Government Employees Insurance Co. et al v. FRY et al

Middle District of Florida, flmd-8:2016-cv-01489

MOTION to Dismiss Count One, Counts Two through Six and Count Eight of the Complaint, MOTION to Strike Paragraph Sixteen of the Complaint by Cornerstone Network, Inc., Jason Fry, Fry Enterprises, Inc., James Hamilton, Suphattra Praphatsarang.

Interested in this case?

Current View

Full Text

2 PageID 114 UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA (Jacksonville Division) GOVERNMENT EMPLOYEES INSURANCE CO., GEICO INDEMNITY CO., GEICO GENERAL INSURANCE COMPANY and GEICO CASUALTY CO., CASE NO.: 8:16cv1489T35TGW Plaintiffs, Dispositive Motion -against- JASON FRY, CORNERSTONE NETWORK, INC. FRY ENTERPRISES, INC. d/b/a CORNERSTONE MOBILE GLASS, JAMES HAMILTON, SUPHATTRA PRAPHATSARANG, DWAYNE JOHNSON a/k/a DJ JOHNSON, MATTHEW MIKA, M&J GLASS COMPANY, LLC, ALFONSO GARCIA, A.B.S. ENTERPRISE, INC., and JOHN DOE DEFENDANTS 1-10, Defendants. _______________________________________/ DEFENDANTS JASON FRY; FRY ENTERPRISES, INC. d/b/a CORNERSTONE MOBILE GLASS; JAMES HAMILTON; CORNERSTONE NETWORK, INC.; AND SUPHATTRA PRAPHATSARANG'S MOTION TO DISMISS, AND MOTION TO STRIKE AND INCORPORATED MEMORANDUM OF LAW Defendants, JASON FRY; FRY ENTERPRISES, INC. d/b/a CORNERSTONE MOBILE GLASS; CORNERSTONE NETWORK, INC.; JAMES HAMILTON; and, SUPHATTRA PRAPHATSARANG, through their undersigned counsel, and in accordance with Rule 12(b)(6) & (f) of the FEDERAL RULES OF CIVIL PROCEDURE, and Rule 3.01 of the LOCAL RULES OF THE MIDDLE DISTRICT OF FLORIDA, hereby move to dismiss Count One, Counts Two through Six, and Count Eight of the Complaint, and to strike Paragraph Sixteen of the Complaint. In support of this motion, these Defendants state as follows: 1 2 PageID 115 1. Count One seeks an inappropriate declaratory Decree because does not ask the Court to decide a controversy between the parties as to the meaning of a contract or statute. Rather, it asks the court to resolve fact issues that are also dispositive as to the Plaintiffs' legal claims, and which are also at issue in prior filed state court actions. This Count should either be dismissed of the Court should abstain from adjudicating it. 2. Counts Two through Five which set forth RICO claims, and Eight, which sets for a common law fraud claim, must be dismissed because they do not meet the heightened pleading standard of Fed. R. Civ. P. 9(b). In brief, while there are numerous factual allegations pertaining to alleged fraudulent, conspiratorial and other wrongful conduct of the co-defendants – the so- called "Cultivator Defendants" and "Employee Defendants" – there are only bare, conclusory allegations connecting these moving Defendants to them and their conduct. 3. Count Six of the Complaint which sets forth a claim under the Florida Deceptive and Unfair Trade Practices Act, must be dismissed because it, too, does not meet the heightened pleading standard of Fed. R. Civ. P. 9(b), and the Act is inapplicable because the Plaintiffs were not consumers engaging in the purchase of goods or services. Nor does the Act even apply because the activity involved herein is within its "insurance exception." 4. Paragraph Sixteen of the Complaint which sets forth an alleged, and very remote, criminal conviction of the defendant, Fry, should be stricken because it is impertinent and immaterial to the issues of the case. 5. For the reasons more fully developed in the Memorandum of Law incorporated herein, these Defendants request entry of an order dismissing Count One, Counts Two through Six, and Count Eight of the Complaint and striking Paragraph Sixteen. 2 2 PageID 116 INCORPORATED MEMORANDUM OF LAW I. Standard of Review -- Motion to Dismiss When ruling on a Motion to Dismiss under Fed. R. Civ. P. 12(b)(6), the Court must accept the allegations in the complaint as true to determine whether plaintiff has stated a claim for which relief can be granted." Taft v. Dade Cnty. Bar Ass'n, 2015 U.S. Dist. LEXIS 134798 at *4 (S.D. Fla. 2015) (citing Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)). "While a complaint need not set forth detailed factual allegations, a plaintiff's obligation to provide the grounds for relief requires more than labels and conclusions." Taft at *3–4. "[A] formulaic recitation of the elements of a cause of action will not do." Id., quoting Bell Atl. Corp. Twombly, 550 U.S. 544, 555 (2007). While "a court must accept all factual allegations in a complaint as true, this tenet is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Therefore, although all factual allegations in the complaint will be accepted as true, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. (quoting Twombly, at 555). Fed. R. of Civ. P. 9(b) requires a party alleging fraud to plead with particularity the circumstances constituting fraud. General allegations will not suffice. Rule 9(b) is satisfied when the complaint sets forth (1) precisely what statements were made in what documents or oral representations or what omissions were made; (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions not making) same; (3) the content of such statements and the manner in which they misled the plaintiff' and (4) what the defendants obtained as a consequence of the fraud. United States ex rel. Clausen v. Lab. Corp. 3 2 PageID 117 of Am., 290 F.3d 1301, 1310 (11th Cir. 2002), citing Ziemba v. Cascade Int'l, Inc. 256 F.3d 1194, 1202 (11th Cir. 2001). II. Standard of Review -- Motion to Strike Pursuant to Fed. R. Civ. P. 12(f), "the