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LLC v. Wright National Flood Insurance Co.

United States District Court, E.D. Virginia, Newport News Division

January 3, 2017




         Before the Court are Defendants' Motions to Dismiss. All Defendants have moved to dismiss Plaintiffs Complaint on the basis that it fails to state a claim for which relief can be granted. All submitted briefs have been reviewed, and the Court held a hearing on November 30, 2016. For the reasons stated below, Defendants' 12(b)(6) Motions to Dismiss (ECF Nos. 24, 26, 28, 59 and 63) are GRANTED.


         On September 9, 2014, Newport News, Virginia experienced excessive rainfall that resulted in stream flooding. Compl. ¶ 23. City Line Associates, LPs ("City Line"), owned 200 apartment units that were "hard hit" by the flooding, and "most" residents were forced to evacuate. Id. To repair the damage, City Line contracted with First Atlantic Restoration, Inc. ("First Atlantic") to perform emergency services to its Newport News, Virginia property. Id. ¶ 16. Thereafter, First Atlantic subcontracted with Plaintiff Slay's Restoration, LLC ("Plaintiff) to "dry" City Line's flooded properties once the flood waters receded. Id.

         City Line is the named insured under eighteen Standard Flood Insurance Policies ("SFIP") issue by Wright National Flood Insurance Company ("Wright National") in its capacity as a Write Your Own (WYO) Program carrier. ECF No. 60. City Line made 18 claims with Wright National regarding the eighteen buildings that were impacted by flooding. Id. ¶ 24. In response to the claims, Wright National dispatched Colonial Claims Corporation ("Colonial"), an adjusting firm, Id. ¶ 8., to inspect City Line's property and document the claims. Id. ¶ 24.

         Plaintiff performed all drying services and provided all materials because First Atlantic subcontracted the entire scope of the work to Plaintiff. Id. ¶ 26. During the repairs, City Line, First Atlantic, and Plaintiff took great care to document the 18 claims, because City Line had prior experiences with Wright National, where Wright National "substantially" reduced the amount paid to City Line for flood restorations even after Plaintiff and First Atlantic objected. Id. ¶ 25. Because Plaintiff conducted all of the drying services, Plaintiff was in direct contact with Colonial and the consultants regarding the claim adjustment. Id. ¶ 26.

         After Plaintiff and First Atlantic dried 18 of City Line's buildings, Plaintiff and First Atlantic submitted "materials" to City Line for submission to Defendants regarding 18 claims. Id. ¶ 28. The materials requested an excess of $1.2 million in payment for First Atlantic and Plaintiffs work on the 18 claims. Id. ¶ 28. After City Line submitted the necessary materials to Defendants for payment, First Atlantic contacted Patrick Durtschi, who was involved with the adjusting and is believed to have been an employee with Colonial on December 18 and 24, 2014, to determine whether additional information was required from Plaintiff or First Atlantic. Id. ¶ 29. Patrick Durtschi informed First Atlantic that ". . . Defendants were waiting on some technical data from a manufacturer and information would be provided to the contractors as soon as Wright [National] had it." Id. "Under the impression Defendants were processing payment, Plaintiff allowed its lien rights on the projects expire." Id.

         Out of 18 claims, plaintiff elected to accept the amount proposed by KD Consulting with respect to building 1 despite the allegations that Plaintiff performed its services incorrectly. Id. at 33. For Plaintiffs seventeen objected claims, however, Plaintiff, First Atlantic and/or City Line received some iteration of the following response from KD Consulting and/or Nicholl, between January 9, 2015 and October 10, 2015: (1) that First Atlantic and Plaintiff did not adhere to ANSI/IICRC S500 Standard and Reference Guide for Professional Water Damage Restoration or FEMA Memorandum W- 13025; (2) KD Consulting and Nicholl's (see Compl. ¶ 22) reply report to Plaintiffs objection bolstering its initial report, and a statement that Plaintiffs "rebuttal report" was submitted to Wright National; and subsequent claim payment reductions varying between $18, 512.70 and $68, 235.92. Id. ¶ 34-103.

         In KD Consulting's October 10, 2015 response to Plaintiffs objections, KD Consulting stated that Rachel Adams ". . . is a IICRC board member and environmental professional expert who assisted Sam in the writing of the rebuttal report. Rachel was instrumental in the development of the IICRC standards." Id. ¶ 103. Rachel Adams stated, however, that she "did not author, help author, or give [her] opinion to any statements written in the Report or the Reply. In fact, she does' not recall seeing them until October 29, 2015." Compl. Ex. A.

