United States District Court, N.D. Georgia, Gainesville Division
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For Chesapeake Employers' Insurance Company, formerly known as Injured Workers' Insurance Fund, Plaintiff: Jeffrey Y. Lewis, LEAD ATTORNEY, Megan Elena Poitevint, Arnall Golden & Gregory - Atlanta, Atlanta, GA.
For Bruce Eades, Insurance Office of America, Defendants: Jo Lanier Meeks, LEAD ATTORNEY, Amanda Noelle Wilson, James Bates Brannan Groover, LLP - ATL, Atlanta, GA.
For Jim Conner, Horner Services, LLC, Defendants: Steven Jeffrey Stuart, LEAD ATTORNEY, Kirk D. Johnston, Smith Currie & Hancock, LLP, Atlanta, GA; Karl Frederick Dix, Jr., Smith Currie & Hancock, Atlanta, GA.
RICHARD W. STORY, United States District Judge.
This case comes before the Court on Defendant Insurance Office of America's
Motion to Dismiss , Defendant Bruce Eades's Motion to Dismiss , and Defendants Jim Conner and Horner Services, LLC's Motion to Dismiss . After reviewing the record, the Court enters the following Order.
Plaintiff Chesapeake Employers' Insurance Company (" Plaintiff" or " Chesapeake" ) brought this action over " Defendants' attempts to illegally manipulate the workers' compensation insurance system" by " creating and transmitting false certificates of insurance to Chesapeake's insured," causing Chesapeake to forego premiums to which it was otherwise entitled. (First Am. Compl., Dkt.  at 1-2.)
" Chesapeake is a not-for-profit, independent state agency that provides workers' compensation insurance coverage to Maryland businesses." (Id. ¶ 9.) Since April 1, 2001, Chesapeake has provided workers' compensation insurance to non-party Merciers, Inc. (" Merciers" ), a Maryland company that provides right-of-way maintenance and vegetation-management services. (Id. ¶ 14.) Merciers contracted out certain jobs to Defendant Horner Services, LLC (" Horner Services" ), a Georgia company that also provides right-of-way maintenance and vegetation-management services, at different periods and locations both in and outside the state of Georgia from 2010 to 2012. (Id. ¶ 15.) According to the July 8, 2010 contract between Merciers and Horner Services, Horner Services was required to carry its own workers' compensation insurance. (Id. ¶ 60.) Further, subcontractors of Horner Services were required to carry workers' compensation insurance, and Horner Services was obligated to provide Merciers with copies of both their insurance and their subcontractors' insurance. (Id. ¶ ¶ 60-61.)
On July 5, 2011, Chesapeake conducted a routine audit of Merciers to calculate the premiums Merciers owed. (Id. ¶ 19.) Sometime before that date, Defendant Insurance Office of America, Inc. (" IOA" ), IOA employee Defendant Bruce Eades, Horner Services, and Horner Services' owner Defendant Jim Conner provided Merciers a certificate of insurance dated October 22, 2010 (" October 2010 Certificate" ). (Id. ¶ 17.) That certificate names Horner Services as the insured, lists Conner as the primary contact, and states that Horner Services had workers' compensation insurance through Columbia Insurance Group for the period of June 17, 2010, through June 17, 2011. (Id.) The October 2010 Certificate also contains a section titled " Description of Operation/Locations/Vehicles," which states: " RE: Contract # 47105--Job Site: Union Pacific Railroad Company Property--CA." (Id.; October 2010 Certificate, Dkt. [27-1] at 2.) IOA is listed as the " Producer" of the certificate and Eades is listed as the " authorized representative." (Id.)
Defendants provided another certificate of insurance to Merciers dated June 20, 2011 (" June 2011 Certificate" ), which again lists Horner Services as the insured and Conner as the primary contact. (Id. ¶ 18.) It states that Horner Services had workers' compensation insurance from June 17, 2011, through June 17, 2012 from Georgia Casualty & Surety Co. (Id.) The June 2011 Certificate contains the same job-site description and lists IOA as the " Producer" and Eades as the " authorized representative." (Id.)
During the July 5, 2011 audit, Chesapeake relied on the October 2010 and June 2011 Certificates to calculate Merciers workers' compensation premium. (Id. ¶ 19.) Believing Horner Services had its own workers' compensation insurance, Chesapeake charged premiums to Merciers without taking into account the Horner Services payroll. (Id.)