court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." (emphasis added). "In evaluating a motion to strike, the court must treat all well pleaded facts as admitted and cannot consider matters beyond the pleadings." Prescott v. Alejo, 2010 U.S. Dist. LEXIS 39941 at *2 (M.D. Fla. 2010). A motion to strike usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties. Id. (citing Harvey v. Home Depot U.S.A., Inc., 2005 U.S. Dist. LEXIS 39180 (M.D. Fla. 2005)). A matter is deemed "scandalous," for purposes of Rule 12(f), when it improperly casts a derogatory light on someone. Pardo v. Fleetwood Motor Homes of Pa., Inc., 2005 U.S. Dist. LEXIS 31395 at *2 (M.D. Fla. 2005). An allegation is "immaterial" when it has no value in developing the issues in a case. Regions Bank v. Kaplan, 2014 U.S. Dist. LEXIS 43607 at *3 (M.D. Fla. 2014). An allegation is "impertinent" when it is not relevant to the issues of the case and could not be put in issue or be given in evidence between the parties. Id. ARGUMENT I. Count One seeks an inappropriate declaratory judgment If the Plaintiffs' count that seeks a declaratory decree – Count One – asks the court to decree that a fraudulent insurance claim need not be paid by the insurer, the plaintiffs will get no opposition from these Defendants. No one would contest the general proposition that a fraudulent insurance claim need not be paid by the insurer. But the Plaintiffs' declaratory judgment claim asks the Court to make the factual determination that there was fraud. And that 4 2 PageID 118 factual determination will be made in connection with the Plaintiffs' other, legal causes of action. For that reason alone, the count seeking a declaratory judgment is improper. A declaratory judgment is an action in which the court declares rights, duties, and status or other legal relations between the parties and is not a theory of recovery. See Jackson v. Astrue, 2009 U.S. Dist. LEXIS 120337, 2009 WL 4730550, *1 (M.D. Fla. 2009), citing 22 AM. JUR. 2D Declaratory Judgments §1. Here, Plaintiffs ask the court to make factual determinations that are also dispositive in their legal claims. That is not proper. Since its inception, the Declaratory Judgment Act has been understood to confer on federal courts unique discretion in deciding whether to declare the rights of litigants. Wilton v. Seven Falls Co., 515 U.S. 277, 132 L. Ed. 2d 214, 223, 115 S. Ct. 2137, 2142 (1995). Cases where fact issues in essentially tort cases, such as here (fraud is a tort), have been particularly recognized as being ill-suited for a federal declaratory judgment action. See, e.g., GEICO v. KJ Chiropractic, LLC., U.S. Dist. LEXIS 185731 (S.D. Fla. 2013); Mutual Life Ins. Co. v. Adams, 972 F.Supp. 1386 (S.D. ala. 1997), citing United Insurance Co. of America v. Harris, 939 F. Supp. 1527, 1531 (M.D. Ala. 1996). In Harris, the district court noted that other courts that had addressed the issue, "almost uniformly concluded that tort claims are ill-suited for declaratory relief." Harris, at 1531. Additional, here, in a shot-gun declaratory judgment count, the Plaintiffs jumble-together an assortment of factual requests – that the Defendants made misrepresentations as to their assignments; made misrepresentations as to whether the repairs were done; made misrepresentations as to the extent of repairs, and so on – that duplicate their legal claims. This is exactly the type of claim for declaratory relief that was found to be improper in a remarkably similar case. See Geico v. KJ Chiropractic, supra, where Geico sued an assortment of allegedly 5 2 PageID 119 fraudulent defendants in the context of PIP claims. "As these alleged injuries are also the subject of the RICO and state law tort claims, the relief sought is subsumed in the previous counts. In that respect, the [DJA] count is redundant." Geico v. KJ Chiropractic, supra, at 26. 1 Finally, the Plaintiffs are wrongfully attempting to use the instant case to preempt what should be a case-by-case, state court process of adjudicating its alleged fraud defenses as to each of the Defendants particular claim submissions. 2 In this regard, the relief requested in this matter violates federal-state principles of comity and the federal anti-injunction statute. See 28 U.S.C. §2283. "The Declaratory Judgment Act was not intended to enable a party to obtain a change of tribunal from a state to federal court, and it is not the function of the federal declaratory action merely to anticipate a defense that otherwise would be presented in a state action." Angora Enterprises v. Condominium Ass'n, 796 F.2d 384, 388 (11th Cir. 1986); Mut. Life Ins. Co. v. Adams, 972 F. Supp. 1386, 1393 (N.D. Ala. 1997). Thus, the Court should either dismiss Count One or abstain from adjudicating it. 3 II. Counts Two through Five and Eight of the Complaint should be dismissed because Plaintiffs fail to allege Defendants' involvement in the underlying fraud with sufficient particularity Counts Two and Three of the Complaint attempt to state causes of action against Defendants, Fry, Praphatsarang, and Hamilton for violation of the RICO statute, specifically, 18 U.S.C. §1962(c). Counts Four and Five of the Complaint attempt to state causes of action against 1 The Defendants are aware of the decision in State Farm Mut. Auto Ins. Co. v. Physicians Injury Care Center, Inc. 427 Fed. Appx. 714, 2011 U.S. App. LEXIS 10447 (11th Cir. 2011). But this had to do with a key issue – whether State Farm met a statutory condition precedent -- which ran through all the allegedly fraudulently submitted PIP bills. In fact, the decision was subsequently reversed on that point. See State Farm Ins. Co. v. Williams, 563 Fed. Appx. 665, 2014 U.S. App. LEXIS 7614 (11th Cir. 2011). 