Waters Edge Living, LLC v. RSUI Indeminity Co. , 355 F. App'x 318 ( 2009 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
Dec. 03, 2009
No. 08-16847 THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 06-00334-CV-4-RH-WCS
WATERS EDGE LIVING LLC, a Florida Limited
Liability Company,
WATERS EDGE JW LLC, a Florida Limited Liability
Company,
Plaintiffs-Counter-Defendants-
Interpleaders-Claimants-Appellants,
TRUSTMARK NATIONAL BANK,
HANCOCK BANK OF FLORIDA,
Plaintiffs-Claimants,
versus
RSUI INDEMINITY COMPANY, a New Hampshire
Corporation,
Defendant-Intervenor-Defendant-
Interpleader-Appellee,
PRIME INCOME ASSET MANAGEMENT, INC.,
a Nevada Corporation,
Defendant-Counter-Claimant,
THE BALDWIN COMPANY, INC.,
Claimant,
CONTINENTAL BARONNE, INC.,
Intervenor.
________________________
Appeal from the United States District Court
for the Northern District of Florida
_________________________
(December 3, 2009)
Before CARNES, FAY and ALARCÓN,* Circuit Judges.
PER CURIAM:
Plaintiffs Waters Edge Living, LLC and Waters Edge JW, LLC (collectively
“Waters Edge”) appeal the district court’s dismissal with prejudice of their
Amended Post-Interpleader Complaint for failure to state a claim on which relief
could be granted. This lawsuit arises out of a dispute between competing claimants
to a single insurance policy. The Amended Post-Interpleader Complaint, which is
the operative one that we will refer to as “the complaint,” contains Waters Edge’s
claims against RSUI Indemnity Company based on RSUI’s mishandling of an
*
Honorable Arthur L. Alarcón, United States Circuit Judge for the Ninth Circuit, sitting by
designation.
2
alleged agreement with Waters Edge for the payment of Waters Edge’s losses after
Hurricane Katrina.
I.
When a case comes to us after the grant of a Rule 12(b)(6) motion to dismiss
for failure to state a claim on which relief can be granted, “we take the factual
allegations in the complaint as true and construe them in the light most favorable to
the plaintiff.” Pielage v. McConnell, 516 F.3d 1282, 1284 (2008). Viewed
through that lens, the facts for present purposes are as follows.
In July 2005 Waters Edge purchased the Waters Edge apartment complex in
Gulfport, Mississippi, from a real estate trust controlled by Prime Income Asset
Management, Inc. Prime retained no interest in the complex. As part of the deal,
Prime agreed for the property to remain covered for Waters Edge’s benefit under
Prime’s master property insurance policy for nine months following the closing.
The master policy also covered properties owned by Prime in Texas and Louisiana.
The master policy covered rent loss and estimated replacement cost in the
event a covered property suffered damage. It also covered the cost of rebuilding to
upgraded code specifications once rebuilding actually occurred. The master policy
limit was $100,000,000 consisting of a primary policy with a $10,000,000 limit
and two layers of excess coverage: (1) a first layer of excess coverage with a
3
$10,000,000 limit and (2) a second layer of excess coverage with an $80,000,000
limit provided by RSUI. This appeal concerns only the RSUI policy.
Because the total value of the properties covered by the master policy
exceeded $100,000,000, the possibility existed that there would not be enough
coverage if multiple covered properties were damaged in a single event. Hurricane
Katrina was that event. It destroyed the Waters Edge apartments and also damaged
Prime’s covered properties in Louisiana.
The primary insurer paid the limit of its policy to Prime. Prime paid Waters
Edge approximately $1.8 million out of this payment. Prime based the amount of
that payment on the estimated value of Waters Edge’s anticipated lost rents.
Waters Edge then tried to recover the rest of its losses from RSUI. It did so
by working with RSUI’s insurance adjuster. After a back and forth exchange
spanning two months, Waters Edge and RSUI determined that Waters Edge’s
property loss was $30,929,371, not including the cost of code upgrades that might
be incurred once rebuilding actually occurred. RSUI’s adjuster sent Waters Edge a
memorandum on January 23, 2006, stating:
Let’s wrap up for R/C [replacement cost] figure of $30,929,371 and
move on. Your client is doubling their money so this represents a
heck of a deal. The $30 M is subject to policy provisions as
interpreted by RSUI.
