Kiewit Const. Co. v. Westchester Fire Ins. Co.
| Citation | 878 F. Supp. 298 |
| Decision Date | 22 February 1995 |
| Docket Number | 92-10773-REK.,Civ. A. No. 91-13229-REK,92-10900-REK |
| Parties | KIEWIT CONSTRUCTION COMPANY, Guy F. Atkinson Construction Company, and Kenny Construction operating as Kiewit-Atkinson-Kenny, a Joint Venture, Plaintiffs, v. WESTCHESTER FIRE INSURANCE COMPANY, Defendant, SAC's CONSTRUCTION COMPANY, INC., Plaintiff, v. KIEWIT CONSTRUCTION COMPANY, Guy F. Atkinson Construction Company, and Kenny Construction operating as Kiewit-Atkinson-Kenny, a Joint Venture, and Aetna Casualty & Surety, Co., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Ellen Donovan McCann, Sidney J. Wartel, Davis, Malm & D'Agostine, P.C., Boston, MA, for Kiewit Const. Co., Guy F. Atkinson Const. Co., Kenny Const. Co.
Walter B. Prince, Peckham, Lobel, Casey, Prince & Tye, Mark B. Schmidt, Schmidt & Moore, Boston, MA, Kathleen M. Moore, Beverly, MA, for Sac's Const.
Alexander H. Pratt, Jr., Peabody & Arnold, Kevin J. O'Malley, Wynn & Wynn, Boston, MA, Thomas J. Wynn, Wynn & Wynn, Raynham, MA, Steven J. Drew, Law Offices of Steven Drew, Boston, MA, for Westchester Fire Ins. Co.
Sidney J. Wartel, Ellen D. McCann, Davis, Malm & D'Agostine, P.C., Boston, MA, for Aetna Cas. & Sur. Co.
Before the court is Defendant Westchester Fire Insurance Company's Motion to Dismiss Counts III and IV of the Plaintiffs' Second Amended Complaint for Failure to State a Claim upon Which Relief Can Be Granted (Docket No. 70, filed March 29, 1994), with supporting memorandum (Docket No. 71), and plaintiffs' opposition thereto (Docket No. 77, filed April 12, 1994).
Also before the court is United States Magistrate Judge Karol's Report and Recommendation regarding the motion. Magistrate Judge Karol recommends that this court grant the motion with regard to Count III and deny the motion with regard to Count IV.
Defendant Westchester Fire Insurance Company ("Westchester") provided performance and payment bond contracts to Sac's Construction Company, Inc. ("Sac's"), a subcontractor for the joint venture known as Kiewit-Atkinson-Kenny ("KAK"). KAK alleges that Sacs defaulted on its contractual obligations, resulting in KAK's termination of Sac's subcontract and takeover of Sac's performance of its contractual obligations. In the case at issue in this motion, KAK further alleges that Westchester defaulted on its obligations to KAK under the performance and payment bonds that Westchester issued to Sac's.
In Count III, KAK contends that Westchester's activities violated Section 11 of 93A because they constitute unfair claims settlement practices of the type proscribed by M.G.L. c. 176D.
In Count IV, KAK contends that those same activities also constitute unfair trade practices that violate Sections 2 and 11 of 93A.
Westchester has moved to dismiss Counts III and IV under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. It argues as to both counts that even if the conduct in question constitutes a violation of 176D, KAK is not entitled under that statute and 93A to a remedy for such violation because it is a person engaged in trade or commerce rather than a consumer.
I conclude, for the reasons expressed in the thorough and excellently reasoned report of the Magistrate Judge, that under the law of Massachusetts, as expressed in the relevant statutes and decisions of its courts, KAK may not bring an action under Section 11 of 93A based on an allegation that conduct of Westchester violated 176D.
I also conclude, for the reasons expressed in the Magistrate Judge's report, that KAK is entitled to bring a claim based on the same purported conduct under Section 11 of 93A for unfair and deceptive practices, without regard to 176D.
For the foregoing reasons, it is hereby ORDERED:
Defendant's Motion to Dismiss for Failure to State a Claim is allowed as to Count III and denied as to Count IV.
A status and scheduling conference is set for Thursday, March 9, 1995 at 2:30 p.m.
REPORT AND RECOMMENDATION REGARDING DEFENDANT'S MOTION TO DISMISS COUNTS III AND IV OF THE PLAINTIFFS' SECOND AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED (DOCKET NO. 70)
Defendant has moved to dismiss Counts III and IV of plaintiffs' Second Amended Complaint for failure to state a claim upon which relief can be granted. It is recommended that the motion be granted with regard to Count III and denied with regard to Count IV.
