Atl. States Ins. Co. v. Copart, Inc.

609 F.Supp.3d 379

ATLANTIC STATES INSURANCE COMPANY, Plaintiff,

v.COPART, INC., Defendant.

No. 5:22-cv-1177

United States District Court, E.D. Pennsylvania.

Signed June 30, 2022

Jesse Morgan Cohen, Smith & Cohen Law Group, Philadelphia, PA, for Plaintiff.

Alexis P. Basilevsky, Matthew A. Green, Samantha J. Koopman, Obermayer Rebmann Maxwell & Hippel LLP, Philadelphia, PA, for Defendant.

OPINION

Defendant's Motion to Dismiss, ECF No. 8 – Granted in part; Denied in part

Joseph F. Leeson, Jr., United States District Judge

I. INTRODUCTION

This case involves claims brought by Atlantic States Insurance Company (ASIC) as the subrogee of Stone Action LLC Stone as well as claims asserted directly by ASIC against Defendant Copart, Inc.¹

ASIC alleges that, as Stone's workers’ compensation insurer, it paid more than one million dollars to compensate an injured employee working at Stone. The employee was driving a 1999 Mack Truck owned by Stone but lost control of it and suffered serious injuries. By way of subrogation, ASIC brought lawsuit against several tortfeasors, including Mack Trucks, to recover the monies it had paid to the injured employee. However, the truck itself, which was a key piece of evidence in the suit against the tortfeasors, was sold from a Copart facility before ASIC could conduct discovery on the vehicle. As a result, ASIC was forced to discontinue the pending claim against tortfeasors due to the lack of evidence. Eventually, ASIC brought suit in this Court against Copart to recover for damages it alleged it suffered as a result of having to discontinue the lawsuit against the tortfeasors.

The motion before this Court is a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6). After review, the motion to dismiss is granted in part and denied in part. ASIC's claim for negligence may proceed as pleaded. ASIC's remaining claims, both those brought in subrogation as well as its direct claims, are dismissed without prejudice and with leave to amend.

II. BACKGROUND

ASIC is an insurance company, and its principal place is in Pennsylvania. See Compl. ¶ 1, ECF No. 1-1. Stone is a company with its principal place of business located in Maryland. See id. ¶ 4. ASIC issued a policy of insurance to Stone, providing workers’ compensation coverage. See id. ¶ 5.

Around March 3, 2015, Stone purchased and obtained title for a 1999 Mack Truck. See Ex. A. Stone insured the Truck against physical damage and loss with Westfield Insurance Group. See Compl. ¶ 10. On February 21, 2018, an employee of Stone was driving the Truck and lost control of it. See id. ¶ 11. The employee suffered serious injuries. Id. After the accident, ASIC accepted the workers’ compensation claim submitted by the injured employee and made payments to the employee in the amount of more than one million dollars ($1,562,388.17). See id. ¶¶ 12–13. After receiving additional information, ASIC believed that the accident was caused by the malfunction of the Truck or the improper service and repair of the Truck. See id. ¶ 14. At the same time, Stone claimed the physical loss of the Truck with Westfield, and the Truck was taken to a Copart facility in Pennsylvania at the instruction of Westfield and Stone. See id. ¶¶ 15–16. ASIC believed that Westfield had a written contract with Copart to store the Truck until it could be sold. See id. ¶ 17.

On March 16, 2018, less than one month after the accident, counsel for ASIC sent a letter to Copart advising them of the need to place the vehicle on a litigation hold pending its investigation. See Ex. B.² On the same day, counsel for ASIC also issued a letter to Stone, requesting that all evidence regarding the Truck be preserved. See Compl. ¶ 20. Three months later, on June 20, 2018, counsel for ASIC called Copart to confirm the Truck was on litigation hold. See id. ¶ 21. Copart confirmed the Truck was on hold through its employee named "Kim." See id. ¶ 22. On September 10, 2019, counsel for ASIC once again called Copart to confirm the Truck was held and secure. See id. ¶ 25. Copart, through its employee "Laurie," verified the Truck was still on hold and secure. See id. ¶ 26.

