MELINDA HARMON, District Judge.
The above referenced cause, alleging breach of flood insurance contract and state-law claims for failure to pay the full amount of benefits owed to the insured, was removed from the 164
Although Plaintiff is represented by counsel, she has failed to file a response.
On May 26, 2015 heavy rainfall flooded the Meyerland area in Houston, Texas and caused such severe damage to Plaintiff's Property that it required extensive remediation and rebuilding. After Plaintiff filed a claim with Defendant for the cost of repairs to the Property under her policy, Defendant allegedly wrongfully underpaid some of the claims and continues to withhold full payment.
When a district court reviews a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), it must construe the complaint in favor of the plaintiff and take all well-pleaded facts as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763 (5
"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, . . . a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. . . ." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)(citations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965, citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004)("[T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action"). Twombly requires that a complaint allege enough facts to state a claim that is plausible on its face." St. Germain v. Howard, 556 F.3d 261, 263 n.2 (5th Cir. 2009), citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) ("To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead `enough facts to state a claim to relief that is plausible on its face.'"), citing Twombly, 127 S. Ct. at 1974). "`A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Montoya v. FedEx Ground Package System, Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plausibility standard is not akin to a "probability requirement," but asks for more than a "possibility that a defendant has acted unlawfully." Twombly, 550 U.S. at 556.
Dismissal under Rule 12(b)(6) is proper not only where the plaintiff fails to plead sufficient facts to support a cognizable legal theory, but also where the plaintiff fails to allege a cognizable legal theory. Kjellvander v. Citicorp, 156 F.R.D. 138, 140 (S.D. Tex. 1994), citing Garrett v. Commonwealth Mortgage Corp., 938 F.2d 591, 594 (5th Cir. 1991); ASARCO LLC v. Americas Min. Corp., 832 B.R. 49, 57 (S.D. Tex. 2007). "A complaint lacks an `arguable basis in law' if it is based on an indisputedly meritless legal theory' or a violation of a legal interest that does not exist." Ross v. State of Texas, Civ. A. No. H-10-2008, 2011 WL 5978029, at *8 (S.D. Tex. Nov. 29, 2011).
As noted, on a Rule 12(b)(6) review, although generally the court may not look beyond the pleadings, the court may examine the complaint, documents attached to the complaint, and documents attached to the motion to dismiss to which the complaint refers and which are central to the plaintiff's claim(s), as well as matters of public record. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010), citing Collins, 224 F.3d at 498-99; Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n.6 (5th Cir. 1994).
"`[D]ocuments that a defendant attaches to its motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [its] claim.'" Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000), quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993). By such attachments the defendant simply provides additional notice of the basis of the suit to the plaintiff and aids the Court in determining whether a claim has been stated. Id. at 499. The attachments may also provide the context from which any quotation or reference in the motion is drawn to aid the court in correctly construing that quotation or reference. In re Enron Corp. Securities, Derivative & "ERISA" Litig., No. H-04-0087, 2005 WL 3504860, at 11 n.20 (S.D. Tex. Dec. 22, 2005). "Where the allegations in the complaint are contradicted by facts established by documents attached as exhibits to the complaint, the court may properly disregard the allegations." Martinez v. Reno, No. 3:97-CV-0813-P, 1997 WL 786250, at *2 (N.D. Tex. Dec. 15, 1997), citing Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). When conclusory allegations and unwarranted deductions of fact are contradicted by facts disclosed in the appended exhibit, which is treated as part of the complaint, the allegations are not admitted as true. Carter v. Target Corp., 541 Fed. Appx. 413, 417 (5th Cir. Oct. 4, 2013), citing Associated Builders, Inc. v. Alabama Power Co., 505 F.2d 97, 100 (5th Cir. 1974), citing Ward v. Hudnell, 366 F.2d 247 (5th Cir. 1966).
Because the NFIP, which provides flood insurance coverage at very reasonable rates, is operated by FEMA, an agency of the Department of Homeland Security, the NFIP draws funds from the federal treasury to cover approved claims. Ferraro v. Liberty Mutual Fire Ins. Co., 796 F.3d 529, 531 (5th Cir. 2015). Therefore the NFIP's regulations implicate sovereign immunity, and "`the provisions of an insurance policy issued pursuant to a federal program must be strictly construed and enforced.'"
