Spear v. Westfield Ins. Co., CIVIL ACTION NO. 15-cv-00582-RAL

• Decision Date: 11 June 2015
• Docket Number: CIVIL ACTION NO. 15-cv-00582-RAL
• Parties: BARBIE SPEAR, et al. Plaintiffs, v. WESTFIELD INSURANCE COMPANY Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

BARBIE SPEAR, et al. Plaintiffs, v. WESTFIELD INSURANCE COMPANY Defendant.

CIVIL ACTION NO. 15-cv-00582-RAL

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

June 11, 2015

RICHARD A. LLORET U.S. Magistrate Judge

OPINION

Defendant, the Westfield Insurance Company ("Westfield"), has filed a Motion for Judgment on the Pleadings, asking me to dismiss a breach of contract claim filed by Barbie Spear and Alliance Holdings, Inc. Employee Stock Ownership Program ("Plaintiffs"). See Motion for Judgment on the Pleadings, Doc. No. 9; Brief in Support of Motion for Judgment on the Pleadings ["Def. Br."], Doc. No. 9-2. Westfield argues that Plaintiffs' breach of contract claim is time-barred based on the terms of the issued policy. See Def. Br. at 1-2. Plaintiffs argue that granting a motion for judgment on the pleadings would be premature at this stage of the litigation. See Plaintiffs' Memorandum of Law in Opposition to Motion for Judgment on the Pleadings ["Pl. Br."], Doc. No. 13, at 5-6.

After careful review, I will deny Westfield's motion.

I. Factual Background

This dispute arises out of an employee theft and forgery policy that the Alliance Holdings, Inc. Employee Stock Ownership Program ("ESOP") purchased from Westfield. Covering a period of three years from December 1, 2010 to December 1,2013,¹ the policy insures for up to $1,000,000.00 any theft, forgery, or alteration committed by an employee of the insured. See Doc. No. 1, 37-38.² The Plaintiffs initiated this action by filing a Writ of Summons in the Pennsylvania Court of Common Pleas in Philadelphia County on October 30, 2014. Doc. No. 1, at 57 (docket sheet for Barbie Spear, et. al. v. Westfield Ins. Co., No. 3872, Oct. Term (C.C.P. Phila. 2014)). The Plaintiffs filed a formal Complaint on January 30, 2015 and Westfield removed this action to federal court on February 6, 2015. See Def. Br. at 2.

As summarized by Westfield, this disputed claim arises out of monetary losses stemming from an "alleged theft of ESOP plan assets by its former trustee, former CEO, president, and director of Alliance Holdings, Inc., David B. Fenkell ('Fenkell')". Id. (citations omitted). Alliance alleges that it "discovered" his theft on October 31, 2012. Def. Br. at 3. Westfield states that 18 months after the ESOP reported the loss, the ESOP provided a revised Proof of Loss claim to the insurance company, which included a Claim Narrative spelling out, in some detail, the nature of the actions allegedly undertaken by Mr. Fenkell while he served as sole trustee of the ESOP. See id. This Claim Narrative, attached in the Defendant's Answer, states that "[i]t was not until July and August of 2012 that Alliance began to discover Fenkell's theft." See Doc. No. 2-1, at 35 (emphasis added); see also Def. Br. at 3 (noting the "Claim Narrative expressly admits that Fenkell's actions and inaction were discovered in July and August 2012 - not October 31, 2012, the discovery date originally reported toWestfield"). Westfield argues that this does not match the October 31, 2012 date originally reported to the insurance company. See Def. Br. at 3.

Following the submission of the claim to Westfield, the company denied coverage on June 24, 2014. See id. (citations omitted). In their brief, Westfield notes that the Alliance ESOP "made no attempt to file a Writ of Summons in July or August, 2014 and comply with the contractual suit limitation [of two years], even though it had counsel actively representing their interests during the claims investigation process." Def. Br. at 4 (citations omitted). As such, the Plaintiffs were aware that their breach of contract claim was time-barred pursuant to the terms of the policy,³ and judgment on the pleadings should be granted. See id. Plaintiffs state that the proof of loss was "ongoing" as of October 15, 2012 and that a detailed proof of loss was not provided to Westfield until June 16, 2014. See Pl. Br. at 3 (citation omitted). Their position seems to indicate that the investigation of Fenkell's alleged wrongdoing effectively "tolled" the time period for reporting the loss to Westfield. See id. at 6.

