Able Masonry Dev. Co. v. Hastings Mut. Ins. Co.

1

Able Masonry Development Co., individually and on behalf of a class of persons similarly situated, Plaintiff, v. Hastings Mutual Insurance Company, et al., Defendants

No. 24 CV 1338

United States District Court, N.D. Illinois, Eastern Division

May 16, 2024

MEMORANDUM OPINION AND ORDER

Lindsay C. Jenkins, United States District Judge

Able Masonry Development Co. sued its insurer, Hastings Mutual Insurance Company,^[1]and the insurer's broker, several entities that the Court refers to as Brown & Brown claiming that Able Masonry had been overcharged for insurance premiums. [Dkt. 1-1.] Hastings removed the case to federal court [Dkt. 1] and moves to dismiss some of the claims against it. [Dkt. 21.] The removal dragged Brown & Brown into federal court as well, and it moves to dismiss on jurisdictional grounds. [Dkt. 20.] Hastings's motion is granted in part and denied in part; Brown & Brown's is denied.^[2]

I. Background

Able Masonry, an Illinois corporation, is a masonry contractor. [Dkt. 1-1 ¶¶ 1, 4.] Between 2019 and 2023, it purchased worker's compensation insurance from Hastings, a Michigan corporation. [Id. ¶¶ 5, 28-30.] Brown & Brown, a broker, facilitated the transaction and received a portion of the premiums as a fee. [Id. ¶¶ 3132, 92.] The policy included a “terrorism premium” under the Terrorism Risk Insurance Program Reauthorization Act of 2019. [Id. ¶ 37.] Able Masonry alleges that Defendants represented that the terrorism premium would total about $489 and be paid annually, but the $489 premium was actually assessed monthly resulting in an overpayment of more than $5,000 per year. [Id. ¶¶ 38, 44, 52.]

Able Masonry filed a 14-count putative class action in Illinois state court in January 2024 on behalf of itself and others that had been overcharged terrorism premiums. [Dkt. 1-1.] It named Hastings and three Brown & Brown entities as Defendants. [Id. ¶¶ 8-17.]^[3]Counts I, II, VI, and VII were individual claims against Hastings for breach of contract, breach of fiduciary duty, consumer fraud, and unjust enrichment, respectively. [Id. ¶¶ 71-88, 116-38.] Counts VIII, IX, XIII, and XIV sought classwide relief from Hastings on the same legal theories. [Id. ¶¶ 139-58, 189213.] The remaining claims alleged that each Brown & Brown entity breached a fiduciary duty to Able Masonry and sought individual (Counts III-V) and classwide (Counts X-XII) relief. [Id. ¶¶ 89-115, 159-88.]

Able Masonry served Hastings on January 17, 2024. [See Dkt. 1 at 2.] Brown & Brown entered an appearance on February 9, 2024 and filed a notice that it had tendered a check for $1,612.30 to the court, which it asserted constituted full payment of the damages Able Masonry claimed against it. [Dkt. 20 at 2.] Several hours later, Able Masonry filed a motion for class certification. [Id. at 3.] On February 16, 2024, Hastings unilaterally removed the case to this Court. [Dkt. 1.] See 28 U.S.C. § 1453(b) (“A class action ... may be removed by any defendant without the consent of all defendants.”). Hastings filed a partial motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. [Dkt. 21.] Brown & Brown moved to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1). [Dkt. 20.]

II. Legal Standard

A motion to dismiss pursuant to Rule 12(b)(1) challenges the Court's subject-matter jurisdiction, whereas a motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the plaintiff's claims. In both cases, the Court takes well-pleaded factual allegations as true and draws reasonable inferences in favor of the plaintiff, Choice v. Kohn L. Firm, S.C., 77 F.4th 636, 638 (7th Cir. 2023); Reardon v. Danley, 74 F.4th 825, 826-27 (7th Cir. 2023), but it need not accept statements of law or conclusory factual allegations as true, Bilek v. Fed. Ins. Co., 8 F.4th 581, 586 (7th Cir. 2021). To survive dismissal, a claim must be “plausible, rather than merely speculative,” which requires a plaintiff to allege “just enough details about the subject matter of the case to present a story that holds together.” Russell v. Zimmer, Inc., 82 F.4th 564, 570-71 (7th Cir. 2023) (cleaned up).

III. Brown & Brown's Motion

Brown & Brown moves to dismiss all claims against it for lack of subject-matter jurisdiction. [Dkt. 20.] Fed.R.Civ.P. 12(b)(1). It does not contest Hastings's removal per se; instead, it argues that the claims against it had become moot when Hastings filed the notice of removal, so the Court lacks jurisdiction over those claims. [Dkt. 27 at 5-6.]^[4] In Brown & Brown's view, before the case was removed, Brown & Brown made a valid tender under Illinois law, “providing full relief to Able on its claims against Brown & Brown,” and mooting the controversy between them. [Dkt. 20 at 4 (citation omitted).] Able Masonry responds that tender did not fully satisfy its claims against Brown & Brown, so those claims are not moot. [Dkt. 25 at 10-12.] The Court agrees with Able Masonry that its claims against Brown & Brown remain live.