2 In this regard, it should be noted that many of the cases that are the subject of the claim for declaratory decree are the subject of previously filed lawsuits that are pending is state court. 3 As to abstention, see, e.g., Hartford fire Ins. Co. v. Donohue, 2014 U.S. Dist. LEXIS 100320, 2014 WL 3643554 (M.D. Fla. 2014). Additionally, Florida law governs the substantive issues presented in the instant case, giving Florida a substantial interest in having these issues decided in state court. See Lincoln Ben. Life Co. v. Look, 2006 U.S. Dist. LEXIS 91750, 2006 WL 3734331 at *4 (M.D. Fla. 2006). 6 2 PageID 120 Defendants, Fry, Praphatsarang, and Hamilton for conspiracy to commit a violation of RICO, specifically §1962(d). In each of these counts, the underlying "racketeering activity" alleged by Plaintiffs is wire fraud. Count Eight attempts to state a cause of action against Defendants, Fry, Praphatsarang, Hamilton, Cornerstone Mobile and Cornerstone Network (hereinafter, "the Cornerstone entities") for common law fraud. Plaintiffs have failed to state a claim for which relief can be granted in each of the above-referenced counts because they fail to plead with the requisite level of specificity required by Rule 9(b). A. Counts Two and Three -- Violation of RICO, 18 U.S.C. § 1962(c) At the outset, it must be noted that the Complaint is, facially, an improper "shotgun pleading" in that each count adopts the allegations of all preceding counts, and consists of mostly conclusory allegations. Weiland v. Palm Beach County Sherriff's Office, 792 F.3d 1313, 1322 (11th Cir. 2015). Of the two hundred and ten numbered paragraphs in the Complaint, only a small fraction (roughly fifteen) contains factual allegations. The remaining paragraphs recite the elements of each cause of action and/or state legal conclusions. The paragraphs that attempt to provide factual support for Plaintiffs' claims are 93-97, 99-102, 107, 110, 112, and 116. Pursuant to Iqbal, the Court is bound only to accept the paragraphs containing factual allegations as true and should otherwise ignore those containing legal conclusions. Iqbal, supra, 556 U.S. at 678. The operative paragraphs against these moving Defendants contain allegations consisting of unsupported conclusions that they allegedly worked in concert with co-defendants to essentially trick insureds into providing their signature or insurance information to form the basis of fraudulent insurance claims pertaining to windshield repair and/or replacement. The allegations pertaining to the other co-defendants – i.e., Garcia, Johnson, Mika, A.B.S. 7 2 PageID 121 Enterprises, M&J Glass, "the Cultivator Defendants" and the various unnamed "Employee Defendants" -- are pled in detail, in particular with respect to their alleged wrongful on-site activities at the car dealerships and car wash shops. On the other hand, the allegations pertaining to Fry, Hamilton and Cornerstone are not. In almost all of the examples, Plaintiffs only allege that "Fry, Hamilton, and Cornerstone Network submitted a fraudulent claim to GEICO." Of course, these submissions would necessarily have been based upon the allegedly fraudulent on- site activities of the other Defendants, many of which are unnamed John Doe's, with regard to their obtaining the insured's signature and/or insurance information. The Plaintiffs simply assume that Fry, Hamilton, and Cornerstone conspired with and had knowledge of the other Defendants' alleged fraudulent conduct. The allegations of the Complaint provide no factual basis for that assumption. The Plaintiffs set forth absolutely no detail connecting-up these Defendants to the conduct of the co-defendants and in particular to their apparently sometimes wrongful on-site activities at car dealerships and car wash shops, or as to how these moving Defendants allegedly knew of the conduct of the co-defendants and their on-site agents or employees. At heart, the Complaint shows that Fry, Hamilton and Cornerstone provided billing services by which the assigned claims from the insured would be submitted to Geico and that at least some of those claims were apparently not based upon bona fide assignments. Viewed most favorably to the Plaintiffs, the Complaint's non-factual, conclusory allegations that Fry, Hamilton and Cornerstone conspired with the co-defendants raises a possibility that these Defendants participated in the fraudulent activity, but it is left to conjecture given the lack of factual allegation as to these Defendants in that regard. It is more plausible that Fry, Hamilton and Cornerstone were under the impression that all claims were legitimate since they were 8 2 PageID 122 clearly not present when the alleged fraudulent on-site activity occurred – whether in making fraudulent repairs or in fraudulently obtaining signatures and insurance information. "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." Iqbal, 556 U.S. at 678. Many cases have held that civil RICO claims based on underlying fraud, such as the instant case, must be pled with specificity pursuant to Rule 9(b). Ambrosia Coal & Constr. Co. v. Morales, 482 F.3d 1309, 1311 (11th Cir. 2007). "To satisfy the Rule 9(b) standard, RICO complaints must allege (1) the precise statements, documents, or misrepresentations made; (2) the time and place of and person responsible for