Butters v. Travelers Indem. Co.

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VINCENT D. BUTTERS, Plaintiff, v. TRAVELERS INDEMNITY COMPANY, Defendant.

No. 3:22-cv-726-SB

United States District Court, D. Oregon

May 18, 2023

Vincent D. Butters, Plaintiff, pro se.

David J. Ryan and Bryce J.Q. Adams, BULLIVANT HOUSER BAILEY PC, One SW Columbia Street, Suite 800, Portland, OR 97204. Of Attorneys for Defendant.

ORDER

MICHAEL H. SIMON, DISTRICT JUDGE

Vincent D. Butters (Butters), representing himself, has sued Travelers Indemnity Company (Travelers). On January 23, 2023 U.S. Magistrate Judge Stacie F. Beckerman issued Findings and Recommendation (F&R), recommending that the Court: (1) deny Travelers' motion to dismiss Butters' First Amended Complaint;^[1] (2) grant Butters' motion for leave to file a Second Amended Complaint; and (3) grant in part and deny in part Travelers' motion to dismiss Butters' proposed Second Amended Complaint. For the reasons discussed below, the Court adopts the F&R in part.

STANDARDS OF REVIEW

Under the Federal Magistrates Act (Act), the Court may “accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C. § 636(b)(1). If a party objects to a magistrate judge's findings and recommendations, “the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id.; Fed.R.Civ.P. 72(b)(3).

For those portions of a magistrate judge's findings and recommendations to which neither party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474 U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to require a district judge to review a magistrate's report to which no objections are filed.”); United States. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court must review de novo magistrate judge's findings and recommendations if objection is made, “but not otherwise”). Although in the absence of objections no review is required, the Act “does not preclude further review by the district judge[] sua sponte . . . under a de novo or any other standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Federal Rule of Civil Procedure 72(b) recommend that “[w]hen no timely objection is filed,” the Court review the magistrate judge's recommendations for “clear error on the face of the record.”

DISCUSSION

Travelers agrees with the procedural approach of allowing Butters to file a Second Amended Complaint and then treating Travelers' substantive challenges as a motion to dismiss that pleading. The F&R recommends that the Court deny Travelers' motion to dismiss with respect to Butters' claims of negligence per se, intentional infliction of emotional distress (IIED) and fraudulent misrepresentation. The F&R also notes that Butters may be able to recover punitive damages for his tort claims of negligence per se, intentional infliction of emotional distress, and fraudulent misrepresentation. Travelers objected. The F&R also recommends that the Court grant Travelers' motion to dismiss Butters' breach of contract claim, to which Butters objected.

A. Negligence per se

The F&R recommends that the Court deny Travelers' motion to dismiss Butters' negligence per se claim. Travelers argues that the F&R misapplies Oregon law in three ways. First, Travelers argues that the F&R errs in relying on a recent and, according to Travelers, incorrectly decided decision from the Oregon Court of Appeals that allowed a negligence per se claim to proceed against an insurer. See Moody v. Or. Cmty. Credit Union, 317 Or.App. 233 (2022).^[2] Travelers states that the Oregon Court of Appeals in Moody reached a decision that conflicts with the Oregon Supreme Court's earlier opinion in Farris v. United States Fidelity and Guaranty Company, 284 Or. 453 (1978), and, thus, this Court should disregard Moody. See, e.g., Runyan v. Foremost Ins. Co., Case No. 6:21-cv-1341-MC, Opinion & Order at 3 (D. Or. Oct. 26, 2022) (“While the Moody court asserts that they are answering a different question [than Farris], it appears to overturn 40 years of precedent. Until the Oregon Supreme Court rules otherwise, negligence per se is unavailable as a cause of action for insurance contract disputes.” (citation omitted)) (available at ECF 41-1). The F&R concludes that Moody and Farris do not clash, however, and agrees with the decision of the Court of Appeals in that case. See Moody, 317 Or.App. at 244 (“Farris, in other words, is not relevant here.”).

The Court adopts the F&R's reasoning and applies Moody to Butters' claim of negligence per se.

