United States District Court, E.D. Virginia, Newport News Division
January 3, 2017
SLAY'S RESTORATION, LLC, Plaintiff,
WRIGHT NATIONAL FLOOD INSURANCE COMPANY, COLONIAL CLAIMS CORPORATION, KLSM CONSULTING GROUP, INC. D/B/A KD CONSULTING & APPRAISAL GROUP JEFFREY P. KAISER, CIS GROUP LLC, SAMUEL WOODARD, JEFFREY NICHOLL, Defendants.
MEMORANDUM OPINION AND ORDER
RAYMOND A. JACKSON UNITED STATES DISTRICT JUDGE.
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.
FACTS & PROCEDURAL HISTORY
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.
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.
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.
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.
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.
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.
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. ¶
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.
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.
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.
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)).
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 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."
Id. at 1950.
of fraud pled as the basis of a Racketeer Influenced and
Corrupt Organizations ("RICO") Act claim must meet
the heightened pleading requirements set forth in Rule 9(b)
of the Federal Rules of Civil Procedure. Menasco, Inc. v.
Wasserman, 886 F.2d 681, 684 (4th Cir. 1989) (citing
Schreiber Distrib. Co. v. Serv-Well Furniture Co.,
806 F.2d 1393, 1400-01 (9th Cir. 1986) ("plaintiff must
plead 'circumstances of the fraudulent acts that form the
alleged pattern of racketeering activity with sufficient
specificity pursuant to Fed.R.Civ.P. 9(b)' ")). Rule
9(b) states, "In alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud
alleges that Defendants violated 18 U.S.C. § 1962(c) by,
directly or indirectly, conducting or participating in a
pattern of racketeering. Compl. ¶ 125. Specifically,
Plaintiff argues that it has been injured in its business or
property by Defendants' using overt acts of mail and wire
fraud to deny their legitimate claims for work to be paid
from NFIP proceeds. Compl. ¶¶ 120 and 127. The
question before the Court is, inter alia, whether
Plaintiff has standing under RICO to pursue this claim, and
whether the National Flood Insurance Act ("NFIA")
preempts Plaintiffs from pursuing this suit. The Court FINDS
that Plaintiff lacks standing and is preempted from pursuing
this claim in light of the NFIA. Accordingly, the Court
DECLINES to consider the merits of Plaintiff s RICO
United States Court of Appeals for the Fourth Circuit
("Fourth Circuit") has found that the language in
18 U.S.C. § 1964(c) "creates certain
'standing' requirements before one can attempt to
state a claim under 18 U.S.C. § 1962." Choimbol
v. Fairfield Resorts, Inc., 428 F.Supp.2d 437, 444 (E.D.
Va. 2006) (citing Brandenburg v. Seidel, 859 F.2d
1179, 1188 n.10 (4th Cir. 1988)). The Supreme Court has noted
that "[a] plaintiff only has standing if, and can only
recover to the extent that, he has been injured in his
business or property by the conduct constituting the
violation." Sedima, S.P.R.L. v. Imrex Co.,
Inc., 473 U.S. 479, 496 (1985).
a plaintiff must show that defendants' violation not only
was a "but for" cause of his injury, but was the
proximate cause as well. Holmes v. Sec. Inv'r Prot.
Corp., 503 U.S. 258, 268 (1992). Proximate cause is a
necessary element of analysis to "limit a person's
responsibility for the consequences of that person's own
act." Ibid. Proximate cause requires "some
direct relation between the injury asserted and the injurious
conduct alleged." Hemi Grp., LLC v. City of New
York, 559 U.S. 1, 9 (2010) (citing Holmes, 503
U.S. at 271); see also Anza v. Ideal Steel Supply
Corp., 547 U.S. 451, 461 (2006) (the "central
question" regarding proximate cause is "whether the
alleged violation led directly to the plaintiffs
injuries.") (emphasis added).