the statement; (3) the content and manner in which the statements misled the Plaintiffs; and (4) what the Defendants gained by the alleged fraud." Id. (internal citations omitted). In addition, when the case involves multiple defendants, "the complaint should inform each defendant of the nature of his alleged participation in the fraud." Id. A complaint that simply lumps together all of the defendants in its allegations of fraud does not meet the heightened pleading standard of Rule 9(b). Id.; see also Brooks v. Blue Cross and Blue Shield of Florida, Inc. 116 F.3d 1364, 1381 (11th Cir. 1997). By "lumping together" the defendants in the allegations of fraud, Counts Two and Three fail to satisfy the heightened pleading standard of Rule 9(b). Brooks, 116 F.3d at 1381. The complaint must "contain specific allegations with respect to each defendant that are sufficient to inform each defendant of the nature of his alleged participation in the fraud." Id. Simply, alleging "Fry, Hamilton, and Cornerstone Network submitted a fraudulent claim" does not suffice because Plaintiffs fail to inform each Defendant of the nature of their alleged participation in the fraud. This precise type of language has been found to fall short of the heightened pleading standard of Rule 9(b). See Viridis Corp. TCA Global Credit Master Fund, 9 2 PageID 123 LP, 2015 U.S. Dist. LEXIS 177833 at *38 (S.D. Fla. 2015) (alleging "Defendants Press and Silverman issued a sham default letter" was insufficient for purposes of pleading mail fraud in a RICO case because it was not "a sufficient statement of each defendant's specific conduct"). Nowhere in the Complaint do Plaintiffs clarify which of the these moving Defendants -- Fry, Hamilton or Cornerstone -- were responsible for allegedly submitting fraudulent claims, nor what specific acts they took in furtherance of the fraud, now how each allegedly knew of the underlying fraudulent conduct of the co-defendants. Further, none of the subject allegedly fraudulent claims are attached to the Complaint. Instead, Plaintiffs attach two "charts" that "set forth a representative sample of the fraudulent claims. . .." Complaint at ¶ 10. Those charts only indicate that the claims were submitted by interstate facsimile. They fail to add any level of specificity in regard to how these Defendants supposedly knew of the underlying alleged fraudulent activity, nor as to Fry's and/or Hamilton's alleged involvement in submitting the claims. To plead a RICO claim pursuant to 9(b), the Plaintiff must allege "the time and place of and person responsible for the statement." Brooks, supra, 116 F.3d at 1381 (emphasis added). Lumping together the Defendants is insufficient. Id. This proposition would obviously apply with even more effect where many of the alleged conspiratorial wrongdoers are not named, as here. Finally, although Defendant, Praphatsarang is named in Counts Two and Three, the Complaint fails to factually allege her involvement in submitting any fraudulent claims. 4 Accordingly, for all of the above-stated reasons, Counts Two and Three of the Complaint must be dismissed. B. Counts Four and Five -- Conspiracy to Commit Violation of RICO, 18 U.S.C. § 1962(d) 4 In fact, the only relevant factual allegation in the Complaint pertaining to Praphatsarang is that she is an owner and operator of Cornerstone Mobile and Cornerstone Network. Complaint at ¶ 17. 10 2 PageID 124 Because Plaintiffs failed to state a substantive RICO claim in Counts Two and Three, Counts Four and Five of the Complaint, alleging conspiracy to violate RICO, should also be dismissed. When a plaintiff "fails to state a RICO claim and the conspiracy count does not contain additional allegations, the conspiracy claim necessarily fails." Rogers v. Nachhio 241 Fed. Appx. 602, 209 (11th Cir. 2007). If the complaint fails to state a substantive RICO claim, a RICO conspiracy allegation "simply concludes that the defendants conspired and confederated to commit conduct which in itself does not constitute a RICO violation." Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1269 (11th Cir. 2004). Accordingly, since Plaintiffs failed to plead fraud with specificity in Counts Two and Three, and Counts Four and Five contain no additional factual allegations, it follows that Plaintiffs have failed to allege Defendants involvement in a conspiracy to violate RICO, 18 U.S.C. 1962(d). Therefore, Counts Four and Five must be dismissed. C. Count Eight -- Common Law Fraud Count Eight of the Complaint attempts to state a claim for Common Law Fraud against Defendants, Fry, Hamilton, Praphatsarang, Cornerstone Mobile and Cornerstone Network. Claims for Common Law Fraud must also satisfy the heightened pleading standard imposed by Rule 9(b). See Five Star Life Ins. Co. v. Simpson, 2015 U.S. Dist. LEXIS 172966 at *5 (M.D. Fla. 2015). Accordingly, in addition to stating each element, Plaintiffs are required to set forth the following, "(1) precisely what statements were made in what documents or oral representations or what omissions were made, (2) the time and place of each such statement and the person responsible for making same, (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud." United States ex rel. Clausen v. Lab. Corp. of Am. 290 F.3d 1301, 1310 (11th Cir. 2002). 