Creative Hospitality Ventures v. U.S. Liability

Decision Date30 September 2009
Docket NumberCase No. 08-22302-CIV.
PartiesCREATIVE HOSPITALITY VENTURES, INC., et al., Plaintiffs, v. UNITED STATES LIABILITY INSUANCE COMPANY, d/b/a United States Liability Insurance Group, et al., Defendants.
CourtU.S. District Court — Southern District of Florida

Joel Victor Lumer, Bruce Benjamin Baldwin, Curtis Jay Mase, Richard David Lara, Leah H. Martinez, Mase & Lara PA, Miami, FL, for Plaintiffs.

Melanie Bernstein Chapman, Fowler White Burnett, Fort Lauderdale, FL.

Carmen Yolanda Cartaya, McIntosh Sawran Peltz & Cartaya, P.A., Miami, FL, Dawn Marshall, McIntosh Sawran Peltz Cartaya & Petruccelli, Fort Lauderdale, FL, for Defendants.

ORDER

WILLIAM J. ZLOCH, District Judge.

THIS MATTER is before the Court upon the Report And Recommendation (DE 65) filed herein by United States Magistrate Judge Robin S. Rosenbaum. The Court has conducted a de novo review of the entire record herein and is otherwise fully advised in the premises.

Accordingly, after due consideration, it is

ORDERED AND ADJUDGED as follows:

1. The Court reserves ruling on the Report And Recommendation (DE 65) filed herein by United States Magistrate Judge Robin S. Rosenbaum as it pertains to the Defendant Essex Insurance Company's Motion to Dismiss (DE 24) and Defendant Essex Insurance Company's Objections to Magistrate's Report and Recommendation (DE 66);

2. As it pertains to Defendant United States Liability Insurance Company's Motion To Dismiss (DE 18), the Report and Recommendation (DE 65) filed herein by United States Magistrate Judge Robin S. Rosenbaum be and the same is hereby approved, adopted and ratified;

3. Defendant United States Liability Insurance Company's Motion To Dismiss (DE 18) be and the same is hereby granted; and

4. Final Order Of Dismissal will be entered by separate order.

REPORT AND RECOMMENDATION

ROBIN S. ROSENBAUM, United States Magistrate Judge.

This matter is before the Court upon Defendant United States Liability Insurance Company's and Defendant Essex Insurance Company's Motions to Dismiss [D.E. 18, D.E. 24], referred to me for report and recommendation by the Honorable William J. Zloch. See D.E. 64. Upon consideration of the pending Motions, all filings in support thereof and in opposition thereto, the parties' responses to the Court's April 14, 2009, Order [D.E. 43], and the entire record, I make this Report and Recommendation recommending that Defendant United States Liability Insurance Company's Motion to Dismiss [D.E. 18] be granted, and Defendant Essex Insurance Company's Motion to Dismiss [D.E. 24] be denied.

I. Background

In this matter Plaintiffs Creative Hospitality Ventures, Inc. ("Creative"), and E.T. Limited, Inc. ("E.T."), (collectively, "Plaintiffs"), seek a declaratory judgment against their respective insurers, Defendants United States Liability Insurance Company ("USLI") and Essex Insurance Company, Inc. ("Essex"), (collectively, "Defendants"). Specifically, Plaintiffs ask the Court to find that Defendants are bound by insurance policies they issued to Plaintiffs to defend and indemnify Plaintiffs in underlying lawsuits filed against them.

This case finds its origins in Turner v. Creative Hospitality Ventures, Inc., Case No. 08-61040-CIV-ZLOCH/SNOW (S.D.Fla.) ("Turner"), and Chavoustie v. E.T. Limited, Inc., Case No. 08-20099 (Fla. 11th Circ.Ct.) ("Chavoustie").1 In Turner, Daniel Turner ("Turner"), a customer at a restaurant operated by Creative, sued Creative for damages resulting from alleged violations of the Fair and Accurate Credit Transactions Act, 15 U.S.C. § 1681c(g) ("FACTA"). See D.E. 47-4. Section 1681c(g) provides, in relevant part,

(g) Truncation of credit card and debit card numbers

(1) In general

Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.

(2) Limitation

This subsection shall apply only to receipts that are electronically printed, and shall not apply to transactions in which the sole means of recording a credit card or debit card account number is by handwriting or by an imprint or copy of the card.

* * * * *

FACTA imposes liability for willful and negligent violations of this provision as well as other directives of the FACTA. Under the statutory scheme, 15 U.S.C. § 1681o makes violators of FACTA liable for negligent noncompliance:

(a) In general

Any person who is negligent in failing to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of—

(1) any actual damages sustained by the consumer as a result of the failure; and

(2) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney's fees as determined by the court.

