Franklin County Commission v. Madden

          MEMORANDUM OPINION

         Plaintiff, the Franklin County Commission (“the Commission”), asserts claims for breach of contract and fraudulent suppression against defendant Lafayette Insurance Company (“Lafayette”), arising from Lafayette's failure to pay a claim under a policy covering employee theft.^[1] The case is before the court on Lafayette's motion to dismiss those claims pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted.^[2] Upon consideration of the complaint, Lafayette's motion, plaintiffs' response, ^[3] Lafayette's reply, ^[4] plaintiff's sur-reply, ^[5] and oral arguments of counsel, the court concludes that the motion should be granted.

         I. STANDARD OF REVIEW

         Federal Rule of Civil Procedure 12(b) permits a party to move to dismiss a complaint for, among other reasons, “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). This rule must be read together with Rule 8(a), which requires that a pleading contain only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). While that pleading standard does not require “detailed factual allegations, ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 550 (2007), it does demand “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted). As the Supreme Court stated in Iqbal:

A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” [Twombly, 550 U.S., at 555]. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557.

To survive a motion to dismiss founded upon Federal Rule of Civil Procedure 12(b)(6), [for failure to state a claim upon which relief can be granted], a complaint must contain sufficient factual matter, accepted as true, to “state a claim for relief that is plausible on its face.” Id., at 570. 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., at 556. The plausibility standard is not akin to a “probability requirement, ” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.'” Id., at 557 (brackets omitted).

Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id., at 555 (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we “are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted)). Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F.3d, at 157-158. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not “show[n]” - “that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2).

In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Iqbal, 556 U.S. at 678-79 (emphasis supplied, second and fourth alterations in original, other alterations supplied).

         II. ALLEGATIONS OF PLAINTIFF'S COMPLAINT AND RELEVANT POLICY LANGUAGE

         Lafayette issued policy number 60346212 (“the policy”) to the Commission, covering employee theft during the policy period from April 1, 2014, to the same date in calendar year 2015.^[6] The policy states that:

Coverage is provided under the following Insuring Agreements for which a Limit of Insurance is shown in the Declarations and applies to loss that you sustain resulting directly from an “occurrence” taking place during the Policy Period shown in the Declarations, . . . which is “discovered” by you during the Policy Period shown in the Declarations or during the period of time provided in the Extended Period To Discover Loss Condition . . .:

         1. Employee Theft

         We will pay for loss of or damage to “money, ” “securities” and “other property” resulting directly from “theft” committed by an “employee, ” whether identified or not, acting alone or in collusion with other persons.

         For the purposes of ths Insuring Agreement, “theft” shall also include forgery.

         Doc. no. 1-5 (Policy), at ECF 5, § A(1) (boldface emphasis in original, ellipses supplied).^[7] The policy defines the term “occurrence” as meaning:

(1) An individual act;

(2) The combined total of all separate acts whether or not related; or

(3) A series of acts whether or not related; committed by an “employee” acting alone or in collusion with other persons, during the Policy Period shown in the Declarations . . . .

Id. at ECF 19, § F(14)(a) (ellipsis supplied). The terms “discover” and “discovered” ...