Sheppard v. Liberty Mutual Insurance Company (E.D. La., Nov. 17, 2016, dismissal)

Our plain-English summary of Sheppard v. Liberty Mutual Insurance Company (U.S. District Court, Eastern District of Louisiana, November 17, 2016).

Jesse Frank Sheppard sued in Louisiana state court, and the case was removed to federal court. He alleged he was exposed to asbestos daily while working for Freeport Sulphur Company, now part of Mosaic Global Holdings, and that it caused asbestos-related cancer, lung cancer, and/or mesothelioma, first diagnosed in October 2015. He also sued makers and sellers of asbestos products and insurers. His claims included negligence, intentional tort, fraud and strict liability. Mosaic moved to dismiss the fraud claim under Rule 9(b), which requires fraud to be pleaded with particularity. The court explained that a fraud-by-silence claim must state what was withheld, when, the relationship creating a duty to speak, and what the defendant gained by withholding it. Sheppard's allegations about what the defendants gained referred to all defendants together and not to Mosaic specifically, which the court called impermissible group pleading. The court granted the motion. It dismissed the fraud claim against Mosaic without prejudice and let Sheppard file an amended complaint within twenty-one days.

We wrote this summary from the court's opinion with the help of AI. It is not the court's wording, and it is not legal advice. The full opinion is below.

The decision

• Court: U.S. District Court, Eastern District of Louisiana
• Decided: November 17, 2016
• Docket: Civil Action No. 16-2401
• Stage: Motion to dismiss
• State: Louisiana

Outcome. The court granted Mosaic Global Holdings' motion to dismiss Sheppard's fraud claim against it under Rule 9(b), without prejudice and with leave to amend within twenty-one days.

What the court held. A fraudulent concealment claim must plead with particularity what each specific defendant gained by withholding information, and allegations aimed at all defendants as a group are impermissible group pleading under Rule 9(b).

Issues decided: Trial Procedure and Discovery.

The people and their exposure

• Jesse Frank Sheppard: lung cancer, mesothelioma

Who	Work	Where	When	Products
Jesse Frank Sheppard	employee of Freeport Sulphur Company	Freeport Sulphur Company	1967-1992

The defendants

• Mosaic Global Holdings Inc. (employer)
• Liberty Mutual Insurance Company (insurer)
• Louisiana Insurance Guaranty Association (insurer)
• OneBeacon America Insurance Company (insurer)
• Pennsylvania General Insurance Company (insurer)
• McCarty Corporation
• Reilly-Benton Company, Inc.
• Taylor-Seidenbach, Inc.
• Bayer CropScience, Inc.
• Union Carbide Corporation
• Montello, Inc.
• Riley Power, Inc.
• General Electric Company
• Uniroyal Holding, Inc.
• Chevron Phillips Chemical Company, LP

Other decisions in this case

Other rulings from the same court in the same case, in our library:

• Sheppard v. Liberty Mutual Insurance Company (October 26, 2016). The district court denied Sheppard's appeal and let stand the magistrate judge's order refusing him leave to amend his complaint to drop the Caminada facility allegations, finding the amendment futile and made in bad faith.
• Sheppard v. Liberty Mutual Insurance Company (November 17, 2016). The court denied plaintiff Jesse Frank Sheppard's motion to remand, holding that federal jurisdiction under the Outer Continental Shelf Lands Act was proper, so defendants including Mosaic kept the case in federal court.
• Sheppard v. Liberty Mutual Insurance Company (January 24, 2017). The court denied Jesse Frank Sheppard's second motion to remand to Louisiana state court and struck his amendments deleting the Caminada allegations, so Mosaic and the other defendants kept the case in federal court.
• Sheppard v. Liberty Mutual Insurance Company (January 24, 2017). The court granted Mosaic Global Holdings' motion to dismiss Sheppard's amended fraud claim with prejudice for failure to plead fraud with particularity, and denied Mosaic's motion to strike as moot.
• Sheppard v. Liberty Mutual Insurance Company (January 30, 2017). The court granted Liberty Mutual Insurance Company's motion for summary judgment, dismissing plaintiff Sheppard's claims against it in its individual capacity because it owed him no duty.
• Sheppard v. Liberty Mutual Insurance Company (February 2, 2017). The court denied Sheppard's motions to exclude settlement and collateral-source evidence, for in limine relief on undeposed experts, for judicial admission on asbestosis, and to exclude the Dr. Smith consultation note, and denied as moot his motion to strike a witness and the defendants' motion for partial summary judgment on asbestosis.
• Sheppard v. Liberty Mutual Insurance Company (February 2, 2017). The court granted the defendants' motion and excluded plaintiff Sheppard's treating physicians from giving expert opinion testimony, because he did not make the required Rule 26(a)(2)(C) disclosures; the physicians may offer only lay testimony.

