Cafe Plaza De Mesilla Inc. v. Cont'l Cas. Co.

519 F.Supp.3d 1006

CAFE PLAZA DE MESILLA INC., Plaintiff,

v.CONTINENTAL CASUALTY CO., Defendant.

No. 2:20-cv-354-KWR-KRS

United States District Court, D. New Mexico.

Filed February 16, 2021

Caren I. Friedman, Rosalind Bienvenu, Justin Ross Kaufman, Durham, Pittard & Spalding, L.L.P., Santa Fe, NM, Patrick Luff, Fears Nachawati Law Firm, Dallas, TX, Robert E. Ammons, The Ammons Law Firm, Houston, TX, for Plaintiff.

Daniel H. Levi, Pro Hac Vice, Elizabeth M. Sacksteder, Pro Hac Vice, H. Christopher Boehning, Pro Hac Vice, Hallie S. Goldblatt, Pro Hac Vice, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, David H. Timmins, Pro Hac Vice, Husch Blackwell LLP, Dallas, TX, Joshua Grabel, Husch Blackwell LLP, Phoenix, AZ, for Defendant.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

KEA W. RIGGS, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court upon Defendant Continental Casualty Co.’s Motion to Dismiss for Failure to State a Claim, filed on June 15, 2020. Doc. 18 . The motion has been fully briefed and the Court deems it suitable for submission without oral argument despite Defendant's request. Having considered the parties’ briefing, the record and applicable law, the Court grants the Motion to Dismiss.

I. BACKGROUND

Plaintiff Cafe Plaza de Mesilla Inc. is a New Mexico company operating as a restaurant and espresso bar in Mesilla, New Mexico. Amended Complaint ¶¶ 1, 14 . Plaintiff brings this putative class action individually and on behalf of other members of a "nationwide" class against Defendant, an Illinois insurance company that writes, sells, and issues insurance policies, including in New Mexico¹ . Id. , ¶ 15.

The Complaint alleges that Defendant issued an "all risk"² insurance coverage ("The Policy") to Plaintiff with a policy period running from February 11, 2020-February 11, 2021. Id. , ¶¶ 15-16. Plaintiff has not included a copy of the policy with the Amended Complaint. Defendant attaches a copy to its motion to dismiss and asks the Court to take judicial notice of the Policy and other documents relevant to the motion. Because Plaintiff has not opposed this request and the Court deems judicial notice of the documents appropriate in this instance, Defendant's request is granted.³ Jacobsen v. Deseret Book Co. , 287 F.3d 936, 941 (10th Cir. 2002) (citing GFF Corp. v. Associated Wholesale Grocers, Inc. , 130 F.3d 1381, 1384 (10th Cir. 1997) ) ("... The district court may consider documents referred to in the complaint if the documents are central to the plaintiff's claim and the parties do not dispute the documents’ authenticity."); Fay v. Hartford Ins. Co. , 2019 WL 1014791, at *3 (D.N.M. Mar. 4, 2019).

The presence of COVID-19, a novel strain of coronavirus, has resulted in nationwide closure and suspension of businesses in efforts to slow the pandemic's spread. Amend. Compl., ¶ 29 . On March 11, 2020, New Mexico Governor Michelle Lujan Grisham issued an executive order in response to the increasing infection rates in the state, titled the "Order Declaring a State of Public Health Emergency and Invoking the Powers Provided by All the Hazard Emergency Management Act and the Emergency Licensing Act," declaring a public emergency. Id. , ¶¶ 30-31. In the ensuing months, the Governor and Department of Health Cabinet Secretary Kathyleen Kunkel ("Kunkel") issued additional orders extending the original order and directing certain public safety action, including limiting public gatherings. Id. , ¶¶ 29-34. On March 12, 2020, Kunkel issued a Public Health Emergency Order prohibiting "mass gatherings" of 100 or more individuals. Id. , ¶ 32. The order exempted restaurants from the prohibition. See Doc. 18-6, Ex. F . On March 16, 2020, Kunkel issued an Amended Public Health Emergency Order limiting restaurants to 50% of maximum capacity. A subsequent order on March 19 further reduced "mass gatherings" to ten or more people in a single room but excluded "businesses .. or other entities engaged in commercial, industrial, charitable, or professional activities." Doc. 18-8, Ex. H. The order defined "local food vendors" as essential businesses and limited them to delivery and take-out services only. Id.

