United States District Court,

E.D. Michigan,

Southern Division.

James HAWTHORNE, Plaintiff,

v.

LINCOLN GENERAL INSURANCE CO., Defendant/Third-Party Plaintiff,

v.

Ingram Trucking, Inc., Third-Party Defendant.

No. 08-12325.

April 16, 2009.

ORDER (1) GRANTING, IN PART, AND DENYING, IN PART, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, AND (2) DENYING PLAINTIFF’S MOTION TO DISMISS

PAUL D. BORMAN, District Judge.

Before the Court is Plaintiff James Hawthorne’s Motion for Summary Judgment, filed October 6, 2008, (Doc. No. 11), and Plaintiff’s Motion to Partially Dismiss Lincoln General’s Third Party Complaint Alleging Fraud, filed December 23, 2008 (Doc. No. 47). The motions have been fully briefed. The Court held a motion hearing on February 19, 2009. For the reasons discussed below, this Court GRANTS Plaintiff’s Motion for Summary Judgment, and DENIES Plaintiff’s Motion to Dismiss.

I. BACKGROUND

The facts of this case are fully recounted in this Court’s February 9, 2009, opinion and order vacating the Magistrate Judge’s order denying Plaintiff’s motion to limit discovery. To view the fully recitation of the facts, refer to this Court’s previous order. The facts necessary to decide Plaintiff’s motion are set out below.

This tort suit arises from a February 23, 2006, car accident in which Plaintiffs car was struck by a semi-truck owned by Ingram Trucking, Inc., operated by Christopher Skimehorn and insured by Defendant. (Complaint ¶¶ 3, 5). Plaintiff suffered personal injuries as a result of the accident. (Complaint ¶ 12). Plaintiff initiated a tort action against Ingram Trucking and Skimehorn in state court. Plaintiff dismissed without prejudice Skimehorn and obtained a default judgment for $942,000 against Ingram Trucking on February 29, 2008. (Pl.’s Mot. Ex. C). After Ingram Trucking failed to pay the judgment, Plaintiff filed suit against Defendant Lincoln General Insurance Company, Ingram Trucking’s insurer, for satisfaction of the judgment.

In the Court’s previous order, entered on February 9, 2009, this Court vacated the portion of the Magistrate Judge’s order denying Plaintiff’s motion to limit discovery. (Doc. No. 54). The Court held that the default judgment entered in Wayne County Circuit Court is a final judgment recovered against Ingram Trucking for injuries resulting from negligence, and the Magistrate Judge’s conclusion otherwise was contrary to law. (Order (1) Vacating the Magistrate Judge’s November 4, 2008 Order, and (2) Granting Plaintiff’s Motion to Limit Discovery, 7, Feb. 9, 2009). The Court further held that Defendant is barred from litigating Ingram Trucking’s negligence liability and precluded from taking discovery on the liability and damages issues. (Id. at 11).

In the instant motions, Plaintiff seeks summary judgment on his complaint, and moves to partially dismiss Defendant’s third-party complaint.

II. ANALYSIS

A. Plaintiff’s Motion for Summary Judgment

The United States Court of Appeals for the Sixth Circuit has summarized the legal standard for summary judgment motions as follows:

Summary judgment is proper if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”In reviewing a motion for summary judgment, we view the evidence, all facts, and any inferences in the light most favorable to the nonmoving party. “To withstand summary judgment, the non-movant must show sufficient evidence to create a genuine issue of material fact.”A mere scintilla of evidence is insufficient; “there must be evidence on which the jury could reasonably find for the [non-movant].”

Thomas v. Speedway SuperAmerica, LLC, 506 F.3d 496, 500-01 (6th Cir.2007) (internal citations omitted).

In his motion for summary judgment, Plaintiff argues that this Court should enter a judgment against Defendant because he satisfied the criteria of MCS-90 and, therefore, is entitled to damages. (Pl.’s Mot. Summ. J. 4-7). Plaintiff also argues that MCS-90 precludes Defendant from disclaiming coverage for the breach of a policy condition. (Id. at 7-10). Defendant responds that Plaintiff has not sustained his burden of proving negligence, which is a necessary predicate to recovering under MCS-90. (Def.’s Resp. 6).