On May 18, 2020, ASIC filed suit against several defendants, including Mack Trucks, to recover, by way of subrogation, the monies it had paid to the injured worker. See Ex. C. After that, counsel for Mack Trucks requested the opportunity to inspect the Truck. See Compl. ¶ 33. Counsel for ASIC contacted Copart to arrange for an inspection but was informed that the Truck had been sold. See id. ¶ 34. Copart, however, did not inform or advise ASIC or Stone that the Truck would be disposed of. See id. ¶ 35. Because of the lack of physical evidence, ASIC was forced to discontinue its action against Mack Trucks. See id. ¶ 36.

On February 23, 2022, ASIC filed a Complaint against Copart with both subrogated claims and direct claims, alleging claims including breach of contract, breach of implied in fact contract, promissory estoppel, negligence, breach of bailment, and conversion. See Compl. On April 5, 2022, Copart filed a Motion to Dismiss for failure to state a claim. See Mot., ECF No. 8. On April 18, 2022, ASIC filed an Opposition to Motion to Dismiss, alleging that its claims were sufficiently pleaded. See Resp., ECF No. 9. On April 25, 2022, Copart filed a Reply in Support of its motion. See Reply, ECF No. 10.

III. LEGAL STANDARDS

A. Motion to Dismiss – Review of Applicable Law

In rendering a decision on a motion to dismiss, this Court must "accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff."³ Phillips v. County of Allegheny , 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd. , 292 F.3d 361, 374 n.7 (3d Cir. 2002) ) (internal quotation marks omitted). Only if "the ‘[f]actual allegations ... raise a right to relief above the speculative level’ " has the plaintiff stated a plausible claim. Id. at 234 (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. (explaining that determining "whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense"). "In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." See Mayer v. Belichick , 605 F.3d 223, 230 (3d Cir. 2010). The defendant bears the burden of demonstrating that a plaintiff has failed to state a claim upon which relief can be granted. See Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc. , 926 F.2d 1406, 1409 (3d Cir. 1991) ).

IV. ANALYSIS

ASIC has pleaded both subrogated and direct claims in the Complaint. With respect to the subrogated claims, ASIC does not have a proper standing to bring the claims against third parties as the subrogee of the employer, Stone, under Pennsylvania law. With respect to direct claims, ASIC does not allege sufficient facts to support all the claims with the exception of its negligence claim. Accordingly, Copart's motion is granted in part and denied in part as further explained below.

A. ASIC lacks proper standing to bring its claims as the subrogee of Stone under the applicable law.

ASIC claims that it may recover against Copart for the compensation paid to the injured employee, standing in place of Stone. Copart asserts that ASIC lacks standing as the subrogee of Stone under both Maryland and Pennsylvania law. This Court agrees with Copart.

"The choice of law rules of the forum state ... apply when a federal court is sitting in diversity." Specialty Surfaces Int'l, Inc. v. Cont. Cas. Co. , 609 F.3d 223, 229 (3d Cir. 2010) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ).

Under Pennsylvania's choice of law rules, a court "must determine whether a real conflict exists between the respective laws." See Mzamane v. Winfrey , 693 F. Supp. 2d 442, 467–68 (E.D. Pa. 2010) (citing Hammersmith v. TIG Ins. Co. , 480 F.3d 220, 230 (3d Cir. 2007) ). "A real conflict exists only where the application of each state's substantive law produces a contrary result." Id. at 468. "If the same result would ensue under the laws of the forum state and those of the foreign jurisdiction, then no conflict exists, and the court may avoid the choice of law question altogether." Id. Moreover, when parties agree upon the law to be applied, a choice of law analysis is unnecessary. See MacDonald v. Unisys Corp. , 951 F. Supp. 2d 729, 737 (E.D. Pa. 2013) (citing Zicherman v. Korean Air Lines Co. , 516 U.S. 217, 228–29, 116 S.Ct. 629, 133 L.Ed.2d 596 (1996) ).

Once a "real" conflict is established, "a court must proceed to the second step of the conflict inquiry to determine whether the conflict is ‘true,’ ‘false,’ or ‘unprovided for.’ " See id. "A ‘true’ conflict exists where both states have a cognizable interest in applying their own law." Id. "A ‘false’ conflict exists when only one state has an actual interest in applying its law." Id. A conflict is "unprovided for" if "neither state has an interest in applying its own law." See id. (citing Hammersmith , 480 F.3d at 230 n.9 ). Where a conflict is "false" or "unprovided for," "the law of the forum applies." See id. (citing Hammersmith , 480 F.3d at 230 ).

Where a conflict is actual, a...