For purposes of defendant's Fed.R.Civ.P. 12(b)(6) motion, we take all of plaintiffs' well-pleaded factual allegations to be true and draw all inferences in favor of plaintiff. Washington Legal Found. v. Massachusetts Bar Found., 993 F.2d 962, 971 (1st Cir.1993); Massachusetts Candy & Tobacco Distribs., Inc. v. Golden Distribs., Ltd., 852 F.Supp. 63, 67 (D.Mass.1994).
Plaintiffs, Kiewit Construction Company, Guy F. Atkinson Construction Company, and Kenny Construction Company, are operating, for the purpose of this action, as a joint venture known as Kiewit-Atkinson-Kenny ("KAK"). KAK is the general contractor for the Massachusetts Water Resources Authority in connection with the project known as the Harbor Clean-up Project on Deer Island. KAK in turn engaged Sac's Construction Company, Inc. ("Sacs") as one of its subcontractors. Pursuant to the subcontract between KAK and Sacs, Sacs was required to furnish a payment and performance bond in an amount equal to the contract price. Defendant, Westchester Fire Insurance Company ("Westchester"), provided performance and payment bond contracts to Sacs wherein Westchester agreed to act as surety for Sacs' work under the terms of Sacs' subcontract with KAK. The contracts bind Westchester to KAK and to Sacs' suppliers and lower-tier subcontractors.
KAK alleges that Sacs defaulted on its contractual obligations, with the result that KAK terminated Sacs' subcontract and completed performance of Sacs' contractual obligations. More important for purposes of the instant motion is KAK's contention that Westchester defaulted on its obligations to KAK under the performance and payment bonds that Westchester had issued to Sacs. Counts III and IV of KAK's Second Amended Complaint allege that Westchester's defaults give rise to two separate violations of M.G.L. c. 93A ("93A").
In Count III KAK contends that Westchester's activities violated Section 11 of 93A because they constitute unfair claims settlement practices of the type proscribed by M.G.L. c. 176D ("176D"). In Count IV Westchester contends that those same activities also constitute unfair trade practices which, independent of 176D, violate Sections 2 and 11 of 93A.
Westchester has moved to dismiss Counts III and IV of KAK's Second Amended Complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. It argues as to both counts, without distinction, that if the conduct in question would, if proved, constitute a violation of 176D, only consumer plaintiffs may challenge it. In other words, it argues, in effect, that 176D creates a sort of "safe harbor," in that it provides absolute immunity to insurance companies from suit brought under Section 11 of 93A by plaintiffs engaged in commerce, as long as the challenged conduct is of a type proscribed by 176D. For reasons set forth below, it is recommended that Westchester's motion be allowed as to Count III but denied as to Count IV.
A person who, like KAK, is engaged in the conduct of trade or commerce might conceivably attempt to frame at least three types of claims under 93A against an insurance company that has allegedly used unfair claims settlement practices. First, the person might attempt to proceed under Section 9 of 93A, which, on its face, affords a remedy to "any person whose rights are affected by another person violating the provisions of clause (9) of section three of 176D." Second, such person might attempt to proceed under Section 11 of 93A based on a theory that 93A in effect incorporates 176D, with the result that any practice which violates 176D constitutes a per se violation of Section 2 of 93A. Third, the person might argue, without any reference to or assistance from 176D, that the insurance company's practices violate Section 2, and, therefore, Section 11 of 93A because, under traditional 93A analysis, they are unfair or deceptive.
Of these three possible approaches, KAK pursued only the latter two. Specifically, it did not attempt to proceed under Section 9 of 93A. Had it done so, it would have been required to send a so-called demand letter, which it did not do. See M.G.L. c. 93A, § 9(2). In all likelihood, Westchester would then have moved to dismiss on the ground that, despite the literal language of Section 9, only individual consumers, not persons engaged in trade or commerce, may sue under Section 9 for unfair claims settlement practices which violate 176D. The Massachusetts Supreme Judicial Court ("SJC") has twice referenced but then found it unnecessary to decide the question of whether a person engaged in trade or commerce might proceed against an insurance company under Section 9 for violations of 176D. See Boston Symphony Orchestra v. Commercial Union Ins. Co., 406 Mass. 7, 545 N.E.2d 1156, 1160 n. 5 (1989); City of Boston v. Aetna Life Ins. Co., 399 Mass. 569, 506 N.E.2d 106, 109 (1987). Here, too, since no demand letter was sent, there is no need to decide whether, as a matter of law, KAK might have proceeded under Section 9.
Focusing, then, on the two claims which KAK has purported to state under Section 11 of 93A, it is clear under existing case law that Count IV states a claim upon which relief can be granted, but Count III does not.
As noted, KAK asserts in Count III that 93A in effect incorporates 176D, with the result that any violation of the 176D is actionable under Section 11 of 93A. KAK acknowledges in its memorandum (Docket No. 77), at 6, that the...
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