All interstate carriers are required to maintain insurance or another form of surety “conditioned to pay any final judgment recovered against such motor carrier for bodily injuries to or the death of any person resulting from the negligent operation, maintenance or use of motor vehicles” under the carrier’s permit. 49 C.F.R. §§ 387.301(a), 387.7. To satisfy this requirement, an MCS-90 endorsement must be attached to each insurance policy of the carrier; the MCS-90 guarantees payment from the motor carrier, or its insurer, in the amount of at least $750,000 per accident. 49 C.F.R. §§ 387.7, 387.9

In light of this Court’s earlier decision that the default judgment Plaintiff obtained in Wayne County Circuit Court is a final judgment recovered against the insured for injuries resulting from negligence, Plaintiff is entitled to summary judgment on his MCS-90 claim.

Plaintiff also seeks summary judgment on his claim that Defendant violated the Uniform Trade Practices Act by refusing to pay the default judgment entered in Wayne County Circuit Court. (Pl.’s Mot. Summ. J. 10-12). Defendant did not take a position on this issue.

The Uniform Trade Practices Act, M.C.L. § 500.2001 et seq., regulates the trade practices of insurance companies in Michigan by prohibiting “unfair methods of competition or unfair or deceptive acts or practices.”M.C.L. § 500.2002. M.C.L. § 500.2006 provides for the imposition of penalty interest for the late payment of an insurance claim, and subsection four governs the imposition of the penalty interest. M.C.L. § 500.2006(4) provides in relevant part:

If benefits are not paid on a timely basis the benefits paid shall bear simple interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum, if the claimant is the insured or an individual or entity directly entitled to benefits under the insured’s contract of insurance. If the claimant is a third party tort claimant, then the benefits paid shall bear interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum if the liability of the insurer for the claim is not reasonably in dispute, the insurer has refused payment in bad faith and the bad faith was determined by a court of law.

The Michigan Court of Appeals has construed M.C.L. § 500.2006(4) as entitling first-party insureds to interest if benefits are not paid within 60 days after satisfactory proof of loss is provided, irrespective of whether the claim is reasonably in dispute. Griswold Properties, L.L. C. v. Lexington Ins. Co., 276 Mich.App. 551, 565-66 (2007). Claimants who are not directly entitled to benefits under an insurance policy, such as the Plaintiff here, may collect penalty interest for untimely payment of benefits only if the claim was not reasonably in dispute. Id. at 566.In addition, Plaintiff must show that Defendant’s refusal to pay was in bad faith. M.C.L. § 500.2006.

In this case, Plaintiff’s claim for benefits was reasonably in dispute. The parties vigorously litigated whether a default judgment is a final judgment for purposes of MCS-90. In addition, there was no Sixth Circuit precedent pertaining to this issue. Thus, whether Defendant was obligated to pay Plaintiff benefits, pursuant to MCS-90, based on the default judgment obtained in state court was reasonably in dispute. Moreover, Plaintiff has not presented any evidence, besides Defendantss refusal to pay, that Defendant refused payment in bad faith. This Court, therefore, denies Plaintiff summary judgment on his UTPA claim.

B. Plaintiff’s Motion to Partially Dismiss Defendant’s Third-Party Complaint

In deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), “[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all the factual allegations as true, and determine whether the plaintiff can prove a set of facts in support of its claims that would entitle it to relief.” Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 360 (6th Cir.2001). The Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U . S. 544, —-, 127 S.Ct. 1955 (2007), that a complaint must be dismissed pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted if the complaint does not plead “enough facts to state a claim to relief that is plausible on its face.” Id. at 1974.When fraud is alleged, Fed.R.Civ.P. 9(b) requires that the allegations “be stated with particularity.”