a plaintiff who complained of harm flowing merely from the
misfortunes visited upon a third person by the
defendant's act was generally said to stand at too remote
a distance to recover." Holmes, 503 U.S. at
268-69; see also Mid Atlantic Telecom, Inc. v. Long
Distance Serv., Inc., 18 F.3d 260, 263 (4th Cir. 1994)
(stating that the RICO action could not lie where "[t]he
causal connection was considered too tenuous, and the
plaintiffs' theory ignored the more immediate causes of
their injuries . . . Where the injuries were more
appropriately attributable to intervening causes that were
not predicate acts under RICO. . .") (citing
Brandenburg, 859 F.2d at 1190); Sedima, S.P.R.L.
v. Imrex Co., Inc., 473 U.S. 479, 496 (1985) ("As
the Seventh Circuit has stated, '[a] defendant who
violates section 1962 is not liable for treble damages to
everyone he might have injured by other conduct...'
" (citing Haroco, Inc. v. Am. Nat'l Bank &
Tr. Co. of Chicago, 747 F.2d 384, 398 (1984), affd, 473
U.S. 606 (1985)).
argue that Plaintiff lacks standing to bring this RICO claim
because Plaintiff cannot show that Defendants are the
proximate cause of its injury. ECF Nos. 25, 27, 29, 60, and
64. Specifically, Defendants argue that they are not the
proximate cause of Plaintiffs injury because the Parties
never had a contractual relationship that required Defendants
to disburse any of the NFIP proceeds to Plaintiff. Most
poignantly, Wright National asserts, "assuming
arguendo that Wright National used or relied upon an
'inaccurate' or 'sham' report prepared by KD
Consulting to reduce the amount of money otherwise payable to
City Line under the [Standard Flood Insurance Policy
("SFIP")], the direct victim of such conduct was
City Line, not [Plaintiff]." ECF No. 29.
response, Plaintiff argues that a contractual relationship is
not necessary to pursue a RICO claim, and that it only has to
plead "some direct relation between the injury asserted
and injurious conduct alleged" to satisfy RICO's
proximate cause requirement. ECF Nos. 40, 41, 42, and 61.
Plaintiff further asserts thaf' [w]hen mail fraud is the
predicate act, the complainant's injury must occur
'by reason of the scheme to defraud.' ".
Id. To that end, Plaintiff avers that its Complaint
sufficiently alleges that the mail and wire fraud committed
by Defendants proximately caused its injury-namely,
recovering less money than they were entitled to for their
work performed. Id. See also Complaint ¶ 120.
RICO does not explicitly state that Plaintiff must have a
contractual relationship in order to file suit, RICO does
require, as the court noted in Holmes, that
Plaintiff must show that Defendants proximately
caused Plaintiffs injury. 503 U.S. at 271-75. On these facts,
Plaintiff cannot show that Defendants proximately caused its
injury because it is only tangentially connected to
Defendants. Stated more specifically, because Plaintiff is a
subcontractor of First Atlantic, who is a contractor of City
Line, who has an insurance policy with Wright National, who
employed the remaining Defendants in this suit, on these
facts, any financial injury Plaintiff has endured was
proximately caused by First Atlantic-the party who hired
Plaintiff to dry 18 of City Line's buildings.
See Compl. ¶¶ 16 and 28. Plaintiff even
references the disputed claims as "City Line Associates,
LP's ("City Line") claims." Id.
the Court understands that Plaintiff argues that the impetus
for First Atlantic and City Line's inability to pay
Plaintiff for the work performed was Defendants alleged
fraudulent denial of City Line's claims, this does not
negate the fact that First Atlantic is still the party who
has directly harmed Plaintiff. As Plaintiff admits in the
Complaint, Plaintiff and First Atlantic submitted all
"materials" to City Line, and City Line, in turn,
submitted those reports to Defendants for review. Compl.
