Texas Courts' Rigorous Standards For Well-Pled Complaints

by Zelle LLP
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In Ashcroft v. Iqbal and Bell Atlantic v. Twombly, the U.S. Supreme Court changed the requirements for a well-pled complaint under Federal Rule of Civil Procedure 8.[1] The court replaced the old “conceivable” standard in Conley v. Gibson with a more rigorous standard.[2]

Under the Conley “conceivable” standard, a plaintiff’s complaint was sufficient if the plaintiff alleged facts that made the cause of action conceivable.[3] A complaint must now meet the “plausibility standard” to avoid a dismissal under Rule 12(b)6.[4]

To meet the plausibility standard, the plaintiff’s complaint must include statements that are both nonconclusory and plausible.[5] That is, the factual allegations must not only comport with the cause of action, but they must also “nudge [the] claims across the line from conceivable to plausible.”[6]

Texas district courts have taken a strict approach to applying the heightened plausibility standard to breach of contract claims. In Radenbaugh v. State Farm Lloyds, the court articulated a test for the plausibility standard in breach of contract claims:

No plausible cause of action for breach of contract can be stated unless there is an allegation as to the exact nature of the contract, including a statement as to defendant’s obligations under the contract, how defendant failed to comply with its contractual obligations and how that damaged plaintiff.[7]

In Radenbaugh, the district court dismissed the complaint with prejudice for failing to specifically allege that the defendant issued him an insurance policy or that there was a policy in effect that provided coverage for the particular type of loss at issue in the case.[8]

Radenbaugh v. State Farm Lloyds

On March 4, 2013, Phillip Radenbaugh filed suit in Palo Pinto County District Court against State Farm Lloyds asserting causes of action for breach of contract because of State Farm’s alleged failure to issue full payment under the policy for fire damage caused to his home.[9]

Radenbaugh also asserted violations of the Texas Insurance Code, breach of the duty of good faith and fair dealing, bad faith, and violations of the Texas Deceptive Trade Practices Act for State Farm’s investigation, adjustment and payment of the claim.[10]

On April 25, 2013, State Farm removed the case to the U.S. District Court for the Northern District of Texas. On May 29, 2013, the federal district court sua sponte ordered Radenbaugh to amend his complaint to comply with Rule 8 as interpreted by Ashcroft.[11]

Radenbaugh filed his amended complaint on June 14, 2013.[12] Nine days later, State Farm filed its motion to dismiss Radenbaugh’s claims because he failed to state a claim upon which relief could be granted.[13] The trial court promptly granted State Farm’s motion and dismissed Radenbaugh’s claim with prejudice.[14]

The court first looked at the allegations of Radenbaugh’s breach of contract claim:

24. The plaintiff, Phillip N. Radenbaugh, and the defendant, State Farm Lloyds, entered into an insurance contract for the property in question.

25. The defendant breached the insurance contract.

26. The breach by the defendants [sic] has caused substantial harm to the plaintiff.[15]

The court found that there was “simply no factual specificity as to the kind of insurance contract at issue, the pertinent provisions of the contract at issue, the conduct on the part of defendant that constituted a breach of a contractual provision, or any specific harm suffered by plaintiff from such a breach.”[16]

The court then turned the “Factual Background” section of Radenbaugh’s amended complaint to determine if the “missing breach of contract factual allegations can be found there.” In reaching its holding, the court recited the allegations in the “Factual Background” section of Radenbaugh’s complaint in their entirety:

5. Plaintiff Phillip N. Radenbaugh's (plaintiff) home located at 1003 Red Bud Point, Graford, Texas 76449 suffered a covered loss.

6. His home suffered fire damage (claim no: 43–059X–942) on or about April 18, 2011.

7. More specifically, on or about April 18, 2011, Phillip N. Radenbaugh's house located at 1003 Red Bud Point, Graford, Texas 76449 (the property) received extensive smoke and ash damage from the Bastrop Wildfires.

8. The plaintiff filed an insurance claim with the defendant for the extensive damage caused by the fires.

9. The defendant assigned the plaintiff claim no.: 43–059X–942.

10. On or around Dec. 5, 2011, defendant composed a letter and estimate to Radenbaugh for the cleaning of the property in the amount of $15,199.09.

11. Defendant’s letter to plaintiff regarding the estimate and payment only spoke to the reasons for receiving the amount for cleaning, not at how defendant came to the conclusion that no other repairs were necessary to the property.

12. On or around Jan. 17, 2012, defendant received a letter by fax from Radenbaugh's representative (Insurancebusters.net) stating the remaining issues needing to be addressed in regards to the property.

13. The letter contained all remaining issues with the property, as well as what would be needed to alleviate them and place plaintiff back into pre-loss condition.

14. The letter received by defendant also had a study by the IICRC (Institute of Inspection, Cleaning and Restoration Certification) attached.

15. The letter put forth the suggested standard of safe removal of the soot as well as the standard to safely remove the odor as well.

16. Defendant received an Exactimate estimate from plaintiff’s representative (Insurancebusters.net) showing that the cost of repairs for the property were $142,609.24 after defendant had tendered an estimate of only $15,199.09 for merely cleaning services.

17. Upon information and belief, discovery is expected to reveal that the defendant paid multiple claims for damages and not merely cleaning services to other insured within the property’s immediate proximity.

18. Defendants [sic] received an attachment produced by the IICRC regarding the dangers and effects of prolonging the exposure to the smoke and soot, yet did not take the necessary steps to have the problems remedied.

19. Defendants received an Exactimate estimate from plaintiff's representative (Insurancebusters.net) showing that the cost of properly repairing the property to a safe inhabitable dwelling was $142,609.24 after defendant had tendered an estimate of only $15,199.09 for merely cleaning services.

