Kllm Transport Services, L.L.C v. Marsh Usa, Incor , 450 F. App'x 406 ( 2011 )

Case: 10-60877 Document: 00511670636 Page: 1 Date Filed: 11/18/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 18, 2011
No. 10-60877 Lyle W. Cayce
Summary Calendar Clerk
KLLM TRANSPORT SERVICES, LIMITED LIABILITY COMPANY,
Plaintiff
v.
MARSH USA, INCORPORATED, ET AL,
Defendants
KLLM TRANSPORT SERVICES, LIMITED LIABILITY COMPANY,
Plaintiff–Appellant
v.
INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA; C.V.
STARR & COMPANY,
Defendants–Appellees
Appeal from the United States District Court
for the Southern District of Mississippi
USDC Nos. 3:09-CV-93; 3:09-CV-94
Before REAVLEY, SMITH, and PRADO, Circuit Judges.
PER CURIAM:*
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. 10-60877
Plaintiff–Appellant KLLM Transport Services, LLC (“KLLM”), brought
suit against Defendants–Appellees C.V. Starr & Company and the Insurance
Company of the State of Pennsylvania (collectively, “Insurer Defendants”),
alleging a breach of an insurance policy (the “Policy”) that it had purchased from
the Insurer Defendants. The district court dismissed KLLM’s complaint for
failure to state a claim after determining that the contract’s terms were
unambiguous and that the Insurer Defendants had not breached any of its
terms. We affirm.
I. BACKGROUND
KLLM, a commercial trucking company, acquired the Policy from the
Insurer Defendants for a three-year period beginning January 1, 2000 and
ending January 1, 2003 (the “Policy Period”). The Policy provided commercial
umbrella coverage beyond the insurance KLLM had otherwise purchased. On
December 31, 1999, the Insurer Defendants sent a “binder” to KLLM’s insurance
broker. This binder stated the Policy Period, the premium rate, and that “[t]his
Binder may be canceled at any time by the Insured or the undersigned giving the
other notice in writing.”
In March 2000, KLLM received the Policy. It contained an endorsement
titled “Mississippi Amendatory Endorsement” (the “Cancellation Provision”)
which stated that:
This policy may be cancelled by the Insured by mailing to the
Insurer written notice stating when such cancellation shall be
effective.
This policy may be cancelled or nonrenewed by the Insurer by
mailing or delivering a notice of cancellation or nonrenewal to the
named Insured at least thirty (30) days prior to the effective date of
cancellation or nonrenewal.
After twenty-two months, on October 30, 2001, the Insurer Defendants notified
KLLM that, pursuant to the Policy’s cancellation provision, they were cancelling
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the policy effective January 1, 2002. Thus, the Insurer Defendants provided
KLLM with sixty days notice of cancellation.
KLLM alleged that this cancellation amounted to: breach of contract,
tortious breach of contract, and breach of the duty of good faith and fair dealing.
In addition, KLLM alleged that the Insurer Defendants made oral
representations amounting to a promise for a guaranteed three-year, level-rate
agreement. KLLM alleged that it relied on these representations to its
detriment and were injured when the Insurer Defendants cancelled the Policy
before the end of the Policy Period. Accordingly, KLLM alleged a claim of fraud
and intentional misrepresentation.
The district court dismissed KLLM’s claims with prejudice1 after
determining that:
(1) the [Policy] was subject to a cancellation provision . . . ; (2) the
Cancellation Provision could be exercised by either Plaintiff or the
Insurer Defendants at anytime for any reason and, was not
restrictive in scope; (3) the Policy was unambiguous and did not
contain a three year “guaranteed” level premium as alleged in the
Complaint; and (4) any alleged promise that the Policy was
“guaranteed” for a three year period could not be relied on by the
Plaintiff, since this alleged promise contradicted the Cancellation
Provision.
KLLM now appeals these determinations by the district court.
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KLLM asserts that due to the complex procedural history of these consolidated cases,
which were both transferred to a multi-district litigation in New Jersey for several years and
then returned to the Southern District of Mississippi, the Insurer Defendants’ motion to
dismiss was no longer pending when the district court called for a hearing to dispose of it.
Regardless, the district court gave counsel nine days advance notice prior to the hearing to
prepare, which we determine was sufficient notice for a sua sponte dismissal with prejudice.
See Carroll v. Fort James Corp., 470 F.3d 1171, 1177 (5th Cir. 2006) (“[A] district court may
dismiss a complaint on its own for failure to state a claim,” “as long as the procedure employed
is fair,”and such fairness requires “both notice of the court’s intention and an opportunity to
respond.”) (internal quotation marks and citations omitted).
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II. STANDARD OF REVIEW AND APPLICABLE LAW
We review de novo a district court’s decision to dismiss a claim pursuant
to Rule 12(b)(6). Herrman Holdings Ltd. v. Lucent Tech., Inc., 302 F.3d 552,
557 (5th Cir. 2002). In doing so, we liberally construe the complaint and draw
all reasonable inferences in the light most favorable to the plaintiff. Woodard
v. Andrus, 419 F.3d 348, 351 (5th Cir. 2005).
When reviewing a motion to dismiss under Rule 12(b)(6) we generally
limit our inquiry to the content of the pleadings, but where, as here, the
complaint incorporates a contract by reference, we may consider it as well. See
United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375,
379 (5th Cir. 2003).
The district court exercised diversity jurisdiction under 28 U.S.C.
§ 1332(a). Accordingly, we apply the substantive law of the forum state,
Mississippi. Wiley v. State Farm Fire & Cas. Co., 585 F.3d 206, 210 (5th Cir.