¶ 28. If Plaintiff, First Atlantic, and City Line
thought Defendants were engaged in fraudulent behavior that
subsequently resulted in the denial of City Line's claim,
City Line, not Plaintiff, should be pursuing this suit
against Defendants. Further, the Court finds it unusual that
the Plaintiff has not sought relief from First Atlantic with
whom it contracted.
more information, the Court is unable to infer that Plaintiff
has standing. See Gallagher v. Canon U.S.A., Inc.,
588 F.Supp. 108, 110 (N.D. Ill. Jul. 24, 1984) (holding,
"Where however Canon seeks RICO standing simply as a
shareholder of an injured corporation, it stretches RICO far
beyond standing notions employed for any other type of
action. Accordingly, the Amended Counterclaim does not
survive unless it can be recast to allege only wrongs by
which Canon was injured in its own right, not just through
the value of its Ambassador stock.") (N.D. Ill. 1984)
(citing "Bennett v. Berg, 685 F.2d 1053, 1058
(8th Cir.1982)). Accordingly, the Court finds Plaintiff lacks
standing under RICO to pursue this claim.
in addition to asserting Plaintiff lacks standing, argued
that Plaintiff is foreclosed from pursuing this suit because
the claim falls under the Standard Flood Insurance Policy. In
response, Plaintiff argues that such a finding would be
unjust because the SFIP does not provide for any remedy for
non-policy holders. The Court disagrees and finds that
Plaintiffs claim is preempted because City Line is not
foreclosed from pursuing a claim under FEMA. Moreover,
Plaintiff admits in the Complaint that NFIP proceeds are at
the core of its suit. Compl. ¶ 127. As a result, the
National Flood Insurance Act governs. See 44 C.F.R.
pt. 61, App. (A)(2), art. IX; see also Melanson v. United
States Forensic, LLC, 2016 WL 1729493 (E.D.N.Y.April 30,
matter of background, the NFIA was enacted with a legislative
"recognition] that 'many factors have made it
uneconomic for the private insurance industry alone to make
flood insurance available to those in need of such protection
on reasonable terms and conditions, ' " Melanson
v. United States Forensic, LLC, 2016 WL 1729493, at *1
(E.D.N.Y.April 30, 2016) (citing Jacobson v. Metro, Prop.
& Cas. Ins. Co., 672 F.3d 171, 174 (2d Cir. 2012)
(quoting 42 U.S.C. § 4001(b)). Thus, under the Act,
" 'the federal government provides flood insurance
subsidies and local officials are required to adopt and
enforce various management measures.' " Id.
the NFIA's umbrella, the National Flood Insurance Program
("NFIP"), administered by the Federal Emergency
Management Agency ("FEMA"), is "supported by
taxpayer funds, which pay for claims that exceed the premiums
collected from the insured parties." Id.
(citing Jacobson, 672 F.3d at 174 (citing Van
Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 n.
2 (3d Cir. 1998)). This means, "[t]he NFIP is a
federally-subsidized program designed to make flood insurance
available to the general public at or below actuarial
rates." Id. (citing Moffett v. Computer
Sci. Corp., 457 F.Supp.2d 571, 573 (D. Md.2006)).
to the NFIP, "FEMA is authorized to promulgate
regulations as to 'the general terms and conditions of
insurability which shall be applicable to properties eligible
for flood insurance coverage, ' and as to 'the
general method or methods by which proved and approved claims
for losses under such policies may be adjusted and paid.'
" Id. (citing Battle v. Seibels Bruce
Ins. Co., 288 F.3d 596, 599 (4th Cir.2002)). "In
other words, FEMA writes the policies and makes the rules as
to claims made under them." Id. (citation
1983, FEMA created the Write Your Own ["WYO"]
program, which allows private insurance companies to issue
and administer SFIPs in their own names as 'fiscal
agent[s] of the Federal Government.' " Id.
at 2 (citing Ravasio v. Fid. Nat'l Prop. & Cas.
Ins. Co., 81 F.Supp.3d 274, 277 (E.D.N.Y. 2015) (quoting
42 U.S.C. § 4071(a)(1)). Under this expansion, private
insurance companies are authorized to "write their
own" federally-underwritten SFIPs, Van Holt,
163 F.3d at 165, but in doing so, assume "significant
administrative responsibilities under the NFIP, "
Id. (citation omitted).
here, the NFIA contains a remedial provision, which creates a
right of action for insureds against the Federal Insurance
Administrator, to be brought in federal court within one year
after the cause of action accrues:
[U]pon the disallowance by the Administrator of any such
claim [for losses covered by an SFIP], or upon the refusal of
the claimant to accept the amount allowed upon any such
claim, the claimant, within one year after the date of
mailing of notice of disallowance or partial disallowance by
the Administrator, may institute an action against the
Administrator on such claim in the United States district
court for the district in which the insured property or the
major part thereof shall have been situated, and original
exclusive jurisdiction is hereby conferred upon such court to
hear and determine such action without regard to the amount
42 U.S.C. § 4072. With this statutory framework in mind,
the Court now turns to the legal analysis.
