Sheppard v. Liberty Mutual Insurance Company (E.D. La., Jan. 24, 2017, dismissal)

Our plain-English summary of Sheppard v. Liberty Mutual Insurance Company (U.S. District Court, Eastern District of Louisiana, January 24, 2017).

Jesse Frank Sheppard sued Mosaic Global Holdings, the successor to his former employer Freeport Sulphur Company, along with product makers and insurers. He alleged daily asbestos exposure at Freeport and said it caused asbestos-related cancer, lung cancer, and/or mesothelioma, diagnosed in October 2015. The case was removed from state court to federal court. This order dealt only with his fraud claim against Mosaic, which alleged that Mosaic concealed the dangers of asbestos. The court had already dismissed an earlier version of the claim and allowed him to amend. It held that the amended claim still did not meet the heightened pleading standard for fraud. Most of Sheppard's allegations said the hazards of asbestos were generally known, which could not support concealment. His allegations about Mosaic's membership in the National Safety Council did not identify any specific information Mosaic received that the public lacked. The court dismissed the fraud claim with prejudice, because he had not asked for further leave to amend and his second attempt showed no progress. Mosaic's motion to strike was denied as moot.

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: January 24, 2017
• Docket: Civil Action No. 16-2401
• Stage: Motion to dismiss
• State: Louisiana

Outcome. 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.

What the court held. A plaintiff alleging fraudulent concealment under Rule 9(b) must specifically plead what information was withheld and that it was known to the defendant but not generally available to the plaintiff through reasonable diligence. Allegations that asbestos hazards were generally known do not support such a claim.

Issues decided: Trial Procedure and Discovery.

The people and their exposure

• Jesse Frank Sheppard: mesothelioma, lung cancer

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

The defendants

• Mosaic Global Holdings Inc. (employer)
• Liberty Mutual Insurance Company (insurer)
• Louisiana Insurance Guaranty Association (insurer)
• Reilly-Benton Company, Inc.
• Taylor-Seidenbach, 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 (November 17, 2016). 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.
• 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 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.

Civil Action No. 16-2401.

January 24, 2017.

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, Frilot L.L.C., Skylar B. Rudin, 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.

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.

Union Carbide Corporation, Defendant, represented by Deborah DeRoche Kuchler, Kuchler Polk Schell Weiner & Richeson, LLC, McGready Lewis Richeson, 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, 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, Samuel L. Burk, Kuchler Polk Schell Weiner & Richeson, LLC, pro hac vice & Trevor Matthew Cutaiar, Mouledoux, Bland, Legrand & Brackett, LLC.

Montello, Inc., Defendant, represented by McGready Lewis Richeson, 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, Milele N. St. Julien, Kuchler Polk Schell Weiner & Richeson, LLC, Perrey S. Lee, Kuchler Polk Schell Weiner & Richeson, LLC & Samuel L. Burk, Kuchler Polk Schell Weiner & Richeson, LLC, pro hac vice.

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., John Willard Elder, Paine Bickers LLP, pro hac vice, John A. Heller, Sidley Austin, LLP, 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, 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 & David M. Stein, 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, Skylar B. Rudin, Kuchler Polk Schell Weiner & Richeson, 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 plead with adequate specificity what information was withheld, 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]

On November 17, 2016, the Court granted Mosaic's first motion to dismiss Sheppard's fraud claim against Mosaic under the heightened pleading standards of Federal Rule of Civil Procedure 9(b).[11] In doing so, the Court found that Sheppard had failed to individually plead what Mosaic gained by allegedly withholding information from Sheppard.[12] In its order, the Court granted Sheppard leave to amend his claim.[13]

On December 8, 2016, Sheppard moved to amend his complaint and reallege his fraud claim against Mosaic.[14] Mosaic now moves to dismiss Sheppard's amended fraud claim, and argues that Sheppard's allegations remain inadequate to state a claim under the heightened pleading standards of Federal Rule of Civil Procedure 9(b).[15]

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

As stated in the Court's earlier order on this point, 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).