2009). Under Mississippi law, courts enforce insurance policies according to
their provisions. Noxubee Cnty. Sch. Dist. v. United Nat’l Ins. Co., 883 So. 2d
1159, 1166 (Miss. 2004). We have recognized that under Mississippi law,
contract interpretation consists of
a three-tiered approach . . . that begins with the text and applies the
familiar four corners test, which focuses exclusively on an objective
reading of the words employed in the contract to the exclusion of
parol or extrinsic evidence. Only if the contract is unclear or
ambiguous is a court authorized to resort to canons of interpretation
and parol evidence.
Wiley, 585 F.3d at 211 (internal quotation marks and citations omitted).
Under Mississippi law, fraud and intentional misrepresentation are shown
by satisfying nine elements:
(1) a representation (2) that is false (3) and material (4) that the
speaker knew was false or was ignorant of the truth (5) combined
with the speaker's intent that the listener act on the representation
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in a manner reasonably contemplated (6) combined with the
listener’s ignorance of the statement’s falsity (7) and the listener’s
reliance on the statement as true (8) with a right to rely on the
statement, and (9) the listener’s proximate injury as a consequence.
Moore v. Bailey, 46 So. 3d 375, 384 (Miss. App. 2010).
III. DISCUSSION
A. Breach of Contract
KLLM argues that the Policy Period established a fixed-premium contract
with a similarly fixed three-year term, and that the fixed term is inconsistent
with the Cancellation Provision. Therefore, it argues, the Policy is ambiguous,
possibly illusory, and should be construed against the Insurer Defendants who
drafted the Policy. On this interpretation of the Policy, the Insurer Defendants’
cancellation constituted a breach. KLLM, however, cites no authority to support
this argument. In response, the Insurer Defendants argue that the Cancellation
Provision and the Policy Period are consistent: the contract establishes a fixed-
rate premium for a three-year period, or until either party cancels the Policy.
Moreover, they argue, policy periods and cancellation provisions are frequently
part of insurance contracts, and so long as the cancellation provision complies
with state law and public policy, it should be enforced. In support of their
interpretation of the Policy, the Insurer Defendants point to a Mississippi
statute which states: “A cancellation . . . of liability insurance coverage . . . is not
effective . . . unless notice is mailed or delivered to the insured . . . not less than
thirty (30) days prior to the effective date of such cancellation.” Miss. Code Ann.
§ 83-5-28 (West 2006).
We agree with the Insurer Defendants that there is nothing in the Policy
indicating a guaranteed three-year term. And, “read[ing] the contract as a
whole, so as to give effect to all of its clauses,” Facilities, Inc. v. Rogers-Usry
Chevrolet, Inc., 908 So. 2d 107, 111 (Miss. 2005), the Policy Period together with
the Cancellation Provision unambiguously means that the premium rate is set
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for the duration of the Policy Period, unless the Policy is cancelled by either
party prior to the end of the Policy Period. This unambiguous meaning is
confirmed by the Mississippi Code’s acknowledgment of cancellation provisions
in insurance contracts. The Insurer Defendants gave KLLM sixty days
notice—more than the thirty days required by the Policy—prior to cancelling the
Policy. Accordingly, the Insurer Defendants did not breach the contract and did
not breach their duty of good faith and fair dealing. See Baldwin v. Laurel Ford
Lincoln-Mercury, Inc., 32 F. Supp. 2d 894, 898 (S.D. Miss. 1998) (“A party which
acts in accordance with the express terms of a contract generally cannot be found
to have violated the covenant of good faith and fair dealing.”).
B. Fraud and Intentional Misrepresentation
KLLM maintains that it still pleaded a viable claim of fraud and
intentional misrepresentation even if the Insurer Defendants did not breach the
Policy. KLLM alleged that “[w]hen KLLM purchased the Policy from Insurer
Defendants, they promised and represented to KLLM that the premium rate
would remain unchanged for three years.” In response, the Insurer Defendants
argue that as a matter of law, KLLM could not have reasonably relied on that
oral promise because it is contrary to the Policy’s unambiguous language. See
Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 440 (5th Cir. 2007)
(“[I]nsured’s reliance on [insurance agent’s] statements was objectively
unreasonable in light of the policy language clearly [to the contrary.]”). The
Insurer Defendants also urge us to affirm on an alternative ground not discussed
by the district court: KLLM failed to plead fraud with the particularity required
by Federal Rule of Civil Procedure 9(b). See Sullivan v. Leor Energy, LLC, 600
F.3d 542, 550–51 (5th Cir. 2010) (“State law fraud claims are subject to the
heightened pleading requirements of Rule 9(b).”).
We may affirm the district court’s dismissal order on different grounds
than those mentioned by the district court. Gulf Guar. Life Ins. Co. v. Conn.
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Gen. Life Ins. Co., 304 F.3d 476, 486 (5th Cir. 2002). We do so here, because
KLLM did not sufficiently plead fraud. “To plead fraud adequately, the plaintiff
must specify the statements contended to be fraudulent, identify the speaker,
state when and where the statements were made, and explain why the
statements were fraudulent.” Sullivan, 600 F.3d at 551 (citation and internal
quotation marks omitted). While it is true that KLLM alleged that “they [the
Insurer Defendants] promised and represented to KLLM that the premium rate
would remain unchanged for three years,” by not specifying “who at the company
made the statements,” they inadequately pleaded fraud under Rule 9(b). See
Sullivan, 600 F.3d at 551. Accordingly, the district court did not err by
dismissing KLLM’s fraud claim.
IV. CONCLUSION
For the foregoing reasons, the district court’s order is AFFIRMED.
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