The court's opinion

The text below is Google Scholar's copy of the court's opinion, a public record. Numbers in brackets, such as [*921], mark where each page of the printed reporter begins.

JESSE FRANK SHEPPARD

v.

LIBERTY MUTUAL INSURANCE COMPANY, ET AL. SECTION "R" (3)

Civil Action No. 16-2401.

November 17, 2016.

United States District Court, E.D. Louisiana.

Jesse Frank Sheppard, Plaintiff, represented by Gerolyn Petit Roussel, Roussel & Clement.

Jesse Frank Sheppard, Plaintiff, represented by Benjamin Peter Dinehart, Roussel & Clement, Jonathan Brett Clement, Roussel & Clement, Lauren Roussel Clement, Roussel & Clement & Perry Joseph Roussel, Jr., Roussel & Clement. Liberty Mutual Insurance Company, Defendant, represented by Leigh Ann Tschirn Schell, Kuchler Polk Schell Weiner & Richeson, LLC, Joseph Henry Hart, IV, Kuchler Polk Schell Weiner & Richeson, LLC, Lori Allen Waters, Kuchler Polk Schell Weiner & Richeson, LLC, Magali Ann Puente-Martin, Kuchler Polk Schell Weiner & Richeson, LLC & Thomas A. Porteous, Kuchler Polk Schell Weiner & Richeson, LLC.

Louisiana Insurance Guaranty Association, Defendant, represented by Edwin Scott Hackenberg, Henchy, Verbois & Hackenberg LLC.

McCarty Corporation, Defendant, represented by Susan Beth Kohn, Simon, Peragine, Smith & Redfearn, LLP, April Ann McQuillar, Simon, Peragine, Smith & Redfearn, LLP, Douglas Kinler, Simon, Peragine, Smith & Redfearn, LLP, Douglas Watson Redfearn, Simon, Peragine, Smith & Redfearn, LLP, Janice M. Culotta, Simon, Peragine, Smith and Redfearn, LLP, Louis Oliver Oubre, Simon, Peragine, Smith & Redfearn, LLP & Nicole M. Loup, Simon, Peragine, Smith & Redfearn, LLP. Reilly-Benton Company, Inc., Defendant, represented by Thomas L. Cougill, Willingham Fultz & Cougill, Jamie M. Zanovec, Willingham Fultz & Cougill, Jeanette Seraile-Riggins, Manion Gaynor Manning LLP, Jennifer H. McLaughlin, Willingham Fultz & Cougill & Jennifer D. Zajac, Willingham Fultz & Cougill.

Taylor-Seidenbach, Inc., Defendant, represented by Christopher Kelly Lightfoot, Hailey, McNamara, Hall, Larmann & Papale, Edward J. Lassus, Jr., Hailey, McNamara, Hall, Larmann & Papale & Richard J. Garvey, Jr., Hailey, McNamara, Hall, Larmann & Papale.

Bayer CropScience, Inc., Defendant, represented by Deborah DeRoche Kuchler, Kuchler Polk Schell Weiner & Richeson, LLC, Ernest G. Foundas, Kuchler Polk Schell Weiner & Richeson, LLC, Francis Xavier deBlanc, III, Kuchler Polk Schell Weiner & Richeson, LLC, McGready Lewis Richeson, Kuchler Polk Schell Weiner & Richeson, LLC, Melissa M. Desormeaux, Kuchler Polk Schell Weiner & Richeson, LLC, Michael H. Abraham, Kuchler Polk Schell Weiner & Richeson, LLC, Milele N. St. Julien, Kuchler Polk Schell Weiner & Richeson, LLC & Perrey S. Lee, Kuchler Polk Schell Weiner & Richeson, LLC.