11 2 PageID 125 Plaintiffs' claim for Common Law Fraud suffers from the same defects as their RICO claims. Once again, Plaintiffs have lumped together the Defendants in their allegations of fraud. See Complaint at ¶ 190 ("Fry, Hamilton, Praphatsarang, Cornerstone Mobile and Cornerstone Network intentionally and knowingly made false and fraudulent statements. . ."). Nowhere in Count Eight do the Plaintiffs provide any factual allegations to support their claim for fraud. It simply recites the elements of Common Law Fraud in a conclusory fashion. While it is true that Count Eight incorporates every allegation before it, the majority of those previous allegations are threadbare recitals/legal conclusions as they pertain to these Defendants. Pursuant to Iqbal, the Court should ignore those allegations and accept only as true the factual allegations that were previously mentioned (paragraphs 93-97, 99-102, 107, 110, 112, and 116). In looking at only the factual allegations, it's clear that Plaintiffs have failed to plead their fraud claim with specificity as to each Defendant. As mentioned above, the factual allegations lump together Defendants, Fry, Hamilton and Cornerstone without stating how each of their individual actions was fraudulent. This type of "lumping together" of defendants in allegations of fraud does not suffice. Brooks, supra, 11 6 F.3d at 1381. Finally, the only factual allegation connecting Defendant, Praphatsarang to this matter is that she is the owner and operator of Cornerstone Network and Cornerstone Mobile. Accordingly, for all of the above reasons, Count Eight should be dismissed. III. Count Six of the Complaint fails to state a claim for relief under the Florida Deceptive and Unfair Trade Practices Act because it fails to meet the heightened pleadings standard of Fed. R. Civ. P. 9(b), and Plaintiffs were not consumers engaging in the purchase of goods or services A. The FDUTPA claim fails to meet the heightened pleading standard of Rule 9(b) Count Six of the Complaint attempts to state a cause of action against Defendants for violation of the Florida Unfair and Deceptive Unfair Trade Practices Act ("FDUTPA"), i.e., 12 2 PageID 126 Fla. Stat. §501.201. When a FDUTPA claim sounds in fraud, it should be pled in accordance with the heightened pleading standard of Rule 9(b). See Casey v. Fla. Coastal School of Law, Inc., 2015 U.S. Dist. LEXIS 176281 at *28 (M.D. Fla. 2015); Perret v. Wyndham Vacation Resorts, Inc., 846 F. Supp. 2d 1327, 1332 (S.D. Fla. 2012). When the complaint is peppered with allegations of fraud, as it certainly is in the instant matter, "the plaintiff's FDUTPA claim sounds in fraud." Casey, supra, at *28. The Complaint in the instant action contains numerous allegations of fraud within the FDUTPA claim. See, e.g., Complaint at ¶ 177 ("The claims and supporting documents submitted to GEICO in connection with the billed-for-services were fraudulent. . .")(emphasis added). Accordingly, because the FDUTPA claim sounds in fraud, Plaintiffs are required to allege "specific allegations with respect to each defendant that are sufficient to inform each defendant of the nature of his alleged participation in the fraud." Brooks, supra, 116 F.3d at 1381. Once again, there are no factual allegations connecting-up these moving defendants to the underlying allegedly fraudulent conduct of the various co- defendants, many of whom are unnamed, and, further, again, the Plaintiffs have lumped each of the Defendants together and stated their fraud allegations against these moving Defendants in very conclusory fashion. For these reasons, alone, Count Six fails to meet the heightened pleading requirement of 9(b) and should be dismissed. 5 B. Plaintiffs were not consumers engaged in purchasing goods or services However, even if the Court should find that Plaintiffs met their burden under 9(b), Count Six should be dismissed because FDUTPA is inapplicable. Plaintiffs did not engage in a "consumer transaction" for goods or services. The Plaintiffs were simply paying claims with 5 Even if the Court should find that Count Six does not sound in fraud, Plaintiffs are required to allege that each individual defendant "was a direct participant in the improper dealings." Visonic Sys. v. AT&T Digitial Life, 971 F. Supp. 2d 1178, 1194 (S.D. Fla. 2013). "Thus, to satisfy Rule 8's pleading standards, Plaintiffs' FDUTPA allegations must specify Defendants' individual actions and how they constitute a violation of FDUTPA." Id. Plaintiffs have failed to meet that burden. 13 2 PageID 127 respect to which they were obligated under their insurance contracts with their insureds. FDUTPA is a consumer protection statute proscribing unfair methods of competition, unconscionable acts or practices, and unfair or deceptive trade or commerce. Fla. Stat. § 501.204(1). It authorizes a private cause of action for actual damages. 6 Fla. Stat. § 501.211(2). Historically, the Act applied to individual consumers. In 2001, the Florida Legislature amended FDUTPA's standing provision by replacing the word "consumer" with the word "person." See. e.g., Leon v. Tapas & Tintos, Inc., 51 F. Supp. 3d 1290, 1296 (S.D. Fla. 2014). The District Courts in the Eleventh Circuit became divided over whether the Florida Legislature's 2001 replacement of the word "consumer" with "person" extended FDUTPA to business entities, i.e., "non-consumers." See Democratic Republic of the Congo v. Air Capital Group, LLC., 614 Fed. Appx. 460, 20015 WL 3619452 *7, 2015 U.S. App. LEXIS 9724 (11th Cir. 2015). The Eleventh Circuit acknowledged this "interpretative tussle" but declined to resolve it. See also Taft v. Dade County Bar Association, 2015 U.S. Dist. LEXIS 134798 at *6 (S.D. Fla. 2015)(discussing the Eleventh Circuit's failure to address the