         As a result of the foregoing, Plaintiff filed a one-count Complaint in this Court on December 22, 2015 against eight Defendants. Compl. ¶¶ 123-27. Count One alleged that Defendants "violated 18 U.S.C. § 1962(c) by conducting or participating, directly or indirectly, their affairs through a pattern of racketeering." Id. at 125. Plaintiff asserted that it has been injured in its business or property as a direct and proximate result of Defendants' predicate acts, which makeup the Defendants' patterns of racketeering activity. Id. ¶ 126. "Specifically, Plaintiff has been injured in its business or property by having their legitimate claims for work to be paid from [National Flood Insurance Program ("NFIP")] proceeds but the claims are being denied in whole or in part as a result of the scheme employed by the Defendants." Id. ¶ 127.

         For contextual purposes, Defendant KLSM Consulting Group, doing business as KD Consulting & Appraisal Group ("KLSM") is a Florida consulting and appraisal firm. Id. ¶ 6. Defendant CIS Specialty Claims Services Group LLC ("CIS") is a Texas adjusting and consulting firm. Id. ¶ 7. Defendant Colonial Claims Corporation ("Colonial") is a Florida adjusting firm. Id. ¶ 8. Defendant Wright National is a Florida insurance company carrying Write Your Own ("WYO") insurance policies as a participant in the National Flood Insurance Program ("NFIP"). Id. ¶ 9. Defendant Samuel Woodard ("Woodard") is a natural person residing in Texas and employed as a mitigation reviewer by "either KLSM or CIS." Id. ¶ 10. Defendant Jeffrey Nicholl ("Nicholl") is a natural person residing in Florida and employed by Wright Flood. Id. ¶ 11. Defendant Michael Carmelia ("Carmelia") is a natural person residing in Florida and employed as a loss consultant by KSLM Consulting. Id. ¶ 12. Defendant Jeffrey P. Kaiser ("Kaiser") is a natural person residing in Florida and was employed as a mitigation professional by KLSM. Id. ¶ 13.

         On February 8, 2016, Colonial filed a Motion to Dismiss for failure to state a claim upon which relief can be granted, ECF No. 24, as did CIS and Woodard, ECF No. 26, and Wright National, ECF No. 28. On February 26, 2016, Plaintiff filed Memorandums in Opposition to the aforementioned Motions to Dismiss. ECF Nos. 40, 41, 42. On March 7, Colonial filed a Reply to Plaintiffs Opposition, ECF No. 56, as did Wright National, ECF No. 57. On March 16, 2016, Plaintiff requested a hearing on the pending Motions to Dismiss. ECF No. 58.

         On March 24, 2016, Nicholl filed a Motion to Dismiss for failure to state a claim upon which relief can be granted. ECF No. 59. On April 6, 2016, Plaintiff filed a Memorandum in Opposition to Nicholl's Motions to Dismiss. ECF No. 61. On April 11, 2016, KLSM and Kaiser filed a joint Motion to Dismiss for failure to state a claim upon which relief can be granted. ECF No. 63. On April 12, 2016, Plaintiff filed an Opposition Memorandum to KLSM and Kaiser's Motion to Dismiss. ECF No. 66. On May 2, 2016, KLSM and Kaiser filed a reply to Plaintiffs Memorandum in Opposition. ECF No. 67. Between May 3, 2016, and May 11, 2016, Colonial, ECF No. 69, Wright National, ECF No. 72, and CIS, Woodard, KLSM and Kaiser, ECF No. 75, filed a Motion for Leave to Supplement the Record with new case law authority in support of their Motion to Dismiss. On May 16, 2016, Plaintiff filed a response to Defendant Wright National's Motion for Leave to Supplement the Record. ECF No. 77. On August 10, 2016, the Court Granted Defendant's Motion for Leave to Supplement the Record. ECF No. 78. On November 30, 2016, the Court held a Motion Hearing regarding Defendants' Motions to Dismiss. ECF No. 79.


         "A motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted is a challenge to the legal sufficiency of a complaint, as governed by Rule 8." Fed. Trade Comm'n v. Innovative Mktg, Inc., 654 F.Supp.2d 378, 384 (D. Md. 2009). The Supreme Court has recently held that "[t]o 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, 129 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127(2007)).

         The Supreme Court noted that "[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, " and noted that "[determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. See also Harman v. Unisys Corp., 356 Fed.App'x. 638, 64(M1 (4th Cir. 2009). The Court added that "the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions" and that, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. The Court further noted that "[w]hen ...

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