2021 WL 3472503

United States District Court, S.D. Illinois.
KAITLYN P. PRUITT, Plaintiff,
v.
K & B TRANSPORTATION, INC., and GERALD W. BOUTWELL, Defendants.
Case No. 20-CV-750–NJR
|
08/06/2021

NANCY J. ROSENSTENGEL, Chief U.S. District Judge

MEMORANDUM AND ORDER
*1 ROSENSTENGEL, Chief Judge:

Pending before the Court is a Motion to Dismiss and Motion to Strike Plaintiff Kaitlyn Pruitt’s First Amended Complaint filed by Defendants K & B Transportation, Inc. (“K & B”) and Gerald W. Boutwell (“Boutwell”) (Doc. 32). For the reasons set forth below, the Motion to Dismiss and Motion to Strike are granted.

BACKGROUND
On May 2, 2019, Boutwell, a driver for K & B, was driving a tractor trailer eastbound on US Highway 50. (Doc. 31, pp. 2-3). Pruitt was also driving eastbound (Id. at p. 3). At or near the intersection of North Sipley Road, Pruitt put her turn signal on and began decelerating to turn (Id.). Boutwell attempted to pass Pruitt, but ended up sideswiping the driver’s side of Pruitt’s vehicle (Id.). Pruitt allegedly “sustain[ed] serious injuries to her neck, back, lower extremities, and head.” (Id.)

On July 31, 2020, Pruitt commenced this action against K & B and Boutwell (Doc. 1). In all, Pruitt brings seven claims against K & B and Boutwell: negligence as to Boutwell (Count I); negligence per se as to Boutwell (Count II); negligence as to K & B (Count III); negligence per se as to K & B (Count IV); negligent hiring as to K & B (Count V); negligent retention as to K & B (Count VI); negligent supervision as to K & B (Count VII).

K & B and Boutwell timely filed a Motion to Dismiss and Motion to Strike under Federal Rules of Civil Procedure 12(b)(6) and 12(f) (Docs. 10, 32).1

ANALYSIS

I. Motion to Dismiss
The purpose of a Rule 12(b)(6) motion is to decide the adequacy of the complaint, not to determine the merits of the case or decide whether a plaintiff will ultimately prevail. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the plaintiff only needs to allege enough facts to state a claim for relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A plaintiff need not plead detailed factual allegations, but must provide “more than labels and conclusions, and a formulaic recitation of the elements.” Id. For purposes of a motion to dismiss under Rule 12(b)(6), the Court must accept all well-pleaded facts as true and draw all possible inferences in favor of the plaintiff. McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 879 (7th Cir. 2012).

Defendants assert that Counts I through IV should be dismissed because Pruitt alleges that Defendants “had the duty to exercise the highest degree of care for the safety of other persons upon the roadway…” (Doc. 1, p. 3). Pruitt concedes that the duty alleged as stated in Counts I through IV is wrong. Accordingly, Pruitt’s negligence and negligence per se claims, Counts I through IV, must be dismissed.

A. Negligence Per Se (Counts II & IV)
*2 K & B’s motion also points out that “Counts II and IV [ ] attempt to state claims based upon negligence per se” (Doc. 32, p. 5). Pruitt’s response concedes that the “phrase ‘negligence per se’ may be inaccurate in the sense of implying strict liability…“ (Doc. 34, p. 4). Pruitt argues, however, that the claims made in Counts II and IV, taken as true, allege conduct which constitutes prima facie evidence of negligence and “should not be dismissed simply for using less-than-ideal terminology” (Id. at p. 4).

In a diversity case, the Court applies state law to substantive issues. RLI Ins. Co. v. Conseco, Inc., 543 F.3d 384, 390 (7th Cir. 2008). When neither party raises a conflict of law issue in a diversity case, the applicable law is that of the state in which the federal court sits. See Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co., 712 F.3d 336, 341 (7th Cir. 2013). Here, the parties have not raised a conflict of law issue and have instead briefed the issues on the merits under Illinois law. The Court, as a result, will apply the law of Illinois.