Before the Fifth Circuit issued Wright v. Allstate Ins. Co., 415 F.3d 384 (5th Cir. 2005), courts interpreted the Circuit's case law as ruling that state law claims are not preempted by the NFIP. Gallup v. Omaha Property and Casualty Insurance Co., 434 F.3d 341, 344 (5th Cir. 2005), citing Spence v. Omaha Indemnity Ins. Co., 996 F.2d 793 (5th Cir. 1993), and Richmond Printing LLC v. Director, FEMA, 72 Fed. Appx. 92 (5th Cir. 2003)("interpreting Spence as holding that a misrepresentation extracontractual claim was not preempted by the Act."). Then in Wright, 415 F.3d at 390, the Fifth Circuit ruled that "`state law tort claims arising from claims handling by a WYO are preempted under federal law.'" See preemption provision added by amendment in 2000, 44 C.F.R. Part 61, App. A(1) art. IX (The SFIP states, "This [flood] policy and all disputes arising from the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968, as amended (42 U.S.C. § 4001 et seq.), and the Federal common law."). In accord Grissom v. Liberty Mut. Fire Ins. Co., 678 F.3d 397, 400 (5th Cir. 2012); Campo v. Allstate Ins. Co., 562 F.3d 751,(5th Cir. 2009). The Fifth Circuit has continued to distinguish between claims for policy handling, which have "traditionally been considered subject to federal jurisdiction" and which are reimbursed by the United States Treasury, and "claims for policy procurement, which have not" been considered subject to federal jurisdiction and which WYO's must defend on their own. Seruntine v. State Farm Fire & Cas., 444 F.Supp.2d 698, 701-02 (E.D. La. 2006).
Defendant points out that every appellate court that has addressed the issue of jurisdiction over state-law extra-contractual based claims in the context of a SFIP claims dispute has concluded that such claims are barred and preempted by federal law, and that federal common law does not permit recovery of interest, penalties, or attorney's fees, all of which Plaintiff seeks here. See, e.g., C.E.R. 1988, Inc. v. Aetna Cas. and Surety Co., 386 F.3d 263, 272 (3d Cir. 2004); Gallup, 434 F.3d at 345; Wright, 415 F.3d at 390; Gibson, 289 F.3d 943 ("Given this court's holding in Wright, that state law tort claims arising from claims handling by a WYO are preempted by the National Flood Insurance Act, it necessarily follows that the Act gives FEMA authority to promulgate regulations to that effect."); Gunter v. Farmers Ins. Co., Inc., 736 F.3d 768, 771-72 (8th Cir. 2013); Pecarivich v. Allstate Ins. Co., 135 Fed. Appx. 23, 25 (9th Cir. 2005); Remund v. State Farm Fire & Cas. Co., 483 Fed. Appx. 403, 409 (10th Cir. 2012); Shuford v. Fidelity Nat' Prop. & Cas. Ins. Co., 508 F.3d 1337, 1344 (11th Cir. 2007); and Palmieri v. Allstate Ins. Co., 445 F.3d 179, 193 ("Although the defendant is a private insurer and not the United States, it is the United States that will pay for an award of interest"; "because there is no express congressional consent to the award of interest separate from a general waiver of immunity to suit, the United States is immune from an interest award"). Moreover some appellate decisions (Gallup; Gowland; Van Holt v. Liberty Mutual Fire Ins. Co., 163 F.3d 161 (3d Cir. 1998); and Flick v. Liberty Mutual Fire Ins. Co., 205 F.3d 386 (9th Cir. 2000)) address the structure and statutory scheme of the NFIP relating to the motion to dismiss. See, e.g., Gallup, 434 F.3d at 342 (The WYO companies "issue SFIPS in their own names and arrange for the adjustment, settlement, payment and defense of all claims arising from the policies. FEMA regulations establish the terms of the SFIP, rate structures and premium costs. Claims are ultimately paid out of the U.S. Treasury.").
In Wright, 415 F.3d at 390 (citations omitted), the Fifth Circuit examined the reasoning of the Third Circuit in C.E.R. and the Sixth Circuit in Gibson in determining whether federal law preempts state law tort claims based on a WYO's handling of an insurance claim. It determined that
The Fifth Circuit went on to join the Third and Sixth Circuits with additional rationale. Wright, 415 F.3d at 390. The conclusion that state tort claims arising from claims handling by a WYO are preempted by federal law
Id.