A. The Barber Rule

Illinois courts recognize what they call the “Barber rule,” whereby a defendant can admit liability and tender the full amount of relief a plaintiff seeks, extinguishing the controversy between them. See Barber v. Am. Airlines, Inc., 948 N.E.2d 1042 (Ill. 2011). As the Court understands it, the primary use for the Barber rule is to moot a putative class representative's claim before he moves for class certification. See id. at 1045-46. The Supreme Court of Illinois recently addressed the differences between a tender and its closest federal cousin, an offer of judgment under Federal Rule of Civil Procedure 68. Joiner v. SVM Mgmt., LLC, 161 N.E.3d 923 (Ill. 2020).

Joiner began by reiterating the Barber rule: “when a defendant tenders the full amount requested by a plaintiff purporting to represent a class before the named plaintiff files a class-certification motion, the plaintiff's claim becomes moot.” Id. at 929 (citations omitted). It distinguished a tender from a Rule 68 offer of judgment: “An offer is ‘a statement that one is willing to do something for another person or to give that person something.' A tender, however, ‘is defined as the actual proffer of money, as distinguished from the mere proposal or proposition to proffer it.'” Id. at 934 (cleaned up) (first quoting Black's Law Dictionary (11th ed. 2019); and then quoting McLean v. Yost, 652 N.E.2d 426, 427 (Ill. 1995)). Joiner went on to state that “[t]he federal rule expressly contemplates a plaintiff's choice to accept or decline such an offer. Our rule does not.” Id. (citation omitted). Thus, unlike a Rule 68 offer, which if unaccepted has no effect, Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 156 (2016); Chapman v. First Index, Inc., 796 F.3d 783, 786-87 (7th Cir. 2015), a valid tender moots the case as a matter of Illinois law, Joiner, 161 N.E.3d at 935-36.

The requirements for a proper tender are specific: “A tender ... is only effective if it is for the entire amount owed. The defendant must actually produce the tender; a mere offer or promise is insufficient. In making an effective tender, the defendant admits liability.” Id. at 935 (citations omitted). Joiner also clarified several additional points. First, if a statute permits the recovery of costs and reasonable attorney's fees, the defendant may effect a tender by stipulating that it will pay fees and costs in an amount to be determined by the court. Id. at 937-38. Second, the best practice is to deposit the tender with the court. Id. at 938. Third, a defendant need not tender relief for every claim against it; a partial tender may be effective as to specific claims. Id. at 937. A tender that meets these requirements renders the plaintiff's claim moot if he has not yet moved for class certification. Id. at 936 (“An issue is moot if no actual controversy exists. When a defendant admits liability and provides the plaintiff with all relief requested-as she does with a tender-no controversy exists.” (cleaned up)).

B. The Effect of a Tender on Federal Jurisdiction

The parties disagree about whether an effective tender, which moots a claim under Illinois law, also means that there is no federal subject-matter jurisdiction. Federal courts' subject-matter jurisdiction extends only to “cases” and “controversies” within the meaning of Article III of the Constitution. See, e.g., Parents Protecting Our Children, UA v. Eau Claire Area Sch. Dist., 95 F.4th 501, 504-05 (7th Cir. 2024). One facet of Article III jurisdiction is standing: to proceed in federal court, a plaintiff “must have suffered (1) a concrete and particularized injury that is actual or imminent, (2) traceable to the defendant's conduct, and (3) can be redressed by judicial relief.” Hero v. Lake Cnty. Elec. Bd., 42 F.4th 768, 772 (7th Cir. 2022) (citations omitted). Further, “[a]n actual controversy must exist at every phase of the litigation. ... A claim becomes moot when it is impossible for a court to grant any effectual relief. If this occurs, federal courts lose subject matter jurisdiction over the case.” Gill v. Linnabary, 63 F.4th 609, 612-13 (7th Cir. 2023) (cleaned up).

Able Masonry contends that a “case or controversy” is broader under federal law than Illinois law, so while a tender moots a claim under Illinois law, the claim may nevertheless remain live for purposes of federal jurisdiction. [Dkt. 25 at 9-10.] It cites cases where the mooting of a class representative's personal claim did not moot the entire class action. [Id.] See U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 397-401 (1980) (discussing this issue and citing cases). Cases about the consequences of an individual plaintiff's claim becoming moot while a federal class action is pending do not control...