On February 1, 2006 Waters Edge asked RSUI’s adjuster to confirm that
4
agreement in writing. On February 2, the adjuster responded with a memorandum
confirming that “the building loss at Waters Edge is $30.9 million subject to policy
provisions.” That same day, the adjuster also wrote an email explaining that
“subject to policy provisions is necessary until RC issue [is] resolved.” According
to Waters Edge, this reservation meant that if the policy required it, RSUI might
hold back 20% of the agreed loss as depreciation until rebuilding occurred. That
reservation disappeared when RSUI provided “official word” that it would not
withhold depreciation.
According to the complaint, all of this means that RSUI and Waters Edge
reached an agreement that RSUI would pay Waters Edge’s replacement costs,
which according to the parties’ agreement totaled $30,929,371. After a $1,000,000
policy deductible was factored in, $29,929,371 remained to be paid.
Because the damage to covered properties exceeded the policy limit, Prime
feared that it would not be able to recover its own losses. Prime insisted that only
it could receive payment under the terms of the RSUI policy and that it would
therefore have to sign off as the policyholder on any payments made to Waters
Edge. When Waters Edge learned through one of its mortgagees that RSUI was
delaying payment while it waited on Prime, as policyholder, to make a claim,
Waters Edge hired counsel and demanded payment from RSUI.
5
While these events unfolded, the first layer excess insurer paid its full
$10,000,000 policy limit to Prime. When Waters Edge learned of this, it filed suit
against RSUI. In the face of conflicting demands from Waters Edge and Prime,
RSUI delivered two checks to Waters Edge. One check was in the amount of
$29,929,371, the amount that Waters Edge and RSUI had agreed on as the
estimated replacement cost. The other check was for $2,039,652 to cover Waters
Edge’s lost rents. RSUI included Prime as a co-payee on the checks. Because
Prime would not sign off on the payments, Waters Edge could not receive any of
the proceeds.
Now that the trench lines had been dug, the parties agreed to place the funds,
totaling $31,969,023, into a custodial account until the stalemate could be broken.
Meanwhile, RSUI continued to pay Prime for its losses. Those payments
eventually totaled $30,448,038. This left only $17,582,939 of the policy proceeds
remaining. Fearing that the remaining policy funds might not be enough to pay all
of the remaining claims, RSUI deposited the full $17,582,939 in the custodial
account along with the original $31,969,023, which was the total of the two checks
on which it had listed Prime and Waters Edge as co-payees.
In an attempt to avoid being caught in no man’s land between two
belligerents, RSUI filed counterclaims interpleading the funds in the custodial
6
account so that Prime and Waters Edge would be forced to battle each other for the
funds. Waters Edge and Prime each claimed the right to receive the remaining
policy proceeds while challenging the losses claimed by the other. RSUI remained
as neutral as Switzerland and sought only to limit its total liability to the
$80,000,000 policy limit.
Just before trial, Waters Edge and Prime agreed to a settlement. Under the
terms of their agreement, Waters Edge received $24,000,000 and Prime received
the rest of the funds in the escrow account. At that point, RSUI had paid out the
full $80,000,000 policy limit, but Waters Edge had received approximately
$6,000,000 less than the amount stated in its agreement with RSUI.
RSUI probably hoped that the interpleader action would be the litigation-to-
end-all-litigation regarding this policy, but that was not to be. While the settlement
of the interpleader action extinguished Waters Edge’s claims against the escrow
account, Waters Edge had reserved its separate claims against RSUI. The
complaint asserts those separate claims, which include: (1) breach of a settlement
agreement; (2) failure to timely pay a settled loss in violation of the Texas
Insurance Code; (3) breach of the duty of good faith; and (4) misrepresentation.