Under Illinois law, “[i]n a common law negligence action, a violation of a statute or ordinance designed to protect human life or property is prima facie evidence of negligence; the violation does not constitute negligence per se.” Abbasi ex rel. Abbasi v. Paraskevoulakos, 718 N.E.2d 181, 185 (Ill. 1999). A violation of an Illinois motor vehicle statue does not constitute negligence per se. See Grass v. Hill, 418 N.E.2d 1133, 1137 (Ill. App. Ct. 1981) (acknowledging that “the violation of a motor vehicle statute cannot be considered negligence per se but only prima facie evidence of negligence, the negligence of the defendant is actionable if it is shown that such statutory violation was a proximate cause of the plaintiff’s injuries”); Leonard v. Pacific Intermountain Exp. Co., 347 N.E.2d 359, 363–64 (Ill. App. Ct. 1976) (noting that the “violation of the 300 foot distance statute cannot be considered negligence per se, but only Prima facie evidence of negligence”); Leaks v. City of Chicago, 606 N.E.2d 156, 160 (Ill. App. Ct. 1992) (finding that the “[v]iolation of a statute or ordinance designed for the protection of human life or property is prima facie evidence of negligence, but does not constitute negligence per se because the evidence of negligence may be rebutted by proof that the party acted reasonably under the circumstances, despite the violation”).

In Daly v. Bant, 258 N.E.2d 382, 385 (Ill. App. Ct. 1970), the court found that the alleged violation of a speeding statute and a distance statute did not constitute negligence per se because “the violation of a statute must be considered with all the other facts and circumstances in determining whether the defendants were negligent before and at the time of the occurrence in question.” The court noted that “[t]he mere failure to perform a statutory duty does not necessarily constitute negligence; a party may be negligent if the circumstances under which he, she, or it fails to observe the statute indicate a neglect of duty; but the mere failure, alone, to comply with the statute, may not be negligence.” Id.

Here, Pruitt brings two negligence per se counts—Counts II and IV (Doc. 31). A violation of these statutes as alleged here only establishes prima facie evidence of negligence, and as such Counts II and IV must be dismissed.

B. Negligent Hiring (Count V), Negligent Retention (Count VI), and Negligent Supervision (Count VII)
*3 K & B’s motion quotes Gant v. L.U. Transp., Inc., 770 N.E.2d 1155 (Ill. App. Ct. 2002) for the notion that “a plaintiff who is injured in a motor vehicle accident cannot maintain a claim for negligent hiring, negligent retention or negligent entrustment against an employer where the employer admits responsibility for the conduct of the employee under a respondeat superior theory” (Doc. 32, p. 3) (emphasis added). K & B then admits that “Boutwell was an employee of K&B working as a company driver and within the course and scope of his employment at the time of the accident” (Id. at p. 4). “Because K&B (the employer) has admitted that Boutwell (its employee) was acting within the course and scope of his employment at the time of the accident, Pruitt’s claims of negligent hiring, negligent retention and negligent supervision must be dismissed or stricken” (Id.).

Pruitt responds by distinguishing Gant. (Doc. 34, p. 4). Pruitt points out that unlike Gant, where the defendant admitted the allegations in an answer, “Defendants have not actually admitted in a pleading or in sworn discovery that K&B is liable as Boutwell’s employer, this case is distinguishable from the cases Defendants rely upon in their motion” (Id. at p. 5). Pruitt then concedes in her response that if K&B intended this statement “as a binding commitment that Defendants’ Answer will admit the entirety of Count III of Plaintiff’s Complaint, then Counts V, VI, VII are indeed obviated” (Id.).

Pruitt’s argument is unpersuasive because a concession in a motion to dismiss is a judicial admission. See Chow v. Aegis Mortg. Corp., 185 F. Supp. 2d 914, 916 (N.D. Ill. 2002) (acknowledging that a concession in a motion to dismiss constituted a judicial admission). “Judicial admissions [ ] are not limited to statements made in the particular motion or application pending. Any ‘deliberate, clear and unequivocal’ statement, either written or oral, made in the course of judicial proceedings qualifies as a judicial admission.” Pierce v. City of Chicago, 2012 WL 401026, at *3 (N.D. Ill. Feb. 7, 2012) (quoting In re Lefkas Gen. Partners, 153 B.R. 804, 807 (N.D. Ill. 1993) (citations omitted)). Thus, K & B’s concession that “[f]or the purposes of this motion and this action, Defendants K&B and Boutwell admit that Boutwell was an employee of K&B working as a company driver and within the course and scope of his employment at the time of the accident,” (Doc. 32, p. 4) is a judicial admission, and has the effect of withdrawing the fact from contention. See Keller v. United States, 58 F.3d 1194, 1199 (7th Cir. 1995) (“[i]ndeed, they are not evidence at all but rather have the effect of withdrawing a fact from contention”) (citations and quotations omitted).