II. Legal Standards

A motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) mirrors the Rule 12(b)(6) standard. See SB Pharmco Puerto Rico, Inc.v. Mutual Pharmaceutical Co., Inc., 552 F. Supp. 2d 500, 505 (E.D. Pa. 2008); Constitution Bank v. DiMarco, 815 F. Supp. 154, 157 (E.D. Pa. 1993). Federal Rule of Civil Procedure 12(b)(6) allows dismissal of claims for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In order for a complaint to survive a motion to dismiss under 12(b)(6), the complaint must allege facts that, if true, would state a plausible claim for relief. See Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009). Courts must conduct a two-part analysis when reviewing a complaint challenged under Rule 12(b)(6). See Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d. Cir. 2009). The first part of the analysis requires courts to separate factual and legal claims, and then accept all well-pled facts as true while disregarding legal conclusions. Id. at 210-11. Second, a court must determine if those facts in the complaint show a plaintiff has a plausible claim for relief. See id. at 211 (citing Iqbal, 556 U.S. at 679). Mere allegations absent any factual support will not survive a motion to dismiss. Id.

The Federal Rules impose limitations on what a court may consider when deciding such a motion, which includes "only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citing 5A C. WRIGHT & A. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1357, at 299 (2d ed. 1990)); Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir. 1993); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988)). Generally, when considering a motion for judgment on the pleadings, a court "may not consider matters extraneous to the pleadings." See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425 (3d Cir. 1997). In some cases however, a court may consider documents outside the pleadings ifthat document is "integral to or explicitly relied upon in the complaint." See Mele v. Federal Reserve Bank of New York, 359 F.3d 251, 256 n. 5 (3d Cir. 2004) (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)). Mele also went on to state that documents that "form[] the heart of [a] complaint. . ." would fall within this exception. See id. (citing In re Burlington Coat Factory, 114 F.3d at 1426).

A) The Westfield Policy and other documents

The insurance policy is the center of this dispute. Westfield argues that I should find the two-year contractual limitations period valid and enforceable. See Def. Br. at 5. They also ask that I consider documents in addition to the pleadings when deciding this motion. Id. at 5 n. 3. Plaintiffs do not argue that the contractual limitations period is invalid. They do argue that I should not consider any documents attached to the Defendant's Answer, including material related to the policy. See Pl. Br. at 8.

I find that the two-year contractual limitations period is valid and enforceable. Pennsylvania recognizes contractual modification of statute of limitation periods. See Toledo v. State Farm Fire & Cas. Co., 810 F. Supp. 156, 157 (E.D. Pa. 1992) (citing General State Authority v. Planet Ins. Co., 346 A.2d 265, 267 (Pa. 1975)); Lardas v. Underwriters Ins. Co., 231 A.2d 740, 741-42 (Pa. 1967). Generally, Pennsylvania law allows four years to bring a breach of contract claim. See 42 Pa. Cons. Stat. § 5525. Parties may agree to a shorter limitations period so long as it provides a "reasonable" time period within which to seek relief. See McElhiney v. Allstate Ins. Co., 33 F. Supp. 2d 405, 406 (E.D. Pa. 1999) (citations omitted). A one-year time period is reasonable. See id. (citations omitted). The parties here agreed to a two-year time period, which is reasonable and enforceable under Pennsylvania law.

I can consider documents outside the pleadings, in particular the insurance policy, which is attached to and forms the "heart of the complaint," paraphrasing the standard announced in Mele. See 359 F.3d 251, 257 n. 5. Plaintiffs argue that I should not consider any documents attached to the Defendant's Answer. See Pl. Br. at 8-9. I agree. See Pension Benefit, 998 F.2d at 1196 (a "court may consider an undisputedly authentic document that a defendant attached as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document.") The court in Pension Benefit considered a purchase and sale agreement that was indisputably authentic, but declined to consider other documents attached to the motion. Id., at 1197.

I may consider "matters of public record." Id. at 1196. "[A] court may take judicial notice of a [court] filing in a prior case in ruling on a motion to dismiss, but it can only do so to establish the existence of that filing, not for the truth of the facts asserted therein." See Burton v. Nationstar Mortg., No. 14-5059, 2015 WL 1636956, at *2 (E.D. Pa. April 13, 2015) (citing Lum v. Bank of Am., 361 F.3d 217, 222 (3d Cir. 2004), abrogated in part on other grounds by Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, (2007)); cf. 5A WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1357, at 299 (2d ed. 1990) ("In determining whether to grant a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record ... also may be taken into account."). These public documents may also include "court files, records and letter of official actions or decision of government agencies and administrative bodies, documents referenced and incorporated in the complaint and documents referenced in the complaint or essential to a plaintiff's claim which are...