The district court dismissed the complaint with prejudice on RSUI’s Rule 12(b)(6)
motion. Waters Edge then brought this appeal.
7
II.
We review de novo a district court’s grant of a motion to dismiss under Fed.
R. Civ. P. 12(b)(6). Chepstow Ltd. v. Hunt, 381 F.3d 1077, 1080 (11th Cir. 2004).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, __ U.S. __, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974 (2007)); Sinatrainal v. Coca-
Cola Co., 578 F.3d 1252, 1268 (11th Cir. 2009). A complaint states a facially
plausible claim for relief “when the plaintiff pleads factual content that allows the
court to draw a reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, __ U.S. __, 129 S. Ct. at 1949. A complaint does not state a
facially plausible claim for relief if it shows only “a sheer possibility that the
defendant acted unlawfully.” Id. While a complaint need not contain detailed
factual allegations to survive a Rule 12(b)(6) motion, “[a] pleading that offers
labels and conclusions or a formulaic recitation of the elements of a cause of action
will not do.” Id. (quotation marks and citations omitted).
III.
A.
Count I alleges that RSUI breached a settlement agreement with Waters
8
Edge. The complaint asserts that the exchange between RSUI’s adjuster and
Waters Edge in early January and February of 2006 culminated in a binding
settlement agreement requiring RSUI to pay Waters Edge $29,929,371, a figure
representing the value of the agreed estimated property loss less the $1,000,000
policy deductible.
The alleged settlement agreement, as embodied in the confirmation
memorandum sent by RSUI, stated that Waters Edge’s entitlement to payment was
subject to the provisions of the policy as interpreted by RSUI. The complaint also
states that a subsequent email from the adjuster, sent the same day as the
confirmation memorandum, explained that the “subject to policy provisions” term
in the settlement agreement applied only to the issue of whether RSUI would
withhold 20% of the agreed replacement cost as depreciation until rebuilding
actually occurred. The complaint further states that this qualification vanished
when RSUI provided “official word” that it would not withhold 20% of the
negotiated replacement cost until rebuilding occurred.
According to the complaint, these alleged facts demonstrate that “[t]he
settlement accord created an independent obligation apart from the policy for
[RSUI] to pay [Waters Edge’s] loss as compromised” and that “[g]eneral policy
terms were not part of the settlement agreement.” Waters Edge claims that RSUI
9
breached this settlement agreement when it included Prime as a co-payee on the
checks tendered to Waters Edge, effectively stopping Waters Edge from receiving
the settlement proceeds.
The district court erred when it dismissed Count I of the complaint because
Count I states a claim to relief that is plausible on its face. See Iqbal, __ U.S. __,
129 S. Ct. at 1949. The factual content of the complaint, particularly the alleged
exchange between Waters Edge and RSUI’s adjuster, allows a reasonable inference
that the parties reached a settlement agreement creating a contractual obligation
independent of the policy. See id. It does not compel that inference, but it does
allow a reasonable factfinder to draw the inference. If the factfinder does draw the
inference, RSUI breached the independent agreement when it included Prime as a
co-payee on the checks tendered to Waters Edge. Because Count I states a facially
plausible claim for relief, the district court erred when it dismissed Count I for
failure to state a claim on which relief can be granted.
B.
Count II of the complaint claims that RSUI “violated Chapter[s] 541 and
542 of the Texas Insurance Code by not making timely payment of a settled loss.”1
1
The district court did not determine which state’s law would govern Waters Edge’s various
claims, finding that it was unnecessary to address that issue in order to rule on the 12(b)(6)
motion before it. Waters Edge argues that Texas law governs its claims. RSUI does not directly
dispute that argument but states that it does not matter which state’s law applies. We take that as
10
The district court dismissed that claim based on its conclusion that Waters Edge
had failed to plead factual allegations plausibly supporting the existence of a
binding settlement agreement between RSUI and Waters Edge. We disagree with
that conclusion. As discussed above, Waters Edge’s factual allegations allow the
reasonable inference that Waters Edge entered into a binding settlement with
RSUI. According to the complaint, RSUI did not fulfill its obligations under that
agreement. Because Waters Edge alleged that it entered a binding settlement
agreement with RSUI and that RSUI did not make payment as required by that
agreement, Waters Edge pleaded facts sufficient to state a claim for relief that is
plausible on its face based on RSUI’s failure to make timely payment of a settled
loss. See Iqbal, __ U.S. __, 129 S. Ct. at 1949.