At the same time, district courts must be careful to not go beyond Illinois law. Both parties fail to address the fact that Gant is distinguishable because the court only addressed hiring and retention. Fortunately, district courts in the Seventh Circuit “have consistently extended Gant’s holding to claims asserting negligent training and supervision as well.” Gilliam-Nault v. Midvest Transp. Corp., 2019 WL 2208287, at *2 (N.D. Ill. May 22, 2019); see e.g., Meyer v. A & A Logistics, Inc., 2014 WL 3687313, at *3 (N.D. Ill. July 24, 2014) (holding that Gant extends to negligent training and supervision claims); Johnson v. First Student, Inc., 2018 WL 5013918, at *1 (N.D. Ill. Oct. 16, 2018) (finding that “under Illinois law, claims of failure to train and supervise an employee must be dismissed as duplicative and unnecessary once the employer admits that any negligence on the part of its employee can be imputed to the employer under a respondeat superior theory”). The Court finds no reason to depart from other district courts. Accordingly, Pruitt’s claims of negligent hiring (Count V), negligent retention (Count VI), and negligent supervision (Count VII) must be dismissed without prejudice.

II. Motion to Strike Paragraphs 43 and 48(b)
*4 Under Federal Rule of Civil Procedure 12(f), “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Defendants argue that paragraphs 43 and 48(b) “clearly fall within [Rule 12(f)’s] reference to impertinent and scandalous matters and should be stricken as the allegation set forth in those paragraphs ‘have no possible relation or logical connection to the subject matter of controversy and may cause some form of significant prejudice to one or more of the parties to the action’ ” (Doc. 32, p. 4) (quoting 5C Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure § 1382 (3d ed.)).

Pruitt counters that “Defendants fail to meet their burden of demonstrating how paragraphs 43 and 48(b) of Plaintiff’s Complaint are so impertinent and scandalous as to overcome the general ‘disfavor’ courts have towards striking matters from pleadings under Federal Rule of Civil Procedure 12(f)” (Doc. 34, p. 7). Pruitt further argues that the “specificity of paragraph 48(b)” is necessary to avoid “conclusory allegations that merely recite the elements of a claim.” (Id.).

Pruitt’s argument is a loser as K & B admitted responsibility for its employee via respondeat superior. Thus, Pruitt cannot maintain a direct claim against K & B for negligent retention or negligent supervision. Indeed, in Boeschen v. Transp., 2016 WL 4617364, at *3 (S.D. Ill. Sept. 6, 2016), the employer admitted that its employee was acting within the course and scope of his employment at the time of the accident. As a result, the court held that “Plaintiff’s claims of negligent entrustment, negligent failure to train, negligent retention, and negligent hiring run are duplicative and unnecessary under Gant.” Id. at 3. This case is no different. Pruitt’s allegations in paragraphs 43 and 48(b) are duplicative and unnecessary under Gant. Accordingly, paragraphs 43 and 48(b) are stricken.

CONCLUSION
For these reasons, the Motion to Dismiss and Motion to Strike filed by Defendants K & B Transportation, Inc. and Gerald W. Boutwell (Doc. 32) are GRANTED. Counts II and IV are DISMISSED with prejudice for failure to state a claim. Counts V, IV, and VII are DISMISSED without prejudice, and Pruitt may timely reassert these allegations, if K & B retracts the admission upon which this ruling is grounded.

The Motion to Dismiss is GRANTED as to Counts I and III, which are DISMISSED without prejudice. Pruitt has until August 20, 2021, to file a Second Amended Complaint consistent with Rule 11. Pruitt’s Motion for Leave to File Second Amended Complaint (Doc. 35) is DENIED as moot.

IT IS SO ORDERED.

DATED: August 6, 2021

NANCY J. ROSENSTENGEL

Chief U.S. District Judge
All Citations
Slip Copy, 2021 WL 3472503

Footnotes

1
The Court has subject matter jurisdiction over this action on the basis of diversity of citizenship. The parties are minimally diverse, as Pruitt is a citizen of Illinois (Doc. 31). K & B is an Iowa corporation with its principal place of business in Nebraska, and Boutwell is a citizen of Missouri (Id.). The amount of controversy exceeds $75,000.00, exclusive of interest and costs (Id.).