Second, Travelers contends that property insurance disputes “sound only in contract,” not in tort, and thus do not give rise to the sort of “standard of care independent of the contract terms” that a negligence per se claim requires. Strader v. Grange Mut. Ins. Co., 179 Or.App. 329, 335 (2002). The F&R addresses how Strader does not conflict with Moody. The plaintiffs in Strader ground their tort claims on “precisely the same conduct that they identify as the breach of contract,” id. at 332, but the plaintiff in Moody distinguished the basis of her breach of contract claim from that of her tortious conduct claims, Moody, 317 Or.App. at 236. The Court agrees with the F&R in finding that Moody and not Strader is the proper precedent to follow in these circumstances. The Court also agrees with the F&R's finding that Butters' claims would not fail under Strader regardless of the Oregon Supreme Court's ultimate decision in Moody.

Third, Travelers asserts that regardless of whether Moody or Strader applies, Butters fails to allege facts sufficient plausibly to show a “physical impact.”^[3] See Hammond v. Cent. Lane Commc'ns Ctr., 312 Or. 17, 23-24 (1991). As Travelers observes, courts in Oregon have consistently “rejected claims for emotional distress damages caused by a defendant's negligence, in the absence of any physical injury.” Paul v. Providence Health Sys.-Or., 351 Or. 587, 597 (2012). This is known as the “physical impact rule.” It has three exceptions, however. They are:

First, where the defendant intended to inflict severe emotional distress. Second, where the defendant intended to do the painful act with knowledge that it will cause grave distress, when the defendant's position in relation to the plaintiff involves some responsibility aside from the tort itself. Third, where the defendant's conduct infringed on some legally protected interest apart from causing the claimed distress, even when that conduct was only negligent.

Hammond, 312 Or. at 22-23 (citations omitted). Travelers argues that none of these exceptions apply, and that Butters' claim fails regardless of the applicability of Moody. See Bryant v. Allstate Indem. Co., 2022 WL 1910128, at *3 (D. Or. June 3, 2022) (dismissing a plaintiff's negligence per se claim against an insurer in the aftermath of Moody because the allegations failed to satisfy the physical impact rule or a Hammond exception).

Butters does not respond to this argument from Travelers. In his Second Amended Complaint, however, Butters alleges that he suffered physical symptoms from chronic stress- including increased heart rate and blood pressure, weight loss, alopecia, and eczema-because of Travelers' conduct. ECF 22-1 at 5-6. “Generally, a person cannot recover for negligent infliction of emotional distress if the person is not also physically injured, threatened with physical injury, or physically impacted by the tortious conduct.” Lockett v. Hill, 182 Or.App. 377, 380 (2002) (emphasis added). “Neither the Supreme Court nor [the Oregon Court of Appeals] have sought to define the minimum amount of bodily harm necessary to constitute physical impact.” Chouinard v. Health Ventures, 179 Or.App. 507, 514 (2002); see also Simons v. Beard, 188 Or.App. 370, 378 n.6 (2003) (explaining how a directed verdict in favor of the defendants was appropriate in Chouinard when “there was no evidence of a ‘perceptible physical effect' on the plaintiff as a result of the defendants' alleged negligence”). Here, Butters alleges that he has suffered tangible physical injury from the stress induced by Travelers' purported negligence. Butters therefore satisfies the physical impact rule on a motion to dismiss. The objection from Travelers on this point does not prevent the Court from adopting the F&R's recommendation to deny Travelers' motion to dismiss the negligence per se claim.

B. Intentional Infliction of Emotional Distress

To state an IIED claim in Oregon, Butters must allege that Travelers' conduct qualified as an “extraordinary transgression of the bounds of socially tolerable conduct.” Babick v. Or. Arena Corp., 333 Or. 401, 412 (2002) (quotation marks omitted). Travelers contends that courts in Oregon have determined that insurance coverage disputes lie within the bounds of socially acceptable behavior as a matter of law, and so the F&R errs in applying a “reasonable minds could differ” standard to transform that dispute into a question of fact. See Conroy v. Mewshaw, 2022 WL 2981453, at *6 (D. Or. July 28, 2022).

The cases that Travelers cites for this proposition do not go quite so far. See, e.g., Rossi v. State Farm Mut. Auto. Ins. Co., 90 Or.App. 589, 591 (1988) rev. den., 306 Or. 414 (1988) (“[Plaintiff's] allegations show nothing more than a typical disagreement between an insurer and an insured over the existence of compensable events and the amount of compensation.” (emphasis added)); State Farm Mut. Auto. Ins. Co. v. Berg, 70 Or.App. 410, 418 (1984) (affirming the dismissal of Berg's emotional distress claim because an alleged “difference of opinion as to the meaning and...