C.
Count III alleges that RSUI breached its duty of good faith by improperly
including Prime as a co-payee on the checks tendered to Waters Edge and by
“skipping over [Waters Edge’s] settled loss to pay Prime’s unsettled losses,
including amounts that were not and could never be due.” Even viewed in the light
most favorable to Waters Edge, the factual allegations in the complaint do not state
a facially plausible claim of breach of the duty of good faith. The allegations that
a waiver by RSUI of any argument that Texas law does not apply.
11
RSUI gave in to Prime’s demand that it withhold payment to Waters Edge “in
deference to its business relation with Prime” and that “RSUI treated [Waters
Edge] unfairly, unreasonably preferring Prime among its coinsureds” are nothing
more than conclusory statements. Under Iqbal, “naked assertions devoid of further
factual enhancement” are not enough to overcome a Rule 12(b)(6) motion to
dismiss. Iqbal, __ U.S. __, 129 S. Ct. at 1949 (quotation marks and citation
omitted).
If you take out the labels, conclusions, and formulaic recitations, id., the
factual allegations contained in the complaint actually indicate that RSUI acted in
good faith. As the district court explained, RSUI promptly settled with Waters
Edge. When faced with the thorny legal issue of what effect the agreement with
Waters Edge had on Prime’s rights under the policy, RSUI tried to balance the
interests of Waters Edge and Prime by listing them as co-payees on the checks.
Finally, when the stalemate between Waters Edge and Prime proved intractable,
RSUI admitted liability for the entire policy limit and interpleaded the funds.
While Waters Edge has stated a claim that RSUI breached the alleged independent
settlement agreement, it has not pleaded factual allegations sufficient to allow us to
draw a reasonable inference that RSUI did so in bad faith. Id. at __, 129 S. Ct. at
1949. The district court properly dismissed Count III.
12
D.
Count IV alleges misrepresentation. Waters Edge claims that RSUI’s
insurance adjuster misrepresented to Waters Edge that Prime, as policyholder,
would have to agree to any payment made to Waters Edge and that this
misrepresentation caused Waters Edge to delay its demand for payment of the
amount due under the settlement, “prevent[ing] them from timely realizing the full
benefit of their reasonable settlement.” According to Waters Edge, the allegations
contained in the complaint adequately state claims under the theories of statutory
misrepresentation under the Texas Insurance Code and common law
misrepresentation.2 We disagree.
Waters Edge contends that Count IV alleges that RSUI’s statement that
Prime would have to consent to payment to Waters Edge constituted a
misrepresentation in violation of the Texas Insurance Code. In its initial brief,
Waters Edge cites Tex. Ins. Code §§ 541.060(a)(1) and 541.061(1), (3), and (4) as
the statutory provisions violated by RSUI. But these statutory subsections appear
2
Waters Edge also devotes one sentence in its brief to arguing that the district court erred in
holding that it failed to allege fraud with sufficient particularity to meet the pleading standards of
Fed. R. Civ. P. 9(b). Waters Edge argues that Rule 9(b) does not apply to its misrepresentation
claim and that “Waters Edge met [the Fed. R. Civ. P. 9(b)] standard in any event.” Because
Waters Edge briefed in such a cursory fashion the issue of whether its allegations meet the
particularity requirement of Rule 9(b), we could deem that argument waived. See In re Globe
Mfg. Corp., 567 F.3d 1291, 1297 n.3 (11th Cir. 2009). It does not matter, though, because even
if that requirement does not apply to Count IV, it still fails to state a claim.
13
nowhere in Count IV.
