Jones v. Penn Nat'l Ins. Co.

835 F.Supp.2d 89

James Wesley JONES, Plaintiff,

v.PENN NATIONAL INSURANCE COMPANY, Defendant.

Civil Action No. 5:09–CV–00114.

United States District Court,

W.D. North Carolina,

Statesville Division.

July 19, 2011.

Forrest A. Ferrell, Sigmon, Clark, Mackie, Hutton, Hanvey & Ferrell, PA, Hickory, NC, for Plaintiff.

David Leonard Brown, Jonathan P. Ward, Pinto Coates Kyre & Brown, PLLC, Greensboro, NC, for Defendant.

MEMORANDUM OPINION AND ORDER

RICHARD L. VOORHEES, District Judge.

This is an action by Plaintiff James Wesley Jones against Defendant Penn National Insurance Company ¹ alleging violations of the North Carolina Unfair or Deceptive Trade Practices Act (“UDTPA”) arising from Defendant's carriage of Plaintiff's underinsured motorist insurance. The matter presently before the court is Defendant Penn National Insurance Company's Motion for Judgment on the Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. (Doc. 6). The parties have timely filed memoranda of law in support of and opposition to this motion (Docs. 6–8), and this matter is now ripe for resolution. For the reasons that follow, Defendant's Motion for Judgment on the Pleadings will be granted as to all of Plaintiff's claims.

STATEMENT OF THE CASE

On September 16, 2009, Plaintiff James Wesley Jones (“Jones”) filed suit against Defendant Penn National Insurance Company (“Penn National”) in the Superior Court of Catawba County, North Carolina. On October 22, 2009, Penn National properly filed a Notice of Removal to the District Court for the Western District of North Carolina pursuant to 28 U.S.C. § 1446. (Doc. 1). Penn National is a corporation with its principle place of business in Pennsylvania, and Jones is a citizen of North Carolina. In bringing suit, Jones seeks “compensatory damages, treble damages, [and] punitive damages” and bases the present action on an underlying state court judgment in the amount of $185,000. (Doc. 1). This Court, therefore, has appropriate subject matter jurisdiction in this matter pursuant to 28 U.S.C. § 1332.

Jones sets forth causes of action for unfair and deceptive trade practices under UDTPA, breach of the covenant of good faith and fair dealing, and aggravated tortious breach of contract. The undisputed allegations in the pleadings reveal the following series of underlying events:

On December 23, 2001, Jones was injured in an automobile collision with one Gaston McKinley Harris (“Harris”), who was killed in the same collision. Harris maintained a liability insurance policy through Allstate Insurance Company with a limit of $30,000 for bodily injury. Jones maintained underinsured motorist coverage ² (“UIM”) through Penn National in a policy that provided coverage in the amount of $100,000 per person and $300,000 per accident. An official investigation into the collision determined that Harris' blood alcohol volume was nearly four times the legal limit for a motor vehicle operator in North Carolina, and that Harris lost control of his vehicle, crossed into the opposing lane of traffic and collided with Jones' vehicle. Jones filed a lawsuit against the estate of Harris in December 2004, and also served Penn National as his first-party insurance carrier. Pursuant to its insurance contract with Harris, Allstate defended the lawsuit.

On January 16, 2006, Jones, a representative of Penn National, and a representative of Allstate Insurance Company attended a mediated settlement conference which resulted in an impasse when Allstate offered only $7,500 to settle Jones' claims against Harris. No settlement agreement resulted from this conference. The case proceeded to trial, where Allstate was allowed to defend the case in its own name. At conclusion of trial, Jones obtained a verdict for $185,000 in compensatory damages in addition to costs and interest. Pursuant to Harris' liability coverage agreement, Allstate paid Jones $30,000–the limits of the coverage. At this point, Penn National paid Jones $70,000 pursuant to the terms of the UIM agreement.