Around December 18, 2012, Chesapeake learned that Merciers was withholding payment from Horner Services until it provided proof of insurance. Conner then provided Merciers five certificates of insurance, each showing that Horner Services had workers' compensation coverage in states other than Georgia. (See id. ¶ ¶ 20-25.)
Chesapeake later learned that Horner Services did not in fact have workers' compensation coverage outside the state of Georgia. Over two years earlier, a Horner Services employee or subcontractor named William Sheldon suffered a workplace injury in Missouri and submitted a workers' compensation claim. (Id. ¶ 27.) This claim was denied after the insurance company determined that Horner Services was only insured for workers' compensation claims arising in Georgia. (Id. ¶ 30.) Chesapeake learned about this denial on December 20, 2012. (Id.) Merciers was consequently the statutory employer for Horner Services and its employees and subcontractors operating outside of Georgia, and Chesapeake--as Merciers' insurer--became obligated to defend this claim through its Missouri subsidiary. (Id. ¶ 32.)
Chesapeake later learned that Sheldon had relied on a certificate of insurance issued to Horner Services dated December 18, 2012 (" December 2012 Certificate" ), which Eades signed and which referenced coverage in Arkansas, Kansas, Louisiana, Texas, Missouri, Oklahoma, Illinois, and California. (Id. ¶ 33; December 2012 Certificate, Dkt. [27-1] at 17.) But since Horner Services was not actually insured in these states, Chesapeake decided to investigate Horner Services' other certificates of insurance. (First Am. Compl., Dkt.  ¶ 33.) As a result of its investigation, Chesapeake determined that Defendants provided numerous false certificates to Merciers upon which Chesapeake relied in calculating Merciers' insurance premiums. (Id. ¶ 34.)
Chesapeake's investigators contacted Defendants Eades, Conner, and IOA about the discrepancies. IOA then sent letters to Merciers and to Chesapeake stating that the December 2012 Certificates " should be completely disregarded." (Id. ¶ 35.) While IOA attached these voided certificates to the letter, it did not attach the October 2010 and June 2011 Certificates. (Id.)
Chesapeake alleges that it was damaged because it calculated its premiums during the policy periods of April 1, 2010-April 1, 2011, and April 1, 2011-April 1, 2012, based on the representation that Horner Services was insured in states other than Georgia. (Id. ¶ 36.) Thus, Chesapeake did not charge Merciers based on Merciers' $8.1 million payroll to Horner Services during these periods. (Id. ¶ 38.) During that time, Chesapeake collected $319,259 in workers' compensation premiums from Merciers, but if it had known that Horner Services did not have its own workers' compensation insurance, Chesapeake would have charged Merciers $1,314,104 in premiums " to account for the $8,086,014 in additional payroll exposure." (Id. ¶ 39.)
Based on the above allegations, Chesapeake alleges numerous claims against Defendants IOA, Eades, Horner Services, and Conner, including negligent misrepresentation, tortious interference with contractual relations, fraud, and violations of the Georgia and Federal Racketeer Influenced and Corrupt Organizations Act (" RICO" ). Defendants move for dismissal of all claims.
I. Motion to Dismiss Legal Standard
Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a " short and plain statement of the claim showing
that the pleader is entitled to relief." While this pleading standard does not require " detailed factual allegations," mere labels and conclusions or " a formulaic recitation of the elements of a cause of action will not do." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). In order to withstand 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.'" Id. (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.
" At the motion to dismiss stage, all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff." Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set forth in the complaint.
See Iqbal, 556 U.S. at 678. " Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Furthermore, the court does not " accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555.
II. Failure to Join an Indispensable Party
Defendants argue that this suit is subject to dismissal under Federal Rule of Civil Procedure 19 for failure to join an indispensable party. (See Conner & Horner's Br., Dkt. [31-1] at 5-7.) Defendants assert that Merciers is indispensable because Plaintiff's contract was with Merciers, not Defendants, and thus Plaintiff's insurance claim for lost premiums should be brought against Merciers. Rule 19 sets forth a two-part analysis. Laker Airways, Inc. v. British Airways, PLC,182 F.3d 843, 847 (11th Cir. 1999). The Court must first determine whether a person should be joined. Id.; see Fed.R.Civ.P. 19(a). If the person should be joined but cannot be joined, the Court must ...