The Court finds that Sheppard has once again failed to plead the "who, what, when, where, and how" that is necessary to meet Rule 9(b)'s heightened pleading requirement. A claim for fraudulent concealment is based on an imbalance of knowledge between the plaintiff and the defendant. Accordingly, to bring such a claim, a plaintiff must allege both: (1) that the defendant concealed information; and (2) that the plaintiff "did not have actual or constructive knowledge of the

information and could not have learned of the information through the exercise of due diligence." In re Ford Motor Co. Bronco II Prod. Liab. Litig., 982 F. Supp. 388, 396-97 (E.D. La. 1997) (citing Landry v. Air Line Pilots Ass'n Int'l AFL-CIO, 901 F.2d 404, 412-13 (5th Cir. 1990)).

Sheppard alleges that Mosaic knew that asbestos was hazardous at the time of Sheppard's exposure. But to do so, Sheppard relies almost entirely on allegations that the hazards of asbestos were generally known at that time. For instance, Sheppard alleges that "[s]tandards regarding the proper handling of asbestos have been in existence since at least the early 1950s" and that "asbestosis was listed as a compensable occupational disease under the Louisiana Worker's Compensation Act of 1952."[16] Sheppard further alleges that "[t]he health hazards of asbestos have been recognized by those in the business for two thousand years," and attributes knowledge of this danger to Strabo, the ancient Greek geographer, and Pliny the Elder, the Roman historian.[17] Finally, Sheppard alleges that, by the time he began working with asbestos "virtually every state in the Unite[d] States recognized asbestosis as compensable claims under workers' compensation laws."[18] Information promulgated by legislators and other public sources is not unique to Mosaic, and could be learned through the exercise of due diligence, and therefore does not support a claim for fraudulent concealment. Sheppard's attempts to attribute unique knowledge of asbestos dangers to Mosaic are comparatively slim. These allegations center around Mosaic's membership in a group called the National Safety Council (NSC). According to Sheppard, the NSC "would publish information to its members regarding hazards in the workplace, including asbestos."[19] Members of the NSC, therefore, "would have had access to information about the hazards of asbestos and the means to control those hazards relating to asbestos-containing materials by even the early 1940s."[20] Sheppard includes no allegations of what specific information was conveyed from the NSC to Mosaic, or how the NSC's information compared to generally-available information on asbestos danger. In other words, Sheppard fails to allege any specific information concerning the danger of asbestos that was, at the time of Sheppard's exposure, both: (1) known to Mosaic; and (2) not generally known such that it could not have been obtained by Sheppard though reasonable diligence. Accordingly, Sheppard's fraud claim against Mosaic must be dismissed.

The Court further finds, for two reasons, that it is appropriate to dismiss this claim with prejudice. First, Sheppard did not ask the Court for leave to further amend his complaint, and this alone provides sufficient grounds to enter dismissal with prejudice. See Wentzell v. JPMorgan Chase Bank, Nat. Ass'n, 627 F. App'x 314, 319 (5th Cir. 2015) ("a party must `expressly request' leave to amend" (quoting United States ex rel. Willard v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 387 (5th Cir. 2003)). Second, the Court finds that Sheppard's vague allegations, even on this second attempt, are not making progress towards an actionable claim for fraud. The Court therefore finds that further leave to amend is unwarranted. See Jacquez v. Procunier, 801 F.2d 789, 792 (5th Cir. 1986) ("At some point a court must decide that a plaintiff has had fair opportunity to make his case; if, after that time, a cause of action has not been established, the court should finally dismiss the suit.").

Finally, Mosaic also moves to strike Sheppard's amendments concerning his work at Mosaic's Caminada plant. The Court has already struck these amendments in its order denying Sheppard's second motion for remand. This portion of Mosaic's motion is accordingly denied as moot.

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. Mosaic's claims are DISMISSED WITH PREJUDICE. Mosaic's motion to strike is DENIED AS MOOT. [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. 143.

[12] Id.

[13] Id.

[14] R. Doc. 164.

[15] R. Doc. 205.

[16] R. Doc. 166 at 3-4.

[17] R. Doc. 1-1 at 9-10.

[18] Id.

[19] R. Doc. 166 at 4.

[20] Id.

Sources

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