20. The defendant has completely failed to fairly, adequately and promptly adjust the plaintiff’s claim.

21. Defendant has failed to properly handle the claim in accordance with the laws enumerated in the Texas Insurance Code as well as the customary standards utilized in the insurance industry.

22. The defendant’s complete failure to properly handle the claim has caused the plaintiff to suffer serious damages.[17]

With very little analysis on Rule 8 or the plausibility standard, the court found the complaint “obviously” deficient.[18] Despite Radenbaugh’s allegation that he submitted an estimate for repairs totaling $142,609.24 and that the defendant was only willing to recognize cleanup costs totaling $15,199.09, the court found that Radenbaugh failed to make sufficient factual allegations to state a claim.

The determining factors appear to be that Radenbaugh “never alleges that defendant issued an insurance policy to him, much less that he had any particular kind of insurance coverage under any policy issued by defendant.”[19]

Radenbaugh’s allegation that “... PHILLIP N. RADENBAUGH and the defendant, STATE FARM LLOYDS entered into an insurance contract for the property in question” coupled with lengthy factual background was insufficient as a matter of law.[20]

Here, Radenbaugh did not directly allege a property insurance contract existed between him and State Farm. A valid contract is an element of a breach of contract claim; accordingly, Radenbaugh cannot establish a breach of contract without providing factual allegations demonstrating the existence of a valid contract.

Therefore, as pled, the breach of contract claim is not plausible. The facts pled by the plaintiff focused on the breach element of the claim and assumed the existence of a contract.[21] As the court noted, plaintiffs must be careful to make factual allegations in support of each element of the cause of action alleged.

Perhaps, if Radenbaugh included the policy number, effective dates and details surrounding coverage of the contract in his complaint, he may have avoided summary dismissal. It is unclear whether or not an allegation that defendant issued Radenbaugh a “property insurance policy” providing coverage to his home for “damage resulting from fire” would have been sufficient under the court’s reasoning.

While the court provided little analysis under the plausibility standard, it took issue with Paragraph 17 of plaintiff’s complaint.[22] There, plaintiff alleged that other homes in the area with similar damage received payment for a greater scope of damages from State Farm.[23]

The court predicted that the real reason for the lawsuit may have been that plaintiff heard of other persons who had received payments from the defendant causing Radenbaugh to think he was entitled to payments the defendant refused to make.[24]

Nonetheless, it is surprising that the court was willing to throw the plaintiff’s claim out on the failure to specifically allege that State Farm issued a property insurance contract with fire coverage to him. The underpinnings of this holding seem to be premised on the principles guiding summary judgment and Federal Rule of Civil Procedure 56 as opposed to the due process concerns of Rule 8.[25]

Plaintiffs must be diligent in asserting factual allegations that make each element of the breach of contract claim plausible on its face to avoid dismissal. Defendants may be able to save their client considerable time and expense by closely reviewing the complaint to ensure the plaintiff has adequately pled its claim.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. 

[1] Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Bell Atlantic v. Twombly, 550 U.S. 544 (2007).
  
[2] See Ashcroft v. Iqbal, 556 U.S. at 679; Bell Atlantic v. Twombly, 550 U.S. at 545; see also Conley v. Gibson, 355 U.S. 41 (1957).
  
[3] Conley v. Gibson, 355 U.S. at 45-46 (1957) (holding that “the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief”).
  
[4] Ashcroft, 556 U.S. at 679.
  
[5] Ashcroft, 556 U.S. at 677-86.
  
[6] Ashcroft, 556 U.S. at 679 (quoting Twombly, 550 U.S. at 547).
  
[7] No. 4:13-CV-339-A, 2013 WL 4442024 *4 (Aug. 16, 2013) (emphasis added).
  
[8] Id.

[9] Id at *1.
  
[10] Id. This article will not address the court’s analysis with respect to the extra-contractual claims or the corresponding duties under the Federal Rule of Civil Procedure 9.
  
[11] Id. Interestingly, the court’s dismissal of what is likely boiler-plate complaint by the plaintiff was precipitated by what appears to be the court’s boilerplate order to abide by federal pleading requirements and not those imposed by the Texas Rules of Civil Procedure.
  
[12] Id.
  
[13] Id.
  
[14] Id at *7.
  
[15] Id at *3.

[16] Id.

[17] Id. at *3-4. In Radenbaugh’s original and amended petitions, he states the fire damage was caused by the “Bastrop Wildfires” despite the fact that his home in Palo Pinto Country was approximately 250 miles north of Bastrop, Texas.
  
[18] Id. at *2-4.

[19] Id. at *4 (emphasis added).
  
[20] Id. at *3.
  
[21] As discussed above, the plaintiff alleged he sustained $142,609.24 in property damage due to fire, but the defendant was only willing to recognize $15,199.09 in damages for clean-up costs. The plaintiff failed to directly plead that he had a property insurance contract with the defendant and that fire was a covered loss. It was not good enough to establish the contract indirectly through pleading that the defendant recognized the insurance claim and offered to settle for $15,199.09.
  
[22] Id. at *4.
  
[23] Id.
  
[24] Id.
 
[25] The court rejected plaintiff’s assertion that a motion for summary judgment was a “more appropriate procedural device.” Plaintiff’s Resp. to Motion to Dismiss, pg. 11. The court addressed plaintiff’s contention insofar as it held that plaintiff did not give any “valid excuse for his noncompliance” and failed to amend his complaint, failed to ask permission to amend his complaint, and failed to suggest that “an amended complaint would correct his pleading deficiencies.” Therefore, the court held that the complaint should be dismissed with prejudice. Radenbaugh, 2013 WL 4442024, at *7.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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