Plaintiff argues that Defendant’s “third party complaint reveals only vague and conclusory allegations of fraud,” and must be dismissed. (Pl.’s Mot. to Dismiss 1). Defendant responds that Plaintiff has no legal basis to move to dismiss its complaint because the complaint seeks indemnification and declaratory judgment against Ingram Trucking, not Plaintiff, and default has already been entered against Ingram Trucking for failing to answer. (Def.’s Resp. 4-6). Defendant further argues that by answering the third-party complaint, Plaintiff waived any objection to the sufficiency of the pleading.(Id. at 5).

The third-party complaint does not contain a fraud claim. Defendant brought a declaratory action against Ingram Trucking for breach of contract and indemnification. (Third-Party Complaint). The only references that could be construed as allegations of misrepresentations are made in paragraphs four, five and thirteen of the complaint, which read, respectively:

That for the purpose of acquiring insurance from Lincoln General Insurance Company, Ingram Trucking, Inc. made certain representations to Lincoln General Insurance Company, which, upon information and belief, were inaccurate and incorrect.

* * *

That in reliance upon the inaccurate and incorrect representations by Ingram Trucking, Inc., Third Party Plaintiff, Lincoln General Insurance Company, issued a policy of insurance and agreed to act as a surety in the issuance of an MCS90 form, as referenced in Plaintiff’s Complaint.

* * *

That Ingram Trucking, Inc. upon information and belief made incorrect statements and representations, and took other actions for the purpose of obtaining insurance from Lincoln General Insurance Company.

(Third-Party Compl. ¶¶ 4, 5, 13).

None of these references to inaccurate or incorrect representations pertain to Plaintiff, nor are they made in connection with a fraud claim. Plaintiff is not the subject of the third-party complaint, even if a fraud claim is alleged. Accordingly, Plaintiff’s motion to dismiss is denied because he “has no dog in this fight.”

III. CONCLUSION

For the reasons discussed above, the Court GRANTS, IN PART, and DENIES, IN PART, Plaintiff’s Motion for Summary Judgment, and DENIES Plaintiff’s Motion to Dismiss.

SO ORDERED

Superior Court of New Jersey,

Appellate Division.

Keith GREENE, Plaintiff-Respondent,

v.

J.B. HUNT TRANSPORT, INC., Defendant-Appellant.

Submitted March 18, 2009.

Decided April 9, 2009.

Before Judges STERN, RODRÍGUEZ and ASHRAFI.

PER CURIAM.

Defendant appeals from an “order for entry of Judgment” in the amount of $3,000, plus costs, following a bench trial in the Special Civil Part-Small Claims Section. Defendant contends that “[t]he trial court erred in determining that [its] driver’s manual created a contract of employment” and “erred in finding that [it] unlawfully terminated [plaintiff’s] employment”. We reverse the judgment.

The facts developed at trial included the following. Plaintiff became employed by defendant in February 2008 as a commercial driver. On February 20, 2008, he signed a “Certificate of Understanding and Agreement,” which stated:

I certify that I have received a copy of the J.B. Hunt Transport Driver’s Manual published June 1, 2005. I have read and understand the provisions outlined in this manual and agree to follow them. I also understand that the provisions in this manual by no means constitute all the rules, policies and benefits, both written and unwritten, as business requires. Neither these rules, policies and benefits, nor any other written or oral statement are contracts of employment and both the employee and the Company understand that employment may be terminated by either at any time for any reason.

Further, I understand that should I become liable for any fines or charges, I hereby authorize J.B. Hunt Transport to deduct the pay adjustment(s) from my base wage as outlined in the Payroll section of this manual.

I certify I have read and understand the policy on Accident Reporting as outlined in the Driver’s Manual. I agree to abide by this policy.

I certify I have read and understand the actions, as presented in orientation, which may result in Automatic Termination on the first offense, with no review.

