RENTAL PROPERTY LLC v. STATE FARM FIRE CASUALTY COMPANY (2024)

ORDER

Before the Court is Defendant's (“State Farm's”) Combined Motion to Dismiss and Motion to Strike under rules 12(b)(1), 12(b)(6), and 12(f). For reasons herein, Defendant's Motion is DENIED.

BACKGROUND

This case revolves around the interpretation of an insurance contract. More specifically, the case concerns whether the method State Farm used to calculate amounts owed in certain insurance payouts, which depreciates future labor costs, violates Missouri contract law, when the insurance contracts at issue lack language specifically allowing for such depreciation. Plaintiff is a Missouri limited liability company located in Nevada, Missouri. Bonnie and Clayton Coale (“the Coales”) assigned their rights and benefits associated with the insurance contract at issue in this case to Plaintiff. Defendant is an insurance company, headquartered in Illinois, whose policy, number 25-KY-8009-6, covered the Coales' property on or about April 7, 2013, when the property sustained structural damage requiring replacement and/or repair. When determining how much Defendant owed the Coales, Defendant relied on calculating the actual cash value (“ACV”) of structural damage losses. To determine ACV, Defendant estimated the cost to repair or replace the damaged materials then subtracted depreciation. Defendant included in this depreciation calculation costs associated with labor, including “both the future labor costs and the future laborers' equipment costs and contractors/laborers' overhead and profit necessary to restore property to its condition status quo ante, as well as the future removal costs to remove damaged property.” (Doc. 34 at ¶ 19). State Farm determined the Coales sustained $11,050.45 in damages. In calculating the amount owed to the Coales, State Farm subtracted from the amount of damages $1,371.24, representing depreciation inclusive of future labor costs. Plaintiff alleges that depreciation of future labor costs when determining ACV violated the insurance contract between State Farm and the Coales.

The present case is one of several filed after the Missouri Court of Appeals held, “In the absence of an express policy provision that allows for it, labor does not fall within that which can be depreciated when an insured is entitled to an ACV payment.” Franklin v. Lexington Ins. Co., 652 S.W.3d 286, 303 (Mo. Ct. App. 2022), reh'g and/or transfer denied (July 26, 2022), transfer denied (Oct. 4, 2022). Franklin effectively overturned a prior finding from the Eighth Circuit, that mis-predicted Missouri courts would allow the depreciation of future labor costs in determining ACV. In re State Farm Fire & Cas. Co., 872 F.3d 567, 577 (8th Cir. 2017) (“LaBrier”). See also Brown v. State Farm Fire & Cas. Co., No. 2:23-CV-04002-MDH, 2023 WL 5599630, at *2-5 (W.D. Mo. Aug. 29, 2023) (accord); Scott v. Safeco Ins. Co., No. 2:23-CV-04008-MDH, 2024 WL 2819259, at *2 (W.D. Mo. June 3, 2024) (accord).

Plaintiff's First Amended Complaint alleges two counts against State Farm: Count One alleges breach of contract and Count Two seeks declaratory judgment finding unlawful State Farm's method of calculating actual cash value which reflects depreciation of future labor costs. Under Federal Rule of Civil Procedure 23, Plaintiff also alleges a class of plaintiffs defined by their receipt of an actual cash value payment from State Farm that reflects depreciation of future labor costs.

STANDARD

A complaint must contain factual allegations that, when accepted as true, are sufficient to state a claim of relief that is plausible on its face. Zutz v. Nelson, 601 F.3d 842, 848 (8th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court “must accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party.” Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005) (internal citations omitted). The complaint's factual allegations must be sufficient to “raise a right to relief above the speculative level,” and the motion to dismiss must be granted if the complaint does not contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp v. Twombly, 550 U.S. 544, 545 (2007). Further, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Ashcroft, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555).

DISCUSSION

Defendant makes three arguments in support of its Motion: 1) the Coales' assignment of rights and obligations of the insurance contract is legally insufficient and therefore Plaintiff lacks standing; 2) Plaintiff's equitable tolling allegations must be stricken; and 3) the Eighth Circuit's holding in LaBrier, not the Missouri Court of Appeals' opinion in Franklin, governs this matter and requires dismissal. This Court will address each argument in turn.

I. Plaintiff's pleadings regarding the Coales' assignment of rights are sufficient

Defendant first argues that the Coales' assignment of their rights and obligations under their insurance contract to Plaintiff is invalid because Plaintiff has failed to adequately assert the exact nature of the consideration that underlies the assignment contract. Defendant points to the assignment, attached to Plaintiff's Amended Complaint as an exhibit, which indicates the Coales transferred their rights and obligations under the insurance contract “for value received.” (Doc. 34-1). Defendant takes issue with this transfer because, according to Plaintiff, the terms are insufficiently detailed.