conflict). The Eleventh Circuit has yet to resolve the split. The Taft decision resolved the issue in a most sensible manner. It looked at the statutory purposes, the language employed, and the legislative history. It intuitively concluded that the statute did apply to corporations and businesses by reason of the 2001 amendment, but only when they are acting as consumers: Given the overwhelming weight of authority in favor of a narrow reading, this Court holds that "person" in section 501.211(2) 6 The standard for determining damages recoverable under FDUTPA is well-defined in case law: "The measure of actual damages is the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties." Rollins, Inc. v. Heller, 454 So.2d 580, 585 (Fla. 3d DCA 1984); see also H & J Paving of Florida, Inc. v. Nextel, Inc., 849 So.2d 1099, 1101-02 (Fla. 3d DCA 2003). These are clearly not the type of damages involved in this case, and this, alone, underscores the inapposite nature of the statute to this case. 14 2 PageID 128 means only "consumers," including businesses that are consumers, and the FDUTPA applies only to a consumer injured by an unfair or deceptive act when buying or purchasing goods and services. Such an interpretation is consistent with the statute's legislative history. The legislative history of the 2001 amendment indicates that the Florida Legislature did not intend to expand the FDUTPA to non-consumers. 2008 U.S. Dist. LEXIS 9464, at *3. Rather, the purpose of the amendment was to clarify that remedies available to individuals under the FDUTPA are also available to businesses. Id. Taft, supra, 2015 U.S. Dist. LEXIS 134798 *10, citing Hinson Elec. Contracting Co. v. Bellsouth Telecomms, 2008 U.S. Dist. LEXIS 9464, 2008 WL 360803 (M.D. Fla. 2008). A recent decision of Florida Fourth District Court of Appeals is to same effect. See Caribbean Cruise Lines, Inc. v. Better Bus. Bur. Of Palm Beach Co., 169 So.3d 164, 168 (Fla. 4th DCA 2015). A very recent decision out of the Middle District, however, broadly concluded that a cause of action lies under FDUTPA for "any person or entity that has suffered a loss as a result of unfair or deceptive acts or practices. . . whether or not a consumer." E-Ventures Worldwide, LLC v. Google, Inc., 2015 U.S. Dist. LEXIS 62855 at * 21 (M.D. Fla. May 12, 2016). This was a case where the plaintiff, which operated an on-line site that ranked products and service of third parties, asserted that Google was engaging in anti-competitive conduct. While this was obviously a Sherman Act case at heart, the plaintiff also cast one if its counts under the auspices of FDUTPA. Although E-Ventures is the most recent Middle District case to weigh in on the issue, many other Judges in the Middle District have opted to interpret FDUTPA with a narrower reading. See Goodbys Creek, LLC v. Arch Ins. Co., 2008 U.S. Dist. LEXIS 60759 (M.D. Fla. 2008); Hughes Supply v. Cont'l Recovery Servs., 2007 U.S. Dist. LEXIS 52916 (M.D. Fla. 2007); and Badillo v. Playboy Entm't Grp., Inc., 2006 U.S. Dist. LEXIS 17205 (M.D. Fla. 2006). 15 2 PageID 129 And some courts have concluded, in a bit of a hybrid analysis, that a non-consumer is not entitled to monetary damages under the statute, but, rather, only injunctive relief. See Kertesz v. Net Transactions, Inc., 635 F.Supp.2d 1339 (S.D. Fla. 2009). Despite the recent decision in E-Ventures, these Defendants urge this Court to follow the narrower reading of FDUTPA represented by Taft, which, it is submitted, is the more well- reasoned decision. This would require the Plaintiffs to show that, though they are business entities, they were acting as consumers at the time, who were "injured by an unfair or deceptive act when buying or purchasing goods and services" – Taft, supra, at *6 – which they were not. This interpretation is consistent with the statute's legislative history which clearly indicates that the Florida Legislature did not intend to expand FDUTPA to non-consumer transactions. Id. "Rather, the purpose of the amendment was to clarify that remedies available to individuals under FDUTPA are also available to businesses. Id. (citing House of Representatives Committee on Agriculture & Consumer Affairs Analysis, HB 685, March 12, 2001, page 4; Senate Staff Analysis and Economic Impact Statement, CS/SB 208, March 22, 2001, pages 3–4). It is important to note that the decision in E-Ventures did not thoroughly analyze this FDUTPA standing issue. It simply noted the change in wording in the 2001 amendment and then summarily concluded that a business entity has standing under FDUTPA. The decision in Taft made the same conclusion -- which is fairly obvious given the 2001 amendment -- but Taft's reasoning and analysis went far beyond that, and rightly concluded that businesses often act as consumers, too, when purchasing consumer goods and services. Taft intuitively held that it is only at such times that that business entities have standing under FDUPTA. As that court said: "'Person' . . . include[s] businesses that are consumers. . .." Taft, supra, at *10 (emphasis added). In the instant case, that scenario does not pertain. Plaintiffs were not acting as a 16 2 PageID 130 consumer of goods or services; they were not purchasing anything. They were paying – or refusing to pay – claims under its insurance policies. The purchasers of goods or services in this matter are the individual insureds who contract with the windshield repair shop. 7 FDUTPA is inapplicable. Accordingly, Plaintiffs lack standing to bring a FDUTPA