2021 WL 3744188

United States District Court, M.D. Louisiana.
BILLY BOUIE
v.
JDV FREIGHT TRANSPORT, LLC, ET AL.
CIVIL ACTION NO. 20-211-JWD-EWD
|
08/24/2021

RULING AND ORDER
JUDGE JOHN W. deGRAVELLES UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF LOUISIANA
*1 This matter comes before the Court on the Rule 12(b)(6) Motion to Dismiss Complaint Filed Against OOIDA Risk Retention Group, Inc., (Doc. 16), filed by Defendant OOIDA Risk Retention Group, Inc. (“OOIDA”). Plaintiff Billy Bouie (“Plaintiff” or “Bouie”) opposes the motion. (Doc. 21.) No reply was filed. Oral argument is not necessary. The Court has carefully considered the law, facts in the operative complaint, and arguments and submissions of the parties and is prepared to rule. For the following reasons, OOIDA’s motion is denied.

I. Relevant Factual Background
The present litigation arises out of a motor vehicle accident that allegedly occurred on April 30, 2019. (Complaint (“Compl.”) ¶ VI, Doc. 1.) Bouie alleges that a 2007 Peterbilt tractor owned by defendant JDV Freight Transport, LLC (“JDV”) and driven by defendant Oscar Carballo (“Carballo”) crashed into the rear of Plaintiff’s tractor/trailer. (Id.) Plaintiff further claims that as a result of the crash, he suffered “severe and disabling injuries,” (id.), including “possible ruptured and/or herniated discs and/or nerve damage in his spine, as well as other injuries to the bones, muscles, joints, tendons and other parts of his body,” (id. ¶ VIII.) Additionally, as a result of the crash, Plaintiff asserts that he “has in the past and will in the future: require medicines, medical care, medical treatment, have to expend moneys and incur obligations for treatment and care, suffer agonizing aches, pains, and mental anguish, and be disabled from performing his usual duties, occupations and avocations.” (Id.)

Defendant OOIDA is a foreign risk retention group (“RRG” or “FRRG”) incorporated under the laws of Vermont, with its principle place of business there as well. (Id. ¶ II.) OOIDA issued an insurance policy to JDV that was allegedly in force at the time of the accident. (Id. ¶ V.) Plaintiff made OOIDA a party defendant under the Louisiana Direct Action Statute (“LDAS”), La. Rev. Stat. Ann. § 22:1269. (Compl. ¶ II, Doc. 1.)

II. Rule 12(b)(6) Standard
In Johnson v. City of Shelby, Miss., 135 S. Ct. 346 (2014), the Supreme Court explained “Federal pleading rules call for a ‘short and plain statement of the claim showing that the pleader is entitled to relief,’ Fed. R. Civ. P. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” 135 S. Ct. at 346-47 (citation omitted).

Interpreting Rule 8(a) of the Federal Rules of Civil Procedure, the Fifth Circuit has explained:
The complaint (1) on its face (2) must contain enough factual matter (taken as true) (3) to raise a reasonable hope or expectation (4) that discovery will reveal relevant evidence of each element of a claim. “Asking for [such] plausible grounds to infer [the element of a claim] does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal [that the elements of the claim existed].”
*2 Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 1965 (2007)).

Applying the above case law, the Western District of Louisiana has stated:
Therefore, while the court is not to give the “assumption of truth” to conclusions, factual allegations remain so entitled. Once those factual allegations are identified, drawing on the court’s judicial experience and common sense, the analysis is whether those facts, which need not be detailed or specific, allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” [Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009)]; Twombly, 55[0] U.S. at 556. This analysis is not substantively different from that set forth in Lormand, supra, nor does this jurisprudence foreclose the option that discovery must be undertaken in order to raise relevant information to support an element of the claim. The standard, under the specific language of Fed. R. Civ. P. 8(a)(2), remains that the defendant be given adequate notice of the claim and the grounds upon which it is based. The standard is met by the “reasonable inference” the court must make that, with or without discovery, the facts set forth a plausible claim for relief under a particular theory of law provided that there is a “reasonable expectation” that “discovery will reveal relevant evidence of each element of the claim.” Lormand, 565 F.3d at 257; Twombly, 55[0] U.S. at 556.
Diamond Servs. Corp. v. Oceanografia, S.A. De C.V., No. 10-00177, 2011 WL 938785, at *3 (W.D. La. Feb. 9, 2011) (citation omitted).