In the instant civil action, Jones claims that Penn National engaged in unlawful conduct by failing to provide UIM coverage, and other services, before he obtained a jury verdict and before Allstate paid its policy limits. Jones roots this argument in N.C. Gen.Stat. § 75–1.1 et seq, the Unfair and Deceptive Trade Practices Act (“UDTPA”), providing a private cause of action for unfair trade practices, and N.C. Gen.Stat. § 58–63–15, defining unfair methods of competition and unfair and deceptive acts or practices in the business of insurance. In opposing Judgment on the Pleadings, Jones asserts that genuine issues of material fact remain for further discovery and a potential trial on the merits, namely whether Penn National's behavior prior to making the $70,000 UIM payment falls within the scope of deceptive or unfair practices stated in § 58–63–15. Penn National asserts that it is entitled to judgment on the pleadings pursuant to N.C. Gen.Stat. § 20–279.21(b)(4), the Motor Vehicle Safety and Financial Responsibility Act, which establishes the scope of UIM coverage in North Carolina and provides the core legal requirements for UIM policies and payment terms. Penn National argues that this statute, as written and as interpreted by the North Carolina Supreme Court in Register v. White, 358 N.C. 691, 599 S.E.2d 549 (2004), makes the availability of UIM coverage expressly conditional on the exhaustion of liability insurance. Because it paid Jones under his UIM policy at the time liability coverage was exhausted-upon entry of the damages award and full $30,000 payment by Allstate–Penn National asserts that it is in compliance with all statutory duties. In other words, Penn National contends that Jones' claims must fail as a matter of law because they seek recovery for alleged breaches of statutory and implied contractual duties that, pursuant to § 20–279.21(b)(4), had not yet come into existence.

ANALYSIS

I. Judgment on the Pleadings v. Summary Judgment

First, on its own accord, the Court must address whether judgment on the pleadings is the appropriate procedural mechanism for the decision it has been asked to render. Generally, in evaluating judgment on the pleadings, a court is limited to the contents of pleading documents, A.S. Abell Co. v. Baltimore Typographical Union No. 12, 338 F.2d 190, 193 (4th Cir.1964), documents attached to the pleadings, Fed.R.Civ.P. 10(c),³ and matters sufficiently incorporated by reference. Penn National relies on N.C. Gen.Stat. § 20–279.21 to establish its argument in favor of judgment as a matter of law. However applicable, this statute is neither cited nor directly referenced in either the complaint (Doc. 1 Ex. 1) or the answer (Doc. 3)—the only pleading documents in front of this Court.⁴ The statute only appears in Penn National's Motion for Judgment on the Pleadings, (Doc. 6), support briefs (Docs. 6, 8), and Jones' responses. (Doc. 7). “If on a motion under rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d). Here, the matter outside of the pleadings is a North Carolina statute, thus the question presented is whether the Court can consider the nonfactual contents of a memorandum of law in evaluating a motion for judgment on the pleadings without converting the motion to one for summary judgment. Two approaches allow the Court to proceed with the instant motion without conversion to summary judgment.

A. Allowing general consideration of non-factual content of legal memoranda where all parties have been noticed

Generally, a court should limit its consideration to the “four corners” of the pleadings, A.S. Abell Co., 338 F.2d at 193, but decisions in other circuits have made clear exceptions for legal briefs and memoranda. For example, in Concordia v. Bendekovic, the Eleventh Circuit held that, “[m]emoranda of points and authorities as well as briefs and oral arguments ... are not considered matters outside the pleadings for the purpose of conversion [to a motion for summary judgment].” 693 F.2d 1073, 1075 (11th Cir.1982); see also U.S. General Inc. v. Schroeder, 400 F.Supp. 713, 715 (E.D.Wis.1975) (“[t]he Court ... must confine the scope of its analysis to matters presented by the pleadings, memorandums, briefs and oral arguments.”). Consideration of legal documents outside the pleadings is limited to the non-factual contents thereof. See Engler v. Cendant Corp., 434 F.Supp.2d. 119 (E.D.N.Y.2006) (determining that a District court cannot consider admissions or statements in parties' memoranda as factual allegations); Thomas v. District of Columbia Government, 580 F.Supp.2d 142 (D.D.C.2008) (“factual allegations appearing in briefs or memoranda generally are not considered....”).

The modern system of notice pleading is intended to ensure that parties have fair notice of the claims, and defenses against them, as well as the grounds upon which they rest. See generally Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). This intention would likely be defeated if courts relied on facts presented in memoranda of law, which do not require responses, and therefore do not create the equivalent level of notice as a formal pleading document. Jurisprudence on this question clearly indicates that the purpose of limiting a motion for judgment on the pleadings to the contents of the pleadings, per se, is to prevent a court from basing decisions on factual allegations made in one party's documents that the other has not had an opportunity to address. In Henschke v. New York Hospital–Cornell Medical Center, 821 F.Supp. 166 (S.D.N.Y.1993), the court was presented with matters outside of the pleadings similar to the instant case and reasoned, “where [the parties] have actual notice of...