Union Carbide Coporation, Defendant, represented by Deborah DeRoche Kuchler, Kuchler Polk Schell Weiner & Richeson, LLC, Ernest G. Foundas, Kuchler Polk Schell Weiner & Richeson, LLC, Francis Xavier deBlanc, III, Kuchler Polk Schell Weiner & Richeson, LLC, McGready Lewis Richeson, Kuchler Polk Schell Weiner & Richeson, LLC, Melissa M. Desormeaux, Kuchler Polk Schell Weiner & Richeson, LLC, Michael H. Abraham, Kuchler Polk Schell Weiner & Richeson, LLC, Milele N. St. Julien, Kuchler Polk Schell Weiner & Richeson, LLC, Perrey S. Lee, Kuchler Polk Schell Weiner & Richeson, LLC & Trevor Matthew Cutaiar, Mouledoux, Bland, Legrand & Brackett, LLC.

Montello, Inc., Defendant, represented by Ernest G. Foundas, Kuchler Polk Schell Weiner & Richeson, LLC, McGready Lewis Richeson, Kuchler Polk Schell Weiner & Richeson, LLC & Perrey S. Lee, Kuchler Polk Schell Weiner & Richeson, LLC.

OneBeacon America Insurance Company, Defendant, represented by Adam Devlin deMahy, Taylor, Wellons, Politz & Duhe, APLC, Angela J. O'Brien, Taylor, Wellons, Politz & Duhe, APLC, Samuel Milton Rosamond, III, Taylor, Wellons, Politz &

Duhe, APLC & Susan Beth Kohn, Simon, Peragine, Smith & Redfearn, LLP.

Pennsylvania General Insurance Company, Defendant, represented by Adam Devlin deMahy, Taylor, Wellons, Politz & Duhe, APLC, Angela J. O'Brien, Taylor, Wellons, Politz & Duhe, APLC, Samuel Milton Rosamond, III, Taylor, Wellons, Politz & Duhe, APLC & Susan Beth Kohn, Simon, Peragine, Smith & Redfearn, LLP.

Riley Power, Inc., Defendant, represented by Jennifer E. Adams, Deutsch Kerrigan LLP, Arthur Wendel Stout, III, Deutsch Kerrigan LLP, Barbara Bourgeois Ormsby, Deutsch Kerrigan LLP, Marc John Bitner, Deutsch Kerrigan LLP & William Claudy Harrison, Jr., Deutsch Kerrigan LLP.

General Electric Company, Defendant, represented by John Joseph Hainkel, III, Frilot L.L.C., Angela M. Bowlin, Frilot L.L.C., James H. Brown, Jr., Frilot L.L.C., Kelsey A. Eagan, Frilot L.L.C., Meredith K. Keenan, Frilot L.L.C. & Peter R. Tafaro, Frilot L.L.C..

Uniroyal Holding, Inc., Defendant, represented by Mary Reeves Arthur, Forman, Perry, Watkins, Krutz, LLP, Jason K. Elam, Forman, Watkins & Kurtz LLP & Katherine Weatherly Emma Trotter, Forman, Watkins & Krutz LLP.

Chevron Phillips Chemical Company, LP, Defendant, represented by Diana Cole Surprenant, Adams & Reese, LLP, Kathleen F. Drew, Adams & Reese, LLP & Alex E. Cosculluela, Adams & Reese, LLP.

Liberty Mutual Insurance Company, Defendant, represented by H. Minor Pipes, III, Barrasso,Usdin, Kupperman, Freeman & Sarver, LLC, Joseph Henry Hart, IV, Kuchler Polk Schell Weiner & Richeson, LLC, Kimberly R. Silas, Barrasso,Usdin, Kupperman, Freeman & Sarver, LLC & Susan Muller Rogge, Barrasso,Usdin, Kupperman, Freeman & Sarver, LLC. ORDER AND REASONS

SARAH S. VANCE, District Judge.

Mosaic Global Holdings Inc. moves to dismiss Plaintiff Jesse Frank Sheppard's fraud claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Because the Court finds that Sheppard has failed to individually plead what Mosaic gained by allegedly withholding information from Sheppard, Mosaic's motion is granted.

I. BACKGROUND

This suit was originally filed in the Civil District Court for the Parish of Orleans.[1] Defendant Mosaic Global Holdings Inc. removed the action to this Court on March 22, 2016.[2] In his complaint, Sheppard alleges that he was exposed to asbestos "[o]n a daily basis" as an employee of Mosaic's predecessor company, Freeport Sulphur Company.[3] This exposure allegedly caused Sheppard to develop asbestos-related cancer, lung cancer, and/or mesothelioma.[4] Although Sheppard stopped working for Freeport in the early-to mid-1990s,[5] Sheppard's asbestos-related ailments were first diagnosed in October 2015.[6]

