Heil court did not analyze its application. Instead, its holding was that section 56-7-105 "precluded punitive damages, even where they attached to a common law breach of contract."18 The statutory amendments, then, could have no effect on the Heil court's decision with regard to punitive damages, which the court held werealready precluded by section 56-7-105. Following Heil's reasoning, several courts within this circuit decided likewise—even after the passage of section 56-8-113—that punitive damages are precluded by...
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