This is to verify that I have been issued and instructed to keep in my possession, or in my truck, a complete copy of the Department of Transportation Federal Motor Carrier Safety Regulations. (FMCSR)

I have been instructed by J.B. Hunt Transport, Inc. to familiarize myself with the contents of the Department of Transportation Federal Motor Carrier Safety Regulations. (FMCSR)

I certify that I have completed J.B. Hunt Transport’s E.E.O. Training and Awareness Program (Non-Discrimination Policy) as outlined in the Driver’s Manual.

The next day, plaintiff executed defendant’s “Driver Application-Certifications, Disclaimers, and Acknowledgements.” The first paragraph thereof provides:

1) General Disclaimers:

I understand that J.B. Hunt Transport, Inc., hereafter “J.B. Hunt”, is under no obligation to hire me, that any employment I am offered will not be for any specified period of time, that my employment is terminable by either party at will with or without notice or cause, and that no representative of J.B. Hunt has authority to enter into any agreement with me contrary to the foregoing. I understand that nothing contained in my employment application, or in granting of an interview, is intended to create an employment contract between J.B. Hunt and myself for either employment or for the providing of any benefit. I understand that none of the benefits or policies in any handbook issued to me by J.B. Hunt are intended by reason of its publication to confer any rights or privileges to any benefits or policies, or entitle me to remain employed by J.B. Hunt, or to change my status as an “at will” employee (as permitted by law). I understand that all statements and provisions in the handbook are procedure or are a guideline and that J.B. Hunt has the right to change any policy, benefit, or procedure at any time without notice.

Plaintiff testified that he and the other drivers in his orientation class received a 2008 drivers’ manual. That manual included “Disciplinary Guidelines,” which embodied “[a]ctions which may result in disciplinary action or termination.”That section of the manual read:

This manual contains highlights of policies, procedures, guidelines, benefits and rules but by no means constitutes all policies, procedures, guidelines and rules of J.B. Hunt for Company Drivers.No written statements in this driver manual, or oral statements, are contracts of employment, and both the employee and the company understand that employment may be terminated by either at any time, for any reason.This Driver Manual does not guarantee employment for any definite period of time. The Company has the right to modify its policies, procedures, guidelines and benefits, both written and unwritten, as business requires.

….

DISCIPLINARY GUIDELINES

Actions Which May Result in Disciplinary Action or Termination. There are certain other serious actions that may result in the termination of your employment.These offenses include, but are not limited to:

• Excessive or serious violations on your motor vehicle record.

• Failure to comply with J.B. Hunt policies and procedures, federal, state, or local laws or regulations.

• Overall performance, conduct, and attitude not in the best interest of J.B. Hunt or which is deemed to damage the reputation of the company. This includes, but is not limited to misconduct of any kind that results in a customer’s request to remove or disallow an employee from a customer site.

• DOT preventable collision or multiple minor preventable collisions.

• Failure to notify your supervisor or Safety Claims Department immediately upon receipt of a traffic violation.

• Serious misconduct of any kind.

• Insubordination.

• Refusal of a dispatch that can be safely and legally delivered.

• Deviation from an assigned work area or dispatch.

• Unauthorized passenger. Authorization for passengers must be in writing from J.B. Hunt for any company vehicle (see Authorized Passenger Policy). Parking in an unauthor-ized location, or leaving a work location without authorization is prohibited.

[ (emphasis added).]

There is no dispute that plaintiff was involved in three accidents or “safety events” between May 6 and June 13, 2008. According to plaintiff, he was wrongfully terminated by defendant after the “three incidents,” and he advised defendant that its termination policy was violated. He testified he received the 2008 drivers’ manual and declined to participate in the “accident review” after the third accident because he had been terminated in violation of the appropriate “accident review policy.” Plaintiff argued that the first and third accidents should not have been used against him based on the fact the first was found “non preventable” by defendant and because the police report regarding the third reflected he was not at fault, and the company failed to do a proper investigation. In other words, according to plaintiff, he could not be terminated because only one accident was “preventable.”

