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Hartford Fire Insurance Co. v. Lewis

January 21, 2009

HARTFORD FIRE INSURANCE COMPANY
v.
WENDY ANN LEWIS, ET AL.



The opinion of the court was delivered by: Bartle, C.J.

MEMORANDUM

Hartford Fire Insurance Company ("Hartford), as assignee of the rights of Aerogroup International, Inc. ("Aerogroup"), seeks to recover damages from defendants, Wendy Ann Lewis ("Lewis"), KIS Transport Inc. ("KIS Transport"), John Does and XYZ Corporations, in connection with their alleged fraudulent scheme to swindle Aerogroup out of approximately $309,000. Hartford asserts claims in Count I and Count II of the amended complaint under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., and state law claims in Counts III through VII for fraud, conspiracy to commit fraud, unjust enrichment, conversion, and negligent misrepresentation.

On October 22, 2008, Lewis filed a third party complaint against the Estate of Samuel Nysenbaum and Brian Nysenbaum, the Estate Administrator, alleging fraud. According to the third party complaint, the fraudulent conduct ascribed to Lewis in the amended complaint was, in fact, all conducted by Nysenbaum without the knowledge or consent of Lewis. Nysenbaum allegedly used Lewis' name and address to carry out his fraudulent scheme without her knowledge or consent.

Now pending before the court is the motion of Lewis to dismiss the amended complaint for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

I.

The following facts are viewed in the light most favorable to the plaintiff. In this subrogation action, Hartford seeks to recoup monies it paid to its insured, Aerogroup, pursuant to indemnification obligations of the "CrimeShield policy" it issued to Aerogroup. Under that policy, Hartford indemnified Aerogroup for the theft of approximately $309,000 by its shipping manager, Samuel Nysenbaum.

According to the amended complaint, Nysenbaum and Lewis established and controlled KIS Transport for the purpose of defrauding Aerogroup. Pursuant to the fraudulent scheme, Nysenbaum, in his capacity as Aerogroup's shipping manager, falsely represented to Aerogroup that KIS Transport was retained to ship, and did ship, Aerogroup merchandise. In fact, the merchandise was shipped by various other shipping companies.

From September, 2003 through October, 2006, Nysenbaum and/or Lewis presented Aerogroup with bogus invoices from KIS Transport. In response, Aerogroup dutifully paid KIS Transport in excess of $600,000 for such services. The difference between the amount charged by the shipping companies that, in fact, shipped the merchandise and the amount purportedly charged by KIS Transport to Aerogroup was retained by Nysenbaum and Lewis. The amended complaint alleges this amounted to approximately $309,000.

Hartford contends that Lewis was a signatory on the KIS Transport bank account, prepared and/or forwarded KIS Transport invoices to Aerogroup setting forth the fraudulent shipping charges, received payments from Aerogroup at her home in Newtown, Pennsylvania, deposited payments into the KIS Transport bank account, and arranged for payments to shipping companies that actually shipped the Aerogroup merchandise.

II.

Lewis has moved to dismiss the amended complaint of Hartford for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The amended complaint, insofar as it alleges RICO (Count I) and fraud (Count III) claims, must comply with the heightened pleading standards of Rule 9(b) of the Federal Rules of Civil Procedure. Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004). Pursuant to Rule 9(b), a party alleging fraud must state with particularity the circumstances constituting fraud. The counts of the amended complaint asserting claims for conspiracy to violate RICO (Count II), conspiracy to commit fraud (Count IV), unjust enrichment (Count V), conversion (Count VI), and negligent misrepresentation (Count VII) are measured under the more liberal Rule 8 pleading standard. Rose v. Bartle, 871 F.2d 331, 366 (3d Cir. 1989); Odesser v. Continental Bank, 676 F. Supp. 1305, 1313 (E.D. Pa. 1987); Alfaro v. E.F. Hutton & Co., Inc., 606 F. Supp. 1100, 1117 (E.D. Pa. 1985).

When deciding a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint, draw all inferences from the facts alleged in the light most favorable to the plaintiff, and "determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008); Umland v. Planco Fin. Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008). In Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), our Supreme Court revisited the standard for deciding motions to dismiss for failure to state a claim upon which relief may be granted. Most notably, the Court "retired" the standard enunciated by the Court in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) under which a complaint should not be dismissed unless it appears the plaintiff can prove "no set of facts" in support of his claim that would entitle him to relief. Id.

In Phillips, our Court of Appeals summarized the Supreme Court's "new formulation of the pleading standard" for stating a claim. 515 F.3d at 234. It requires "'a complaint with enough factual matter (taken as true) to suggest' the required element." Id. (citing Twombly, 127 S.Ct. at 1965). This "'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Id. Our Court of Appeals has "cautioned that the factual allegations in the complaint must not be 'so undeveloped that it does not provide a defendant the type of notice of claim which is contemplated by Rule 8.'" Umland, 542 F.3d at 64 (citing Phillips, 515 F.3d at 233). Furthermore, ...


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