In Wright v. Allstate Ins. Co. (Wright II), 500 F.3d 390 (5th Cir. 2007), the Fifth Circuit also examined in detail the issue of extra-contractual claims in the context of the NFIP regarding "federal common law" claims. The Fifth Circuit held that neither NFIA nor the SFIP expressly authorized policyholders to file such claims. 500 F.3d at 393-95. In questioning whether there was an implied right of action to bring extra-contractual federal common law claims against the WYO Program carrier, the Fifth Circuit applied the four-prong test of Cort v. Ash, 422 U.S. 66 (1975). Id. at 395. It determined that, as to the first prong, Wright was not an "especial beneficiary" of the NFIA for whom the statute created a federal right because its primary purpose was "to reduce, by implementation of agequate land use controls and flood insurance, the massive burden on the federal fisc of the ever-increasing federal flood disaster assistance.". Id. at 395-97. As to the second, any legislative intent to permit an implied right of action, the Fifth Circuit found "it significant that Congress expressly provided a private remedy for policyholders in 42 U.S.C. §§ 4053 and 4072, which
Wright II, 500 F.3d at 397. Finally the Fifth Circuit found that the last two prongs "are relevant only if the answers to the first two indicate congressional intent to create a private remedy," which under its findings, clearly do not. Id. The appellate court concluded that based upon Wright, 415 F.3d 384, Gallup, and Wright II, the Fifth Circuit has barred any state law based extra contractual theories of recovery for a NFIP breach of contract action. Defendant lists a number of Texas District Court cases in accord. #6 at pp. 12-13.
As for Plaintiff's prayer for attorney's fees from Texas Farmers, it is black letter law that claimants cannot recover attorney's fees in an NFIP claims handling dispute. See, e.g., West, 573 F.2d at 880-81; Hanover Bldg. Materials, Inc v. Guiffrida, 748 F.2d 1011, 1013 (5th Cir. 1978). So, too, are her claims for pre- and post-judgment interest barred. See, e.g., In re Estate of Lee v. NFIP, 812 F.2d 253, 256 (5th Cir. 1987)("As a general rule, in suits against the sovereign, the United States is not liable for interest unless the liability is imposed by statute or assumed by contract" because "an award of interest against the government is a direct and costly charge on the public treasury." While a claimant may sue the Director of FEMA in federal court, 42 U.S.C. § 4072 "does not provide for awards of prejudgment interest in favor of prevailing plaintiffs."). see also Newton v. Capital Assur. Co., Inc, 245 F.3d 1306, 1312 (11th Cir. 2001); Scandia Oil Co., Inc. v. Beckton, 889 F.2d 258, 264 (10th Cir. 1989).
Finally the Fifth Circuit has held that since payments pursuant to a flood insurance policy are "a direct charge on the public treasure," "when federal funds are involved, the judiciary is powerless to uphold a claim of estoppel because such a holding would encroach upon the appropriation power granted exclusively to Congress by the Constitution. `Any exercise of a power granted by the Constitution to one of the other branches of Government is limited by a valid reservation of congressional control over funds in the Treasury.'" Gowland, 143 F.3d at 955.
The Court has carefully reviewed Defendant's brief and the applicable law and fully concurs with its argument that the extra-contractual claims that have been asserted or might be should, as a matter of law, be dismissed with prejudice. Accordingly, the Court
ORDERS that Defendant's motion to dismiss with prejudice Plaintiff's extra-contractual claims is GRANTED. Plaintiff's claim for breach of insurance contract under the SFIP shall proceed.
Furthermore, effective December 31, 2000 an amendment to the SFIP added the following language to Article IX ("What law Governs") of the standard flood insurance policy: "This policy and all disputes arising from the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the national Flood Insurance Act of 1968, as amended (42 U.S.C. § 4001, et seq.), and Federal common law." 44 C.F.R. Part 61, App. A. Art. IX (2001).
Several Circuit Courts of Appeals have held that § 4072 also applies to lawsuits against private insurers who issue SFIPs under the Write Your Own ("WYO") program. See Wright v. Allstate Ins. Co., 415 F.3d 384, 389 (5th Cir. 2005); Gibson v. Am. Bankers Ins. Co., 289 F.3d 943, 947 (6th Cir. 2002); Van Hold v. Liberty Mut. Fire Ins.Co., 163 F.3d 161, 166-67 (3d Cir. 1998).
In sum Texas Farmers maintains that all of Plaintiff's extra-contractual claims are barred by Merrill, Heckler, Wright, and Richmond.
