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ABC Capital Investments, LLC v. CNA Financial Corp.

United States District Court, E.D. Pennsylvania

June 20, 2017

ABC CAPITAL INVESTMENTS, LLC, AND ALPHA CAPITAL INVESTMENTS, LLC, Plaintiffs,
v.
CNA FINANCIAL CORPORATION, et al., Defendants.

MEMORANDUM

          JOYNER, J.

         Before the court are four motions to dismiss filed by each of the four remaining defendants in this case (Doc. Nos. 20, 25, 30, and 32), Plaintiffs' Consolidated Reply to those Motions (Doc. No. 33), and various replies, sur-replies, and supplemental briefing (Doc. Nos. 35, 36, 38, 45, 46, and 47). For the reasons below, the City of Philadelphia's Motion to Dismiss is DENIED, and the other three Motions are GRANTED. An appropriate Order follows.

         I. Factual and Procedural Background[1]

         On December 1, 2015, Alpha Capital Investments, LLC (“Alpha”) purchased a property located at 714 North 36th Street in Philadelphia (“the Property”). (Amended Complaint (“AC”), Doc. No. 17, at ¶¶ 9-10). At some point in time not specified in the Amended Complaint, Alpha entered into a contract with ABC Capital Investments, LLC (“ABC”) to manage the Property, with an aim toward renovating it and turning it into a rental property. Id. at ¶ 10. Although ABC is itself a plaintiff in this action (as is Alpha), the Amended Complaint alleges that “ABC was negligent with regard to its duties to Alpha, by not insuring that the proper construction permits, and other insurance had been obtained by the hired contractors.” Id. at ¶ 11.[2]

         In any event, Plaintiffs allege that they hired Beneficial Insurance Services, LLC (“BIS”) to serve as their insurance agent. Id. at ¶ 16. In this capacity, BIS was responsible for ensuring that the Property was “fully insured from all perils and risks of all kinds.” Id. BIS in turn directed Plaintiffs to contract with Transportation Insurance Company (“TIS”) and Continental Casualty Company (“CCC”) to procure insurance for the Property covering “all risks.” Id. at ¶ 17. Plaintiffs allege that an insurance policy between ABC, TIS, and CCC was enacted on July 10, 2015. Id. at ¶ 18; id. at Exhibit (“Ex.”) A (Doc. No. 17-2).

         At some point after the December 1, 2015 purchase date, the City of Philadelphia (“the City”) inspected the Property and determined that a retaining wall was in danger of collapsing. Id. at ¶ 12. ABC responded by hiring a contractor to reinforce the wall, apparently bracing it as directed by the City's inspector. Id. at ¶¶ 12-13. ABC and Alpha also procured a sworn affidavit from William Scott Cooper, a professional engineer, dated February 4, 2016, in which Mr. Cooper stated that he personally inspected the Property and found that it “IS NOT in danger of collapse.” Id. at ¶ 14; id. at Ex. B (Doc. No. 17-3). The City was evidently not satisfied. Plaintiffs allege that the City conducted an emergency hearing at which it refused to allow the professional engineer or any other person to speak. Id. at ¶ 14. It then authorized the demolition of Alpha's property. Id. Once the property was destroyed, the City sent Alpha a bill for $53, 000, the cost of demolition. Id.

         In the wake of that demolition, Plaintiffs ABC and Alpha submitted an insurance claim “against Plaintiff ABC” to their insurers, TIC and CCC. Id. at ¶ 20. Plaintiffs allege that both TIC and CCC have “refused to cover and compensate properly for the damages of Plaintiffs, have ignored the provable facts and policy language and issued a Reservation of Rights letter . . . .” Id. at ¶ 21; id. at Ex. D (Doc. No. 17-4).