Carl De Brizzi, defendant’s account manager, testified that “[o]n reviewing the driver’s history obviously three events as we outlined here in less than 30 days, two within one week, … met the criteria as far as frequency, accidents and their frequency which resulted in a termination formality and process.”He said the termination “was based on the frequency of the event in such a short period of time.”According to De Brizzi, “it wasn’t a matter of preventable/non-preventable, it was frequency.”He said that even if he had reviewed the report of the third accident, he would still find it “preventable.”

Defendant argued there was no excuse that plaintiff “declined” to appear for the final review, whereas plaintiff claimed he did not have to participate because he had already been improperly terminated.

The judge found, “as a matter of fact,” that plaintiff “was not given a copy of the 2005 agreement, but rather he was given a copy of the 2008 agreement.”The judge also found that plaintiff was given a copy of the 2008 drivers’ manual. The judge then concluded that the Woolley disclaimer in the manual “does not meet the requirements subsequently [en]unciated by the Supreme Court and the Appellate Division’s interpreting the [Woolley ] case.”See Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284,modified, 101 N.J. 10 (1985). He found “that the disclaimer contained in the handbook [is] … insignificantly drawn and it’s on a page mixed up with other things that it would not draw the attention to the average person and I find that it is totally ineffective.”The judge therefore found “that the manual constitutes a contract of employment, which is designed to govern the employment of the plaintiff and was relied on by the plaintiff for that purpose.”The judge concluded the same with respect to the driver application certification and acknowledgement, and that the first paragraph thereof was “not effective” because it was in “very fine print,” “not highlighted, not bold type, not prominently displayed and not … designed to attract the attention of the employee.”

The judge also concluded that the driver of the other vehicle cut plaintiff off in the third accident so that “the third one was not preventable because the plaintiff had already stopped and the other driver cut in front of him and he couldn’t have prevented it.”The judge concluded that the termination was, therefore, “not in accordance with the disciplinary guidelines of multiple minor preventable condition” because “[m]ultiple is really more than two” and the “termination of the plaintiff was in violation of [defendant’s] responsibility under the agreement.”As plaintiff made more than $1,000 a week and was unemployed for more than three weeks, the judge awarded the maximum damages that could be awarded.

On May 6, June 10, and June 13, 2008 plaintiff was involved in separate accidents. The first was deemed “N/P incident” on defendant’s form. The second was deemed “preventable,” and he was suspended two days, and placed on probation for 60 days with special training. The company’s “Safety Event Review” report on the third indicated that “driver refused to sign document” as he left the company. The “Safety Event Review” indicated “inattention on the driver’s part.”

The issue before us is whether the documents received by plaintiff gave rise to a contractual right to employment which would be terminable only for the reasons stated in the drivers’ manual. We agree with plaintiff that “if an employee can prove that an employee manual containing job[ ]security and termination procedures could reasonably be understood by an employee to create binding duties and obligations between the employer and its employee, the manual will constitute, in effect, a unilateral offer to contract that an employee may accept through continued employment.”Under Woolley, an implied promise is enforceable unless the manual contains a clear and prominent disclaimer. Woolley, supra, 99 N.J. at 285-86. We find no basis for disturbing the judge’s fact finding that plaintiff signed for and received the 2005 certificate and 2008 manual. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474 (1974).

An implied contract to discharge only for cause or for the reasons stated in a manual nullify the rule that employees may generally be fired at will. The employment relationship is “at-will unless specifically stated [otherwise] in explicit, contractual terms.” Bernards v. IMI Sys., Inc., 131 N.J. 91, 106 (1993).See also, e.g., Shebar v. Sanyo Business Sys. Corp., 111 N.J. 276, 284-90 (1988); Velantzas v. Colgate-Palmolive Co ., 109 N.J. 189, 191-92 (1988). As stated by Justice Handler in Witkowski v. Thomas J. Lipton, Inc., 136 N.J. 385, 392-93 (1994):

An employment manual providing terms and conditions of employment that include grounds and procedures for dismissal can create an employment contract. This Court held in Woolley that “absent a clear and prominent disclaimer, an implied promise contained in an employment manual that an employee will be fired only for cause may be enforceable against an employer even when the employment is for an indefinite term and would otherwise be terminable at will.” 99 N.J. at 285-86. Therefore, the Court ruled that the termination clause of the company’s employment handbook, including the procedure required before termination, could be contractually enforced.