The Fifth Circuit further explained that all well-pleaded facts are taken as true and viewed in the light most favorable to the plaintiff. Thompson v. City of Waco, Tex., 764 F.3d 500, 502–03 (5th Cir. 2014). The task of the Court is not to decide if the plaintiff will eventually be successful, but to determine if a “legally cognizable claim” has been asserted.” Id. at 503.

III. Discussion
A. Parties’ Arguments
1. OODIA’s Original Memorandum (Doc. 16-1)
OOIDA argues that although Plaintiff may have a right of direct action against it under the LDAS, La. Rev. Stat. Ann. § 22:1269, the Liability Risk Retention Amendments of 1986 (“LRRA”), specifically 15 U.S.C. § 3902, preempts the application of the LDAS in this case. (Doc. 16-1 at 3.) Because of this preemption, OOIDA contends that Plaintiff has no right of direct action against it, and thus, Plaintiff’s claim against OOIDA should be dismissed. (Id. at 6.) In support, OOIDA relies on two cases: Courville v. Allied Pros Ins. Co., 13-0976 (La. App. 1st Cir. 6/5/15); 174 So. 3d 659, writ denied, 15-1309 (La. 10/30/15); 179 So. 3d 615 and Wadsworth v. Allied Pros. Ins. Co., 748 F.3d 100 (2d Cir. 2014). (See Doc. 16-1 at 3-6.) OOIDA contends that Wadsworth held that the New York Direct Action Statute was preempted by the LRRA. (Id. at 4. (citing Wadsworth, 748 F.3d at 102-03).) OOIDA further urges that the Louisiana First Circuit Court of Appeal in Courville held that the “[Louisiana Direct Action Statute] is inapplicable to risk retention groups chartered in another state.” (Id. at 5–6.)

2. Plaintiff’s Opposition (Doc. 21)
*3 Bouie responds “that OOIDA is either incorrect, or it has not established [that it is not subject to the LDAS] beyond dispute via the present motion to dismiss.” (Doc. 21 at 3.) Plaintiff contends that although the two cases cited by OOIDA found that state direct action statutes violated the LRRA, several other courts, including this Court, have held the contrary. (Id.) In support of this, Plaintiff points to a Louisiana Fourth Circuit case: Zeigler v. Hous. Auth. of New Orleans, 15-0626 (La. App. 4th Cir. 3/23/16); 192 So. 3d 175. Zeigler itself cites to a Missouri state court case, Sturgeon v. Allied Pros. Ins. Co., 344 S.W.3d 205 (Mo. App. 2011), and a Kentucky federal court case, Nat’l Home Ins. Co. v. King, 291 F. Supp. 2d 518 (E.D. Ky. 2003). (Doc. 21 at 3-4.) Moreover, Plaintiff notes that this Court has previously declined to apply the LRRA exemptions to the application of the LDAS in Collins v. AAA Rent All, Inc., 812 F. Supp. 642, 644 (M.D. La. 1993) (holding that “[a]lthough 15 U.S.C. § 3901, et seq. exempts risk retention groups from certain state regulations, it does not expressly or impliedly preempt La. Revised Statute 22:655 [now La. R.S. 22:1269] which permits a plaintiff to directly sue the insurer of the defendant.”). (Doc 21 at 6.) Plaintiff also points the Court to the language of the LRRA, specifically 15 U.S.C. § 3901(b), which provides in part, “[n]othing in this chapter shall be construed to affect either the tort law or the law governing the interpretation of insurance contracts of any State.” (Doc. 21 at 4 (quoting Sturgeon, 344 S.W.3d at 216).) Based on this language, Plaintiff urges that “OOIDA’s Motion to Dismiss has failed to demonstrate that it is not subject to such laws,” (id. at 6), and that its “Motion to Dismiss should be denied,” (id. at 7.)

B. Analysis
Having carefully considered the matter, the Court finds that the plain language of the LRRA supports a finding that the LDAS is not preempted. Moreover, the Court also finds that the cases cited by Defendant are unpersuasive. The Court instead chooses to adopt the reasoning of its prior precedent in Collins and that of Zeigler, Nat’l Home, and Sturgeon.