         On August 19, 2016, Alpha and ABC filed a lawsuit in the Philadelphia County Court of Common Pleas naming the City, BIS, CCC, and CNA Financial Corporation (“CNA”) as defendants. (See Doc. No. 1). Plaintiffs asserted various state-law claims against BIS, CCC, and CNA, including breach of contract, unjust enrichment, and negligence. It asserted its sole federal claim against the City, which Plaintiffs say violated Plaintiffs' constitutional right to due process. The City promptly removed this case to federal court on the basis of federal-question jurisdiction. After CNA and CCC filed motions to dismiss, Plaintiffs filed an amended complaint substituting TIS as a defendant in place of CNA. The City, BIS, CCC, and TIS then separately moved to dismiss Plaintiffs' amended complaint for failure to state a claim on which relief can be granted. (Doc. Nos. 20, 25, 30, and 32). Those motions are now fully briefed and the matter is ripe for disposition.

         II. Standard of Review

         A party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In considering such a motion, a district court must “accept as true the factual allegations in the complaint and all reasonable inferences that can be drawn therefrom.” Krantz v. Prudential Invs. Fund Mgmt. LLC, 305 F.3d 140, 142 (3d Cir. 2002) (quoting Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996)). While a court generally cannot consider matters outside the pleadings, “a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (emphasis in original) (internal quotation marks and alteration omitted).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (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.” Id. (citation omitted). “Threadbare” recitations of the elements of a claim supported only by “conclusory statements” will not suffice. Id. (citation omitted). Rather, a plaintiff must allege some facts to raise the allegation above the level of mere speculation. Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 176 (3d Cir. 2010) (citing Twombly, 550 U.S. at 555). Although a plaintiff is entitled to all reasonable inferences from the facts alleged, a plaintiff's legal conclusions are not entitled to deference, and the Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986).

         III. Due Process Claim Against City of Philadelphia

         Plaintiffs allege that the City violated Plaintiffs' right to due process and other constitutional rights by demolishing Plaintiffs' property without first adhering to proper procedural steps. Plaintiffs rely on 42 U.S.C. § 1983, which authorizes private parties to enforce their federal constitutional rights against defendants who acted under color of state law. A municipality, like Philadelphia here, can be liable under § 1983, but not on the basis of respondeat superior. Rather, a municipality can be liable only when it acts on “‘a policy statement, ordinance, regulation, or decision officially adopted and promulgated by' the officers of that municipality.” Langford v. City of Atl. City, 235 F.3d 845, 847 (3d Cir. 2000) (quoting Monell v. Dep't of Soc. Servs. of City of New York, 436 U.S. 658, 690 (1978)).

         The City argues that we should dismiss Plaintiffs' claim because the Amended Complaint fails to allege facts regarding a municipal policy or custom, and because it fails to allege prior instances of misconduct. But Plaintiff need not allege a consistent pattern of behavior when the Amended Complaint clearly alleges that the City acted in its official capacity, and not through the behavior of a possibly rogue officer. As the Supreme Court has made clear, “it is plain that municipal liability may be imposed for a single decision by municipal policymakers under appropriate circumstances.” Pembaur v. City of Cincinnati, 475 U.S. 469, 480 (1986). The act Plaintiffs complain of was allegedly the product of an emergency hearing conducted by the City. It is possible that the procedures employed at, before, and after that hearing satisfied Plaintiffs' due process rights, but that question is for another day. A fair reading of Plaintiffs' complaint demonstrates that the decision to demolish the property was made by the City's authorized decision makers. That is enough. See id. at 481 (“[W]here action is directed by those who establish governmental policy, the municipality is equally responsible whether that action is to be taken only once or to be taken repeatedly. To deny compensation to the victim would therefore be contrary to the fundamental purpose of § 1983.”). We hold that Plaintiffs have stated a cognizable due process claim against the City, and so the City's motion will be denied.

         IV. State-Law Claims Against CCC

         Plaintiffs assert three claims against Defendant CCC: (1) breach of contract, (2) unjust enrichment, and (3) bad faith. CCC advances distinct arguments as to why neither Plaintiff Alpha nor Plaintiff ABC has stated any cognizable claim.

         (1) ...


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