Court is persuaded that the Plaintiffs RICO claim is
precluded by the provisions of the National Flood Insurance
Program, which provides the exclusive remedy for all claims
arising from a WYO carrier's handling of claims under an
SFIP. See Melanson, WL 1729493 *at 12.
on the comprehensive and detailed regulatory system Congress
established to govern claims arising out of the NFIA,
numerous courts have held that claims other than those
expressly authorized by the NFIA are preempted. See,
e.g., Wright v. Allstate Ins. Co., 415 F.3d 384, 390
(5th Cir. 2005) (holding that "state law tort claims
arising from claims handling by a WYO are preempted by
federal law";, - C.E.R.1988, Inc. v. Aetna Cas.
& Sur. Co., 386 F.3d 263, 272 (3rd Cir. 2004)
("We address in this appeal whether the National Flood
Insurance Program (omitted) is sufficiently comprehensive to
preempt a state tort suit arising from conduct related to the
Program's administration. We conclude that the
overarching purpose of the NFIP-to provide affordable flood
insurance in high-risk areas in order to reduce pressures on
the federal fisc-would be compromised by state court
interference. Thus the plaintiffs state law tort claims are
preempted."); Gibson v. Am. Bankers Ins. Co.,
289 F.3d 943, 949-50 (6th Cir. 2002).
date, every circuit that has considered this question of
preemption, with regard to the NFIP, has found for the
Defendants. Melanson, at 12. Although the leading
cases only address the preemptive effect of the NFIP on
overlapping claims based on state and federal common law
theories, the Court discerns no principled basis for refusing
to extend those holdings and their underlying rationale to
the facts of this case. Several relevant factors highlighted
in the case law support this conclusion. Id.
it would be patently inconsistent with the federal
government's overarching goal of promoting uniformity to
disallow a wide range of tort and federal common law claims
arising out of claims handling activities by WYO carriers,
only to permit a civil RICO claim to proceed on the same
underlying facts. Id. at 13. Second, courts have
repeatedly emphasized the harmful effect that duplicative
flood loss claims would have on the public fisc. Id.
courts that have considered this issue have consistently
implied that the preemptive effect of the NFIP is not limited
to state law claims. Id. In fact, "nowhere in
the NFIA or the SFIP does Congress explicitly reference any
right of a policyholder to bring extra-contractual claims
against a WYO insurer" and the reference to federal
common law in Article IX "does not confer on
policyholders the right to assert extra-contractual claims
against WYO insurers-which claims, if successful, would
likely be paid with government funds." Id. at
and most importantly, civil RICO claims are precluded where
the challenged conduct is already covered by a more
comprehensive and specialized federal statute.
Melanson, at 14; see Palmer v. Trump Model Mgmt,
LLC, 175 F.Supp.3d 103, n. 14 (S.D.N.Y. 2016) (observing
that courts in the Second Circuit "routinely preclude[ ]
RICO claims where the alleged conduct is already covered by a
more detailed federal statute").