1. Background
The present ruling warrants a discussion of the underlying statutes at issue here: the LDAS, La. Rev. Stat. Ann. § 22:1269, and the LRRA, 15 U.S.C. § 3901, et seq.

a. The Louisiana Direct Action Statute
Plaintiff seeks to make OOIDA a party to this litigation pursuant to the LDAS, La. Rev. Stat. Ann. § 22:1269, which provides in pertinent part:
B. (1) The injured person … shall have a right of direct action against the insurer within the terms and limits of the policy; and, such action may be brought against the insurer alone, or against both the insured and insurer jointly and in solido …
…
(2) This right of direct action shall exist whether or not the policy of insurance sued upon was written or delivered in the state of Louisiana and whether or not such policy contains a provision forbidding such direct action, provided the accident or injury occurred within the state of Louisiana.
The LDAS “grants a procedural right of action against an insurer where the plaintiff has a substantive cause of action against the insured.” Zeigler, 192 So. 3d at 179 (quoting Green v. Auto Club Grp. Ins. Co., 08–2868, p. 3 (La.10/28/09); 24 So. 3d 182, 184). “Thus, the Direct Action Statute has the effect of allowing injured parties to sue insurance companies of the party allegedly at fault directly.” Id.

b. The Liability Risk Retention Amendments of 1986
Due to extremely high premiums and coverage gaps, Congress enacted the Product Liability Risk Retention Act of 1981, which allowed “persons or businesses with similar or related liability exposure to form ‘risk retention groups’ for the purpose of self-insuring.” Wadsworth v. Allied Pros. Ins. Co., 748 F.3d 100, 102–03 (2d Cir. 2014) (citing 15 U.S.C. § 3901(a)(4)). However, this only applied to product liability and completed operations insurance. Id. at 103. In 1986, “following additional disturbances in the interstate insurance markets” Congress passed the LRRA, extending the 1981 PLRRA to commercial liability insurance as a whole. Id. (citing 15 U.S.C. §§ 3901–3906 (1982 & Supp. IV 1986) and Preferred Physicians Mut. Risk Retention Grp. v. Pataki, 85 F.3d 913, 914 (2d Cir. 1996)). The statutory scheme of the LRRA “secures the authority of the domiciliary, or chartering, state to ‘regulate the formation and operation’ of risk retention groups.” Id. (quoting 15 U.S.C. § 3902(a)(1)). “[T]he Act prohibits states from enacting regulations of any kind that discriminate against risk retention groups or their members, but does not exempt risk retention groups from laws that are generally applicable to persons or corporations.” Id. (citing 15 U.S.C. § 3902(a)(4)).

2. Preemption and the LRRA Generally1
*4 Preemption is derived from the Supremacy Clause of the Constitution. Brackeen v. Haaland, 994 F.3d 249, 298 (5th Cir. 2021). The Supremacy Clause provides in part that “the Laws of the United States which shall be made in Pursuance thereof[ ] … shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. “Therefore, when ‘Congress enacts a law that imposes restrictions or confers rights on private actors’ and a ‘state law confers rights or imposes restrictions that conflict with the federal law,’ under the Supremacy Clause, ‘the federal law takes precedence and the state law is preempted.’ ” Brackeen, 994 F.3d at 298 (quoting Murphy v. NCAA, ––– U.S. ––––, 138 S. Ct. 1461, 1480 (2018)).

The Fifth Circuit has yet to weigh in on whether the LRRA preempts the LDAS or other similar state laws. However, other courts have provided some guidance. The Ninth Circuit has recently stated that:
“When considering whether the LRRA preempts a state law, [the Court must] first determine whether the challenged aspect of the state law offends the LRRA’s broad preemption language. If so, [the Court] consider[s] whether one of the LRRA’s exceptions, which are contained in §§ 3902(a)(1) and 3905, applies to save the state law. If no exception applies, the law is preempted.” Attorneys Liab. Prot. Soc’y, Inc. [v. Ingaldson Fitzgerald, P.C.], 838 F.3d [976,] 980 [(9th Cir. 2016)] (citations omitted).
Allied Pros. Ins. Co. v. Anglesey, 952 F.3d 1131, 1134–35 (9th Cir. 2020), cert. denied, 141 S. Ct. 866 (2020). The Supreme Court has also stated that when “Congress has legislated in a field which the States have traditionally occupied, we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Wyeth v. Levine, 555 U.S. 555, 565 (2009) (internal quotation marks and alterations omitted). “Further, state laws enacted for the purpose of regulating the business of insurance do not yield to conflicting federal statutes unless a federal statute specifically requires otherwise.” Wadsworth, 748 F.3d at 105 (quoting United States Dep’t of Treasury v. Fabe, 508 U.S. 491, 507 (1993) (internal quotation marks omitted)).