* * * * *

Section 1681n, on the other hand, establishes liability for willful violators:

(a) In general

Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of—

(1)(A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; . . .

* * * * *

(2) such amount of punitive damages as the court may allow; and

(3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney's fees as determined by the court. . . .

* * * * *

15 U.S.C. 1681n.

Turner, who sued for damages on his own behalf and on behalf of those similarly situated, alleged that on July 1, 2008, after Turner tendered his credit or debit card to pay for items Creative served him at its restaurant, Creative's restaurant issued Turner an electronically printed receipt bearing the expiration date of Turner's card, in violation of FACTA. Id. After receipt of service of the lawsuit, Creative invoked its insurance policy with USLI and requested coverage, seeking a defense to the lawsuit and indemnity. See D.E. 47 at 1 & 12; Counts I and II. USLI denied coverage. See id.

Chavoustie involved similar allegations. In that case Eric Chavoustie ("Chavoustie"), suing for damages on his own behalf and on behalf of those similarly situated, claimed that on October 9, 2007, Chavoustie used a payment card to pay for items served to him at E.T.'s restaurant. See D.E. 47-5. After processing the payment card, E.T.'s restaurant issued Chavoustie an electronically printed receipt revealing more than five digits of Chavoustie's payment card account number, as well as the expiration date for Chavoustie's payment card. Id. at 4.2 As Creative had requested of USLI in Turner, E.T. sought a defense to the lawsuit and indemnity, pursuant to its insurance policy with Essex. D.E. 47 at 1 & 12; Counts I and II. Essex denied coverage. See id.

Consequently, Plaintiffs filed the abovecaptioned lawsuit on behalf of themselves and those similarly situated, against Defendants and those similarly situated. See D.E. 47. In this case Plaintiffs ask the Court to issue a declaratory judgment finding that "Defendants and the members of the Defendant Class have a duty to defend [and indemnify] the Plaintiffs and the members of the Plaintiff Class in the FACTA lawsuits," and awarding damages incurred in the FACTA lawsuits (in the way of monies spent to defend the lawsuits and to pay any resulting judgment) and attorney's fees expended in the pending matter. See id. at 10-11.

On November 24, 2008, Defendant USLI filed its Motion to Dismiss [D.E. 18]. Essentially, Defendant USLI asserts that the insurance policy at issue does not cover the Turner lawsuit, so Defendant USLI bore no duty to defend nor indemnify Creative in that case. Defendant Essex likewise filed a similar Motion to Dismiss [D.E. 24] on December 15, 2008.

Plaintiff Creative filed a Response to [USLI's] Motion to Dismiss, although Plaintiff E.T. neither joined in Creative's Response nor filed its own response to USLI's Motion to Dismiss. [D.E. 25]. Similarly, while Plaintiff E.T. responded to Essex's Motion to Dismiss, see D.E. 28, Plaintiff Creative did not, and it did not join in Plaintiff E.T.'s Response. Defendants each filed a Reply in support of each Defendant's respective Motion to Dismiss. See D.E. 32 (Essex's Reply), D.E. 35 (USLI's Reply).

On April 14, 2009, Judge Zloch entered a sua sponte Order directing the parties to brief nine specific points as they related to Defendants' Motions to Dismiss. See D.E. 43. Additionally, Judge Zloch instructed Plaintiffs to file an amended complaint correctly alleging the citizenship of the parties to enable the Court to determine whether it has subject matter jurisdiction over this action, and to file individually exhibits to any amended complaint. Id.

Plaintiffs Creative and Essex jointly filed their Submission of Additional Briefing in accordance with the April 14, 2009, Order. See D.E. 53. Defendants followed suit, although separately filing their responses to the April 14, 2009, Order. See D.E. 54 (Essex's Response); D.E. 55 (USLI's Additional Briefing). Defendants also subsequently filed their responses to Plaintiffs' Submission of Additional Briefing. See D.E. 61 (Essex's Response); D.E. 62 (USLI's Response).

On August 6, 2009, Judge Zloch referred the matter to me for Report and Recommendation. See D.E. 64. This matter is now ripe for consideration.

II. Analysis

Defendants seek to dismiss this case under Rule 12(b)(6), Fed.R.Civ.P., which authorizes motions to dismiss for "failure to state a claim upon which relief can be granted." Rule 8(a)(2), in turn, sets forth the requirements for pleading a claim in federal court: "A pleading that states a claim for relief must contain...

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