Waters Edge relies on the fact that Count IV realleges paragraph 71 of the
complaint. Paragraph 71 says that “RSUI violated Chapter[s] 541 and 542 of the
Texas Insurance Code by not making timely payment of a settled loss.” Despite
the general leniency of the pleading requirements under the Federal Rules of Civil
Procedure, “it is axiomatic that defendants remain entitled to know exactly what
claims are being brought against them.” Omar ex rel. Cannon v. Lindsey, 334 F.3d
1246, 1250 (11th Cir. 2003) (citing Fed. R. Civ. P. 8 & 10). A sentence in the
complaint alleging that RSUI violated two unnamed chapters of the Texas
Insurance Code by failing to timely pay a settled loss did not let RSUI know that
Waters Edge was bringing a claim of misrepresentation against them based on
particular provisions of the Texas Insurance Code.
Consistent with its everything-but-the-kitchen-sink approach to this appeal,
Waters Edge also makes a two-sentence argument that Count IV sufficiently states
a claim of common law misrepresentation sounding in negligence. Waters Edge
apparently feels that the sufficiency of that claim is self-evident, as it chose not to
burden that portion of its argument with citation to any authority. Generally, we
deem waived “[i]ssues raised in a perfunctory manner, without supporting
arguments and citation to authorities.” N.L.R.B. v. McClain of Ga., Inc., 138 F.3d
14
1418, 1422 (11th Cir. 1998); see also Fed. R. App. P. 28(a)(9)(A). Waters Edge’s
negligent misrepresentation argument clearly fits the bill.
Even without Waters Edge’s waiver of this issue on appeal, the result would
be the same. Count IV does not state a facially plausible claim for relief. Under
Texas law, a plaintiff seeking to recover for negligent misrepresentation must
demonstrate that he justifiably relied on the misrepresentation. Fed. Land Bank
Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991). In paragraph 84 of the
complaint, Waters Edge alleges that, due to the adjuster’s statement that Prime
would have to agree for Waters Edge to be paid for its loss, Waters Edge
“reasonably believed [it] had no choice but to ask Prime if it would agree” to allow
Waters Edge to receive payment. But the complaint, in paragraphs realleged in
Count IV, states that Waters Edge’s “entitlement to the agreed amount was beyond
dispute” and that “RSUI knew or should have known that Prime had no insurable
interest or entitlement in the estimated property loss for Plaintiffs’ apartments.” If
Waters Edge’s entitlement to receive the agreed amount from RSUI was so clear,
Waters Edge could not have justifiably relied on the adjuster’s statement that Prime
would have to agree to allow Waters Edge to receive payment from RSUI.
Because Count IV does not allow a reasonable inference that Waters Edge
justifiably relied on the adjuster’s alleged misrepresentation, it does not state a
15
claim of negligent misrepresentation that is plausible on its face. See Iqbal, __
U.S. __, 129 S. Ct. at 1949.
IV.
The district court properly dismissed Counts III and IV of the complaint for
failure to state a claim on which relief can be granted. Neither of those counts state
a facially plausible claim for relief. See Iqbal, __ U.S. __, 129 S. Ct. at 1949.
Because the factual allegations contained in the complaint allow a reasonable
inference that RSUI failed to fulfill its obligations under a binding settlement
agreement between RSUI and Waters Edge, see id., Waters Edge has stated facially
plausible claims for breach of a settlement agreement and failure to timely pay a
settled claim.
Although we reverse the district court’s decision to dismiss Counts I and II,
we note that Waters Edge has its work cut out for it. Waters Edge must prove the
existence of a binding settlement agreement independent of the insurance policy.
It must also establish that under the terms of that settlement agreement, it was
entitled to direct payment from RSUI and that this right was not limited by Prime’s
rights under the insurance policy. We express no opinion on whether Waters Edge
will be able to make those showings. We merely hold that the district court erred
when it dismissed Counts I and II pursuant to Rule 12(b)(6) because both of those
16
counts state a facially plausible claim for relief. See id. Absent a settlement treaty,
the fight between RSUI and Waters Edge will continue, because the judgment of
the district court is reversed insofar as Counts I and II are concerned.
AFFIRMED IN PART, REVERSED IN PART.
17