3. Language of the LRRA
The LRRA exempts risk retention groups from state laws that “make unlawful, or regulate, directly or indirectly, the operation of a risk retention group[.]” 15 U.S.C. § 3902 (a)(1). As the Sturgeon court noted, “operation” is the key term of this provision. Sturgeon, 344 S.W.3d at 215. Here, the ordinary meaning rule governs the Court’s interpretation of “operation.” See Sebelius v. Cloer, 569 U.S. 369, 376 (2013) (Sotomayor, J.) (“As in any statutory construction case, ‘[w]e start, of course, with the statutory text,’ and proceed from the understanding that ‘[u]nless otherwise defined, statutory terms are generally interpreted in accordance with their ordinary meaning.’ ”) (quoting BP America Production Co. v. Burton, 549 U.S. 84, 91 (2006)).

Here, nothing indicates anything other than the ordinary meaning of the word should be used. Operation generally means “the quality or state of being functional or operative.” Operation, Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/operation. (last visited Jun. 16, 2021).2 Functional means “performing or able to perform a regular function.” Functional, Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/functional. (last visited Jun. 21, 2021). Function means, inter alia, “the action for which a person or thing is specially fitted or used or for which a thing exists: purpose.” Function, Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/function. (last visited Jun. 22, 2021). Operative means “producing an appropriate effect.” Operative, Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/operative. (last visited Jun. 21, 2021).

*5 Considering the above statutory text and meanings, the Court finds that the LRRA does not preempt the LDAS. Nothing in the LDAS prevents OOIDA from “being functional or operative” as a risk retention group. See Zeigler, 192 So. 3d at 179 (“Louisiana’s Direct Action Statute does not directly or indirectly regulate the operations of [the defendant risk retention group].”) Again, the LDAS merely “has the effect of allowing injured parties to sue insurance companies of the party allegedly at fault directly.” Id. Further, the word “operation” in the LRRA “means that a state may not pass laws that keep risk retention groups from operating as insurance companies; however, the LRRA preserves the state’s traditional role in the regulation of insurance.” Sturgeon, 344 S.W.3d at 215 (citing Mears Trans. Group v. State, 34 F.3d 1013, 1017 (11th Cir. 1994)). Direct action statutes certainly fall within this category. See, infra, at 12. Thus, the plain and unambiguous language of the LRRA supports a finding that the LDAS is not preempted by the LRRA.

Other statutory language in the LRRA also supports this conclusion and contradicts OOIDA’s position. Specifically, the definitions section provides:
Nothing in this chapter shall be construed to affect either the tort law or the law governing the interpretation of insurance contracts of any State, and the definitions of liability, personal risk liability, and insurance under any State law shall not be applied for the purposes of this chapter, including recognition or qualification of risk retention groups or purchasing groups.
15 U.S.C. § 3901(b) (emphasis added). The LDAS undoubtedly falls within “the tort law … of any state.” See Zeigler, 192 So. 3d at 179 (stating that LDAS “has the effect of allowing injured parties to sue insurance companies of the party allegedly at fault directly.” (emphasis added)). Indeed, a leading Louisiana tort law treatise dedicates an entire section to the statute. See 12 William E. Crawford, Louisiana Civil Law Treatise Tort Law, § 21:3 (2d ed. 2020); see also Frank L. Maraist & Thomas C. Galligan, Jr., Louisiana Tort Law, § 12.05 (2020) (also discussing LDAS); Thus, under the plain and unambiguous language of the two statutes, the LDAS is not preempted by the LRRA.

4. Caselaw
OOIDA relies on Wadsworth, 748 F.3d 100 and Courville,174 So. 3d 659. Courville relies heavily on Wadsworth. The Court finds the Second Circuit’s reasoning in Wadsworth unpersuasive and declines to follow it.

Rather, the Court agrees with the Zeigler court that the Wadsworth interpretation is “expansive and overly broad.” Zeigler, 192 So. 3d at 179. The Wadsworth court reasoned that its “expansive reading” of the LRRA preemption language “furthers the Act’s purpose.” Wadsworth, 748 F.3d at 107 (citing Preferred Physicians Mut. Risk Retention Grp. v. Pataki, 85 F.3d 913, 915 (2d Cir. 1996)). The court derives the purpose of the LRRA from prior Second Circuit precedent and the legislative history of the LRRA. See id.