The Court in Woolley explained that “[a] policy manual that provides for job security grants an important, fundamental protection for workers.”Id. at 297.In that case, the termination policy was “definite,” id. at 305 n. 12, “explicit and clear,” id. at 306, and provided “a fairly detailed procedure,” id. at 287 n. 2. Hence, the Court reasoned “job security provisions contained in a personnel policy manual widely distributed among a larger workforce are supported by consideration and may therefore be enforced as a binding commitment of the employer.”Id. at 302.

The key consideration in determining whether an employment manual gives rise to contractual obligations is the reasonable expectations of the employees.“When an employer of a substantial number of employees circulates a manual that, when fairly read, provides that certain benefits are an incident of the employment (including, especially, job security provisions),” courts should continue and enforce that manual “in accordance with the reasonable expectations of the employees.”Id. at 297-98.

….

In sum, under Woolley, the basic test for determining whether a contract of employment can be implied turns on the reasonable expectations of employees. A number of factors bear on whether an employee may reasonably understand that an employment manual is intended to provide enforceable employment obligations, including the definiteness and comprehensiveness of the termination policy and the context of the manual’s preparation and distribution.

The conclusion that the disclaimer was not prominent, adequate, or that the manual gives rise to a contract presents a question of law. See Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366 (1995).“Actions which may result in disciplinary action or termination” in the 2008 drivers’ manual include a “DOT preventable collision or multiple preventable collisions.”The record does not explain any difference between a “DOT preventable collision” and any other “preventable” collisions. Plaintiff does not contend that the second accident, as found by defendant, was not a “preventable collision,” much less a “DOT preventable collision.” Defendant states that the discharge was authorized “[p]ursuant to the Federal Motor Carrier Safety Administration” because whether an accident is “preventable” “can be based on a company-adopted definition, thus allowing the company to establish a goal for its safety management programs.”Unfortunately, in support of that proposition it merely cites to a website without a particular reference, and contends that “J.B. Hunt’s determination of whether or not [plaintiff’s] collisions were preventable is in accordance with the procedure established by the FMCSA.”While the defendant does not explain the reason for that conclusion, we are nevertheless satisfied that the defendant’s discharge of plaintiff after his third accident in approximately five weeks, including two over a seven-day period, was indisputably based on “frequency” and done in good faith, and the “disciplinary guidelines” in the 2008 drivers’ manual, read as a whole, does not prevent that action. In other words, assuming the 2008 drivers’ manual was circulated widely enough and did not have sufficiently prominent disclaimers, such that the manual became an enforceable agreement as to the basis and procedure for terminating a driver, the proofs do not permit a finding that the manual prevents plaintiff’s discharge where he was involved in what the company could reasonably consider to be two preventable accidents.

According to the Federal Motor Carrier Safety Administration, a separate administration within the Department of Transportation, “the commonly used definition” of preventable accident:

[I]s one which occurs because the driver fails to act in a reasonably expected manner to prevent it. In judging whether the driver’s actions were reasonable, one seeks to determine whether the driver drove defensively and demonstrated an acceptable level of skill and knowledge. The judgment of what is reasonable can be based on a company-adopted definition, thus establish-ing a goal for its safety management program. [Federal Motor Carrier Safety Administration, Accident Preventability Evaluations, http:// www.fmcsa.dot.gov/facts-research/researchtechnology/ publications/accidenthm/managmnt.htm (last visited Mar. 26, 2009).]

We recognize that this information was not presented to the trial judge.

Accordingly, we reverse the judgment of the Special Civil Part and order the entry of a judgment for defendant.

N.J.Super.A.D.,2009.

Greene v. J.B. Hunt Transport, Inc.

Not Reported in A.2d, 2009 WL 937258 (N.J.Super.A.D.)

END OF DOCUMENT