In addition to Freeport/Mosaic, Sheppard sues several defendants involved in the manufacture, distribution, and sale of asbestos-containing products that Sheppard allegedly encountered in the course of his work.[7] Sheppard also brings claims against insurance companies that allegedly provided coverage to defendants for asbestos-related claims and withheld information from Sheppard about the danger of asbestos.[8]

Sheppard brings claims for "negligence, intentional tort, fraud, and strict liability," and alleges that all defendants are "jointly, severally, and in solidio liable."[9] He seeks damages for, among other things, physical and mental pain, loss of life, loss of income, and medical expenses.[10]

Mosaic now moves to dismiss Sheppard's fraud claims for failure to state a claim under the heightened pleading standards of Federal Rule of Civil Procedure 9(b).[11]

II. LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, plaintiffs must plead enough facts "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232-33 (5th Cir. 2009); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678.

Generally, a court ruling on a motion to dismiss may rely on only the complaint and its proper attachments. Fin. Acquisition Partners LP v. Blackwell, 440 F.3d 278, 286 (5th Cir. 2006). A court is permitted, however, to rely on "documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). The court may not consider new factual allegations made outside the complaint. See Fin. Acquisition Partners, LP, 440 F.3d at 289.

Federal Rule of Civil Procedure 9(b) imposes a heightened pleading requirement for fraud claims. The purpose of Rule 9(b) is to "ensur[e] the complaint `provides defendants with fair notice of the plaintiffs' claims, protects defendants from harm to their reputation and goodwill, reduces the number of strike suits, and prevents plaintiffs from filing baseless claims then attempting to discover unknown wrongs.'" United States ex. rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009) (quoting Melder v. Morris, 27 F.3d 1097, 1100 (5th Cir. 1994)). Under Rule 9(b), a party alleging fraud or mistake "must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The required conditions of a person's mind, however, may be alleged generally. Id. The Fifth Circuit "interprets Rule 9(b) strictly, requiring the plaintiff to 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." Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 207 (5th Cir. 2009), cert. denied, 588 U.S. 873 (2009). In other words, "Rule 9(b) requires `the who, what, when, where, and how' to be laid out." Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 723 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992)). The requirements of Rule 9(b) are "supplemental to the Supreme Court's recent interpretation of Rule 8(a) requiring enough facts [taken as true] to state a claim to relief that is plausible on its face." Lentz v. Trinchard, 730 F.Supp.2d 567, 579 (E.D.La. 2010) (citing Grubbs, 565 F.3d at 185) (quoting Twombly, 550 U.S. at 570). State-law fraud claims, such as those alleged by plaintiff here, are subject to the pleading requirements of Federal Rule of Civil Procedure 9(b). Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008). Louisiana law defines fraud as "a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other." La. Civ. Code art. 1953. "Fraud may also result from silence or inaction." Id. The elements of a Louisiana fraud or intentional misrepresentation claim are: 1) a misrepresentation of a material fact; 2) made with intent to deceive; and 3) causing justifiable reliance with resultant injury. Kadlec Medical Center v. Lakeview Anesthesia Assoc., 527 F.3d 412, 418 (5th Cir. 2008), cert. denied, 555 U.S. 1046 (2008); see also Gonzalez v. Gonzalez, 20 So.3d 557, 563 (La. Ct. App. 2009), writ denied, 27 So.3d 305 (La. 2010). In cases concerning "omission of facts, Rule 9(b) typically requires the claimant to plead the type of facts omitted, the place in which the omissions should have appeared, and the way in which the omitted facts made the misrepresentations misleading." Carroll v. Fort St. James Corp., 470 F.3d 1171, 1174 (5th Cir. 2006). To state a claim for fraud by silence or inaction, plaintiffs also must show that the there was a duty to disclose the information. Kadlec Medical Center, 527 F.3d at 418 ("To establish a claim for intentional misrepresentation when it is by silence or inaction, plaintiffs also must show that the defendant owed a duty to the plaintiff to disclose the information."); see also Greene v. Gulf Coast Bank, 593 So.2d 630, 632 (La. 1992) ("To find fraud from silence or suppression of the truth, there must exist a duty to speak or to disclose information.").