claim. C. Plaintiffs have no damages that are recognized under FDUTPA The standard for determining damages recoverable under FDUTPA is well-defined in case law: "The measure of actual damages is the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties." Rollins, Inc. v. Heller, 454 So.2d 580, 585 (Fla. 3d DCA 1984); see also H & J Paving of Florida, Inc. v. Nextel, Inc., 849 So.2d 1099, 1101-02 (Fla. 3d DCA 2003). Additionally, under FDUTPA, "actual damages" do not include "consequential" damages. Rollins, Inc. v. Butland, 951 So.2d 860, 869 (Fla. 2d DCA 2006); see also, KIA Motors America Corp. v. Butler, 985 So.2d 1133, 1140 (Fla. 3d DCA 2008) ("FDUPTA 'actual damages' do not include consequential damages, such as repair damages or resale damages."). In this matter, the Plaintiffs, because of alleged fraud, have simply not paid the repair/replacement claims submitted by the Cornerstone defendants (and Geico asks the Court to 7 Geico is most certainly not the purchaser of the goods or services here. The purchasers of goods or services – i.e., windshield repair/replacement -- in this matter are the individual insureds. In a case involving the same subject matter (insurance claims submitted for windshield repair), GEICO admitted that "it contracts with its insureds (rather than repair shops) to pay for repairs, while it is the insureds that contract with the repair shops. . .." Crawford's Auto Center, Inc. v. State Farm Mutual Automobile Insurance Company, No. 614-cv-6016-ORL-31TBS at *9 (M.D. Fla. 2015). Therefore, based on its own admission, GEICO is not the purchaser of goods or services. Geico is simply paying on an insurance claim pursuant to its insurance policy and that is the type of activity that is expressly excluded from FDUTPA. Pursuant to §501.212(4)(a), this statutory scheme does not apply to "any person or activity regulated under laws administered by. . . the Office of Insurance Regulation of the Financial Services Commission or any person or activity regulated under the laws administered by the former Department of Insurance which are now administered by the Department of Financial Services." The payment of claims with its insureds goes to the heart of the insurance relationship between insurer and insured, and must be deemed to be regulated activity. See, e.g., Professional Lens Plan, Inc. v. Dep't of Ins., 387 So.2d 548, 550 (1st DCA 1980)(setting forth criteria for what constitutes regulated "insurance"). There are, in fact, regulations even pertaining to the submission of false claims. See FLORIDA ADMINISTRATIVE CODE §69B-153.002. 17 2 PageID 131 declare it has no obligation to pay the pending submissions), or they unilaterally paid less than the face amount of the submissions. Accordingly, Plaintiffs have not paid anything or they unilaterally paid less than the amount of the claim. FDUTPA was not designed or intended to be used the way Geico is trying to use it. "[T]he act is intended to protect a consumer from unfair or deceptive acts or practices which diminish the value or worth of the goods or services purchased by the consumer." Urling v. Helms Exterminators, Inc., 468 So.2d 451, 454 (Fla. 1st DCA 1985). In the instant case, Geico cannot realistically argue that defendants' conduct resulted in a diminution of value or worth of goods or services purchased by it as a consumer. "[W]hen a plaintiff in her complaint fails to allege a recoverable loss under FDUTPA, the complaint fails to state a cause of action under FDUTPA." Mantz v. TRS Recovery Services, Inc., 2011 WL 5515303 * 3 (S.D. Fla. 2011) ("If a plaintiff fails to allege a recoverable loss under FDUTPA, the complaint fails to state a cause of action."); see also Rodriguez v. Recovery Performance & Marine, LLC, 38 So.3d 178, 180 (Fla. 3d DCA 2010). 8 The fact that the FDUTPA measure of damages is the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered underscores the inapposite nature FDUTPA with respect to this case. Thus, the Plaintiffs FDUPTA count, Count Six, must be dismissed. 8 In Ft. Lauderdale Lincoln Mercury, Inc. v. Corgnati, 715 So.2d 311, 314 (Fla. 4th DCA 1998), the court stated that "[e]vidence as to the amount of damages cannot be based on speculation or conjecture, but must be proven with certainty." (citing George Hunt, Inc. v. Dorsey Young Constr., Inc., 385 So.2d 732, 733 (Fla. 4th DCA 1980)) ("the evidence as to the amount of damages cannot be based on speculation or conjecture, but must be proven with certainty."). See also City First Mort. Corp. v. Barton, 988 So.2d 82, 86 (Fla. 4th DCA 2008) ("[E]ven if the record contained evidence supporting the borrower's speculation as to why the bank terminated its loan offer, it would be insufficient to establish damages under FUDTPA, which provides for recovery only of 'actual damages,' which cannot include consequential or special damages."). Dorestin v. Hollywood Imports, Inc., 45 So.3d 819, 824-25 (Fla. 4th DCA 2010) ("Proof of actual damages is necessary to sustain a FDUTPA claim. The statute does not allow the recovery of other damages, such as consequential damages. . .."). 