On March 23, 2020, Kunkel issued another order, directing all "non-essential" businesses to reduce their in-person workforce by 100%, but again permitted "essential" businesses, including restaurants, to remain open "provided they minimize their operations and staff to the greatest extent possible." Amend. Compl., ¶ 33; Doc. 18-9, Ex. I. Restaurants remained restricted to delivery and carry out services only. Id.

The Governor and Kunkel subsequently issued further orders extending the requirements through April 30, 2020. Docs. 18-10, 11, Exs. J-K.

On March 19, 2020, Plaintiff posted an announcement on its official website advising customers that as of that day Plaintiff would be offering take-out services only and would be open from 9:00a.m.-1:30p.m. Doc. 18-3, Ex. C. On March 24^th, Plaintiff posted another message on Facebook and its website, notifying clientele that "In an effort to keep our valued clientele, staff and our families safe during the current COVID-19 outbreak and to do our part in contributing to flatten the curve, we have decided to close the restaurant until further notice." Id. , Exs. C-D. The cafe appears to have remained closed until May 26^th, 2020, when the restaurant advertised that it would be reopening for outdoor patio dining, with temporary hours running from 8:00a.m.-1:00p.m. Thursday-Monday. Id. On May 28^th, Plaintiff stated on Facebook that it would also be implementing curbside pickup services. Id.⁴

Denial of the Insurance Claim

On or around March 18, 2020, Plaintiff filed an insurance claim for, among other things, lost business income following the onset of COVID-19 and the ensuing executive orders issued mandating suspension, closure, and limited operation of businesses. Id. ¶¶ 29-34, 38 . In a denial of claim letter dated April 14, 2020, Defendant noted that Plaintiff stated to it in a telephonic conversation that Plaintiff closed its operations on March 19, 2020 in response to the Governor's orders but that none of its employees had reported sickness at that time. Defendant concluded that Plaintiff had not demonstrated that the suspension of activity was due to "direct physical loss of or damage to the property" as required by the Policy to trigger coverage. Id. ¶ 39; Doc. 18-2, Ex. B. The Complaint contends that the denial of coverage was improper in light of four provisions in the Policy, specifically the "Business Income, Extra Expense, Civil Authority, and Sue and Labor provisions."^{5 6} Amend. Compl., ¶ 28.

The Policy does not contain any specific exclusions as to "viruses or communicable diseases" (Id. , ¶ 8), but does include exclusions for losses caused by "contamination by other than ‘pollutants’." Doc. 18-1, Ex. A at 21, 34.

Plaintiff advances eight counts on its behalf and on behalf of a putative nationwide class; four counts for Breach of Contract (Counts I-IV), and four counts seeking declaratory relief (Counts V-VIII) that Plaintiff incurred covered losses pursuant to the four referenced provisions in connection with New Mexico's closure orders arising from the COVID-19 pandemic.

II. Legal Standard

Rule 12(b)(6) Motion to Dismiss

Rule 12(b)(6) permits the Court to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). To survive a motion to dismiss, the Complaint must have sufficient factual matter that if true, states a claim to relief that is plausible on its face. Ashcroft v. Iqbal , 556 U.S. 662, 677, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). As such, a plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). All well-pleaded factual allegations are "viewed in the light most favorable to the nonmoving party." Brokers’ Choice of Am., Inc. v. NBC Universal, Inc. , 757 F.3d 1125, 1136 (10th Cir. 2014). In ruling on a motion to dismiss, "a court should disregard all conclusory statements of law and consider whether the remaining specific factual allegations, if assumed to be true, plausibly suggest the defendant is liable." Kan. Penn Gaming, LLC v. Collins , 656 F.3d 1210, 1214 (10th Cir. 2011). Mere "labels and conclusions" or "formulaic recitation[s] of the elements of a cause of action" will not suffice. Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

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." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Plausibility lies somewhere between possibility and probability; a complaint must establish more than a mere possibility that the defendant acted unlawfully. Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ); see also Ridge at Red Hawk, LLC v. Schneider , 493 F.3d 1174, 1177 (10th Cir. 2007) ("[T]he mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complainant must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims."). "This requirement of plausibility serves not only to weed out claims that do not (in the absence of additional allegations) have a reasonable prospect of success, but also to inform the defendants of the actual grounds of the claim against them." Robbins v. Oklahoma , 519 F.3d 1242, 1248 (10th Cir. 2008). The degree of specificity "depends on context". Id. "Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937.

III. DISCUSSION

New...