However, the Court finds this exercise unnecessary. While reliance on legislative history is certainly a valuable method of statutory interpretation, see Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597, 610 n.4 (1991) (noting the benefits of using legislative history), such a method should only be employed when there is an ambiguity in the statute. See Milner v. Dep’t of Navy, 562 U.S. 562, 572 (2011) (Kagan, J.) (explaining that the Court will not allow “legislative history to muddy clear statutory language.”) As discussed previously, the language of the statute is clear and unambiguous; thus, there is no need to consult legislative history. Thus, because the Second Circuit’s reliance on the legislative history of the LRRA is unwarranted given the clarity of the statute, and because its interpretation of the LRRA is excessively broad, the Court declines to adopt its reasoning.

The Court instead chooses to adopt the reasoning set forth by its own precedent in Collins, 812 F. Supp. 642, and that of the Louisiana Fourth Circuit Court of Appeal in Zeigler, 192 So. 3d 175. The Court finds these cases to be more persuasive because they are more consistent with the plain language of the statute.

*6 The facts of Collins are strikingly similar to the facts of the present case. In Collins, the plaintiff sued the defendant and his employer seeking damages resulting from an automobile accident that allegedly occurred while the defendant was within the course and scope of his employment. Collins, 812 F. Supp at 643. Pursuant to the LDAS, the plaintiff also sued the defendants’ insurer, a risk retention group. Id. After removal to federal court, the plaintiff filed a motion to remand back to state court. Id. The court granted the plaintiff’s motion to remand, finding that there was no federal question jurisdiction. Id. at 644. The court explained that “[a]lthough 15 U.S.C. § 3901, et seq. exempts risk retention groups from certain state regulations, it does not expressly or impliedly preempt La. Revised Statute 22:655 [revised La. Rev. Stat. Ann. § 22:1269] which permits a plaintiff to directly sue the insurer of the defendant.” Id.

Similarly, in Zeigler, the Louisiana Fourth Circuit Court of Appeal found that “Louisiana’s Direct Action Statute does not directly or indirectly regulate the operations of [the defendant risk retention group].” Zeigler, 192 So. 3d at 179. The court followed the reasoning set forth in Sturgeon, 344 S.W.3d 205 and Nat’l Home Ins. Co, 291 F. Supp. 2d 518.

Although Sturgeon and Nat’l Home Ins. Co. both involved state statutes banning arbitration clauses in insurance contracts and not state direct action statutes, they are still persuasive here. For example, in Nat’l Home Ins. Co., the Eastern District of Kentucky stated.:
When Congress expanded this Act in 1986 to cover all types of liability insurance, “it included provisions to preserve the states’ traditional role in regulating insurance and protecting the public.” In doing so, Congress sought to “augment[ ] the authority of non-chartering States to regulate solvency, trade practices and other matters” and it “contemplated that States may enact statutes and issue regulations to protect the public to the extent such action is not exempt by th[e] Act.”
Nat’l Home, 291 F. Supp. 2d at 530–31 (citations omitted); see also Sturgeon, 344 S.W.3d at 215 (“[H]owever, the LRRA preserves the state’s traditional role in the regulation of insurance.”) (citing Mears Trans. Group, 34 F.3d 1013 at 1017). Furthermore, the application of the state statute “d[id] not offend the non-discrimination principle underlying the LRRA.” Nat’l Home Ins. Co., 291 F. Supp. at 531.

Similarly, here, the LRRA preserves Louisiana’s “traditional role in protecting the public.” In doing so, the LRRA allows the State to provide plaintiffs a direct right of action against a risk retention group.

In sum, the Court disagrees with the reasoning set forth by the Second Circuit in Wadsworth and followed by the Louisiana First Circuit in Courville. Instead, the Court will adopt the more persuasive reasoning of Collins, Zeigler, Sturgeon, and Nat’l Home, as these cases are more consistent with the plain and unambiguous language of the LRRA. Consequently, OOIDA’s motion to dismiss will be denied.

IV. Conclusion
Accordingly,

IT IS ORDERED that the Rule 12(b)(6) Motion to Dismiss Complaint Filed Against OOIDA Risk Retention Group, Inc. (Doc. 16) filed by Defendant OOIDA Risk Retention Group, Inc is DENIED.

Signed in Baton Rouge, Louisiana, on August 24, 2021.

All Citations
Slip Copy, 2021 WL 3744188

Footnotes

1
Neither party provides the Court with a broad preemption analysis in their Memorandums; nevertheless, an examination of background preemption principles is warranted here.

2
The words defined in this paragraph have multiple definitions; however, these are the most applicable ones given the context.