III. DISCUSSION

Courts in this district recognize that "[f]raud by silence. . . `is, by its very nature, difficult to plead with particularity.'" In re Ford Motor Co. Vehicle Paint Litig., No. 1063, 1997 WL 539665, at [*3] (E.D. La. Aug. 27, 1997) (quoting Chrysler Credit Corp. v. Whitney Nat'l Bank, 824 F. Supp. 587, 598 (E.D.La. 1993)). This does not, however, excuse plaintiffs alleging such fraud from the requirements of Rule 9(b). Therefore, to plead a claim for fraudulent concealment, the plaintiff must specifically allege: "(1) the information that was withheld, (2) the general time period during which the fraudulent conduct occurred, (3) the relationship giving rise to the duty to speak, and (4) what the person or entity engaged in the fraudulent conduct gained by withholding the information." First Am. Bankcard, Inc. v. Smart Bus. Tech., Inc., No. 15-638, 2016 WL

5869787, at [*9] (E.D. La. Oct. 7, 2016); see also Sarrat v. Univar U.S.A., Inc., No. 14-1017, 2014 WL 3588849, at [*2] (E.D. La. July 18, 2014) (applying test); In re Ford Motor Co. Vehicle Paint Litig., 1997 WL 539665, at [*3] (same). Furthermore, "group pleading is impermissible under Rule 9(b)." Boutain v. Radiator Specialty Co., No. 11-1907, 2011 WL 6130754, at [*2] (E.D. La. Dec. 8, 2011); see also Quintero Cmty. Ass'n Inc. v. F.D.I.C., 792 F.3d 1002, 1010 (8th Cir. 2015) ("Appellants' shotgun-style allegations of wrongdoing by all the Director Defendants generally, in a group pleading fashion does not satisfy Rule 9(b)." (internal quotations and modifications omitted). Claims for fraudulent concealment will therefore be dismissed if any one of the four required elements is pled generally as to all defendants, rather than specifically as to a single defendant. See id. (complaint alleging fraud may not group the defendants together; plaintiffs must plead "specific facts as to each defendant for each of the Rule 9(b) requirements."); see also Lang v. DirecTV, 735 F.Supp.2d 421, 437 (E.D. La. 2010) ("[A] complaint alleging fraud may not group the defendants together."). Here, Sheppard has failed to plead what Freeport gained by withholding information about the danger of asbestos. His complaint therefore fails to meet the fourth requirement for specifically alleging fraud under Rule 9(b).

Sheppard's allegations concerning defendants' gains from withholding information are contained in two nearly identical paragraphs. Sheppard alleges:

The misrepresentations and suppressions of the truth of occupational health hazards were made by all

defendants with the intent of obtaining an unjust advantage over Mr. Sheppard and other employees who remained uninformed and ignorant of the risks of contracting occupational lung diseases form their work environment. These misrepresentations and suppressions were calculated to produce the effect of

misleading the employees so that they would not associate any lung disease with occupational exposure on the job. As a result of these misrepresentations and suppressions, all defendants sought to prevent or limit occupational disease claims by injured employees and claims from family members who also contracted

disease.[12]

This allegation is plainly aimed at "defendants" as a whole, rather than Mosaic or any other specific defendant. It therefore constitutes impermissible group pleading under Rule 9(b).

Although Sheppard has failed to meet the requirements of Rule 9(b), this error "may reflect mere pleading defect, rather than a more fundamental problem with his claims." Sartin v. EKF Diagnostics, Inc., No. 16-1816, 2016 WL 3598297, at [*4] (E.D. La. July 5, 2016). Accordingly, the Court dismisses Sheppard's claim without prejudice and with leave to amend within twentyone days of entry of this order. See id.; see also Foman v. Davis, 371 U.S. 178, 182 (1962) ("If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits.").

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS Mosaic's motion to dismiss Sheppard's fraud claim against Mosaic for failure to state a claim. This dismissal is WITHOUT PREJUDICE and with leave to file an amended complaint within twenty-one days of this order.

[1] R. Doc. 1 at 1.

[2] Id.

[3] R. Doc. 1-1 at 5.

[4] Id. at 6.

[5] Sheppard's complaint is inconsistent on this point. Sheppard alleges variously that his tenure at Freeport, and exposure to asbestos, ran from "approximately 1967 through 1992," from "approximately 1967 through 1994," and "from 1967 through 1976." R. Doc. 1-1 at 5, 6. [6] R. Doc. 1-1 at 6.

[7] Id. at 6, 7.

[8] Id. at 3, 4, 8.

[9] Id. at 29.

[10] Id.

[11] R. Doc. 12.

[12] R. Doc. 101 at 9; see also id. at 24-25 (making nearly identical allegations).

Sources

• The opinion on Google Scholar
• Louisiana asbestos laws
• Louisiana asbestos exposure sites