18 2 PageID 132 IV. Paragraph Sixteen of the Complaint should be stricken as it contains impertinent and immaterial matter that may cause prejudice to Jason Fry Paragraph sixteen of the Complaint alleges that Defendant, Fry has, allegedly, an extensive criminal record, including a felony conviction, and is currently on parole. Paragraph sixteen is completely irrelevant to the remaining allegations of the Complaint and adds nothing to Plaintiffs' claims, except to portray Mr. Fry in a negative light in the instant Complaint – which is, of course, a public document. A motion to strike should be granted when the allegation has no possible relation to the controversy and may cause prejudice to one of the parties. Prescott v. Alejo, 2010 U.S. Dist. LEXIS 39941 at *2. Mr. Fry's conviction (which is more than a decade old) has absolutely no connection to the transactions at issue in this matter. Given its remoteness, it is extremely questionable whether it could even be used to impeach him when he testifies at deposition or at trial. But it surely has no place in a complaint. When allegations pertaining to a Defendant's criminal history are immaterial to the issue of the case, the court should strike them from the complaint. See Santiago v. Jamison, 2014 U.S. Dist. LEXIS 122545 at *3 (M.D. Fla. 2014) (striking allegations relating to defendant's criminal history because they were irrelevant to the central issue of the case which was alleged discriminatory actions taken by the defendant). See also Morse v. Wiengarten, 777 F. Supp. 312, 319 (S.D.N.Y. 1991) (where the court granted a motion to strike references in the complaint to defendant's criminal conviction because it was immaterial, impertinent and served "no purpose except to inflame the reader"). 9 An allegation is "impertinent" when it is not relevant to the issues of the case and could not be put in issue or be given in evidence between the parties. Regions Bank v. Kaplan, 2014 9 At least one Court in the Middle District has denied a motion to strike reference to a defendant's criminal history. In Al-Rayes v. Willingham, 2007 U.S. Dist. LEXIS 17858 (M.D. Fla. 2007), the court denied defendant's motion to strike a paragraph from the complaint that referred to him as a convicted felon. The court did so without prejudice, recognizing that defendant failed to cite any legal authority in support of his position. Al-Rayes at *16. To the contrary, Defendant Fry has cited relevant case law to support his position that paragraph sixteen is immaterial. 19 2 PageID 133 U.S. Dist. LEXIS 43607 at *3 (M.D. Fla. 2014)(emphasis added). Because Mr. Fry's criminal history has absolutely no factual relation to the Plaintiffs' causes of action, it appears that paragraph sixteen was included in an attempt to show Fry's supposed propensity to engage in fraudulent activity. Evidence offered for that purpose would most certainly be excluded at trial. See Fed. R. Evid. 404(b) (evidence of a crime, wrong, or other act not admissible to prove a person's character in order to show that on a particular occasion the person acted in accordance with that character). While it is imaginable that Fry's conviction could be admitted for impeachment purposes, it is extremely unlikely considering it is more than ten years old and therefore presumed to be inadmissible. See Fed R. Evid. 609(b) (only admissible if its probative value, supported by facts and circumstances, substantially outweighs its prejudicial effect; and the proponent gives the adverse party advanced notice so that the party has a fair opportunity to contest its use) (emphasis added). Considering the strong presumption of inadmissibility of this type of evidence, paragraph sixteen is impertinent to the facts of this matter and therefore should be stricken from the Complaint. 10 CONCLUSION WHEREFORE, JASON FRY, CORNERSTONE NETWORK, INC., FRY ENTERPRISES, INC. d/b/a CORNERSTONE MOBILE GLASS, JAMES HAMILTON, and SUPHATTRA PHRAPHATSARANG, requests entry of an order dismissing counts two through six and striking paragraph sixteen of the Complaint, together with costs, and such further relief as this Court deems appropriate. 10 Further, the allegation that Fry is on parole is simply wrong. Undersigned counsel for these Defendants brought this to the attention of Plaintiffs' counsel, in the good faith conference, and even furnished documents to establish that Fry is not "on parole." See Exhibit 1 attached hereto. But, as of the time this responsive pleading is due, no agreement has been reached. 20 2 PageID 134 CERTIFICATE OF GOOD FAITH CONFERENCE I HEREBY CERTIFY that the undersigned has conferred with opposing counsel in a good faith effort to resolve the issues raised in Defendant, Jason Fry's Motion to Strike. Counsel were unable to agree on a resolution of the Motion. /s/ Michael Buckley_ MICHAEL B. BUCKLEY, ESQUIRE FBN: 365734 150 Second Avenue North, Suite 1200 St. Petersburg, Florida 33701 Main Number: (727) 822-4800 Facsimile: (727) 822-4855 Toll Free: (888) 583-0050 Primary E-Mail: mbuckley@buckleylawgroup.com Secondary E-Mail: hdalmanieras@buckleylawgroup.com rparker@buckleylawgroup.com CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing was served via ECF on this 30th day of June, 2016, to: Lindsey R. Trowell, Esq., John P. Marino, Esq., and Kristen W. Bracken, Esq., Smith Gambrell & Russell, LLP, 50 North Laura Street, Suite 2600, Jacksonville, Florida 32202 ltrowell@sgrlaw.com and Barry I Levy, Esq., Max Gershenoff, Esq., and Steven Henesy, Esq., Rivkin Radler, LLP, 926 RXR Plaza, Uniondale, New York 11550. BUCKLEY LAW GROUP, P.A. BY: /s/Michael Buckley ________________ MICHAEL B. BUCKLEY, ESQUIRE FBN: 365734 150 Second Avenue North, Suite 1200 St. Petersburg, Florida 33701 Main Number: (727) 822-4800 Facsimile: (727) 822-4855 Toll Free: (888) 583-0050 Primary E-Mail: mbuckley@buckleylawgroup.com Secondary E-Mail: 21 2 PageID 135 hdalmanieras@buckleylawgroup.com rparker@buckleylawgroup.com 22