Plaintiff argues that its claim is properly filed under RICO,
in lieu of independent flood insurance law, ECF No. 41, there
is no question that the crux of Plaintiffs complaint is that
Wright National did not pay all amounts owed under the SFIPs
issued to City Line. Therefore, Plaintiffs RICO claim -
predicated on Wright National's handling of City
Line's flood loss claim and Defendant's alleged
failure to pay all amounts owed under the SFIP for mitigation
work performed by Plaintiff- is a dispute arising from the
handling of the subject flood loss claims.
additional sums are owed under the SFIP, the precisely drawn
and detailed statutory and regulatory system in place under
the NFIA and the SFIP provides the exclusive remedy. 44
C.F.R. Part 61, Appendix (A)(1) at Art. IX (underscore
supplied) (". . . 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, and Federal common
law."); see also 44 C.F.R. § 61.13(a)
(incorporating Appendix "A" into the SFIP);
Melanson, at 14 ("Under the relevant case law,
this "careful blend of administrative and judicial
enforcement powers" would ordinarily be sufficient to
confer upon the NFIP primacy over other forms of relief with
respect to claims handling disputes. However, Congress saw
fit to go a step further and amend the Act in order to make
more explicit in the text of Article IX that "all
disputes arising from the handling of any claim tinder [an
SFIP] are governed exclusively by the flood insurance
regulations issued by FEMA, the National Flood Insurance Act
of 1968, as amended, and Federal common law." In the
Court's view, this reflects a clear legislative intent to
limit the available remedies to policyholders for claims
under the NFIP, and the Plaintiffs "[a]rtful
invocation" of the "ubiquitous" and
"controversial" civil RICO statute "cannot
conceal the reality that the gravamen of the complaint"
is a claims handling dispute falling squarely within the
scope of the NFIP.")(citations omitted)).
Plaintiff asserts that it is "logical" to conclude
that "Congress intended for parties to employ causes of
action outside the NFIA to sue WYO insurers and their
adjusters in such circumstances." ECF No. 41. But the
Court rejects this argument, in part, because both courts and
Congress have deemed it inefficient to expose WYO carriers to
extra-contractual liability arising from their administration
of the NFIP, including, specifically, their claims handling
activities. See, e.g., Wright II, 500 F.3d at 397.
Indeed, the NFIP's subsidized reimbursement arrangement
incentivizes private insurance companies to provide
affordable flood loss coverage, and effectively sustains the
existence of a national flood insurance industry, which
otherwise might not be feasible. See C.E.R., 386
F.3d at 270 (speculating that if FEMA refused to reimburse
WYO carriers for their defense costs, "insurers would
leave the [NFIP], driving the price of insurance
higher"); Moffett, 457 F.Supp.2d at 586
(observing that if FEMA regularly declined to reimburse
litigation costs, "WYO carriers might well leave the
Program in droves"); cf. Jacobson, 672 F.3d at
174 (noting that "many factors have made it uneconomic
for the private insurance industry alone to make flood
insurance available to those in need of such protection on
reasonable terms and conditions").
the Plaintiff in this case characterizes the Defendant's
conduct as being outside the scope of the NFIP arrangement,
See ECF No. 41, the Plaintiff has no authority to
make such a determination. Ultimately, such determinations
are within the sole province of FEMA and the Federal
Insurance Administrator to determine what actions are
significantly outside the scope of the NFIP arrangement
and/or involve agent negligence. See Moffett, 457 F.Supp.2d
at 586.-87 ("The regulation leaves the definition of
what is within and without the Arrangement to FEMA's
Plaintiff has made no allegation that FEMA has made any such
finding; that it has declined to defend this action; or that
any other rational basis exists for treating this action as
outside the scope of the relevant NFIP agreement. See
Melanson, at *16. This result is critical because
Plaintiffs factual allegations, assuming them to be true,
relate clearly to a claims handling dispute, which under
Article IX is redress able only through a contract
claim. See Id. The Plaintiffs conclusory allegations
of mail and wire fraud do not require a different result.
these reasons, the Court finds that on these facts, Plaintiff
is preempted from pursuing this suit. See also
Melanson, at *14. In reaching this conclusion, and in
accordance with the reasoning stated above, the Court rejects
the Plaintiffs argument that the allegations giving rise to
its RICO claim are not preempted.
foregoing reasons, Defendants' Motions to Dismiss are
GRANTED, and Plaintiffs case is DISMISSED with prejudice.
Clerk is DIRECTED to send a copy of this Order to the
Plaintiff argues that Holmes
does not apply in this case. The Court disagrees and finds
that the analysis in Holmes is applicable in this