This Court disagrees. As Plaintiff argues, under Missouri law, litigants not party to a contract lack standing to challenge that contract. See Banks v. HSBC Bank USA, N.A., 2014 WL 4829541, at *1 (W.D. Mo. Sept. 29, 2014) (“for over a century, state and federal courts around the country have ․ [held] that a litigant who is not a party to an assignment lacks standing to challenge that assignment”) (citations omitted). Moreover, this Court agrees with Plaintiff that the phrase “for value received” is sufficient, particularly at the pleadings stage. Gover v. Empire Bank, 574 S.W.2d 464, 468 (Mo. App. 1978) (“the initial recitation in the guaranty agreement, to wit, ‘For Value Received,’ is prima facie evidence of consideration to support that agreement.) (citations omitted). State Farm's attempt to distinguish the present case from Grover and other cases likewise finding “for value received” to be sufficient is uncompelling, particularly at the pleadings stage. For these reasons, State Farm's Motion to Dismiss under Rule 12(b)(1) is DENIED.

II. Equitable tolling allegations

State Farm next seeks an order striking, under Rule 12(f), equitable tolling allegations contained within Plaintiff's Amended Complaint. Rule 12(f) permits Courts to strike “from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Though the Amended Complaint references tolling in several places, the crux of the tolling allegations are as follows.

Specifically, under Missouri law, equitable tolling can and should be applied, in the discretion of the Court, in circumstances where a prior legitimate lawsuit is barred by prior precedent, but later becomes viable due to a change in law. Further, equitable tolling can be applied where overruled precedent stands in the way of the commencement litigation. Further, equitable tolling can be applied where it is manifestly unfair to apply contractual limitations or statutes of limitations. Further, equitable tolling can be applied where a law is clarified by a governing entity. (Doc. 34 at ¶ 38).

State Farm contends that the above tolling allegations seek to void a ten-year statute of limitations, applicable to Plaintiff's claim under Missouri law and the insurance contract at issue. State farm argues equitable tolling proves unavailable to Plaintiff under both Missouri and federal law. At the same time, however, State Farm acknowledges various exceptions to the unavailability of equitable tolling under Missouri and federal law. (Doc. 42 at 14-15). This Court agrees with Plaintiff in that State Farm's request proves premature at the pleadings stage. Evert v. U.S., Waste Mgmt. of Missouri, Inc., No. 4:97CV408-DJS, 1997 WL 834822, at *3 (E.D. Mo. Oct. 8, 1997) (“Because the applicability of the equitable tolling doctrine often depends on matters outside the pleadings, it is not generally amenable to resolution on a Rule 12(b)(6) motion”) (citations omitted). For the purposes of a motion to dismiss, in which this Court simply considers the sufficiency of the pleadings, it remains unclear that equitable tolling proves altogether unavailable to Plaintiff as a matter of law. This is true, even given the allegations of prejudice through burdensome discovery on the part of State Farm. For these reasons, State Farm's Motion to Strike Equitable Tolling Allegations under Rule 12(f) is DENIED.

III. Under Franklin, insurers in Missouri may not depreciate labor costs when determining ACV absent a contract provision to the contrary

State Farm next reiterates the same arguments put forth in another, related case, Brown v. State Farm, 23-cv-04002, in which this Court held that, under Franklin, “labor may not be depreciated under an insurance policy that does not define ACV or depreciation to expressly include labor depreciation.” Brown v. State Farm Fire & Cas. Co., 2023 WL 5599630, at *3 (W.D. Mo. Aug. 29, 2023) (citing Franklin v. Lexington Ins. Co., 652 S.W.3d 286, 303 (Mo. Ct. App. 2022), reh'g and/or transfer denied (July 26, 2022), transfer denied (Oct. 4, 2022)). This is particularly true given the Eighth Circuit's holding that, “although ‘various intermediate appellate [state] courts are not [binding on us], ․ they are persuasive authority, and we must follow them when they are the best evidence of what [state] law is.” ’ Holden Farms, Inc. v. Hog Slat, Inc., 347 F.3d 1055, 1066 (8th Cir. 2003) (citing Garnac Grain Co. v. Blackley, 932 F.2d 1563, 1570 (8th Cir.1991).¹ For these reasons, State Farm's Motion to Dismiss under 12(b)(6) as well as State Farm's Motion to Strike Class Allegations under Rule 12(f) are DENIED.

CONCLUSION

For the reasons set forth herein, State Farm's combined Motion to Dismiss and Motion to Strike is DENIED.

IT IS SO ORDERED.

FOOTNOTES

1.   This Court also incorporates relevant portions of its denial of Defendant's Motion to Dismiss in Brown into the present order.

DOUGLAS HARPOOL United States District Judge