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Star Insurance Co. v. Irvington Board of Education

United States District Court, D. New Jersey

December 17, 2019

STAR INSURANCE COMPANY, Plaintiff/ Counterclaim Defendant,
v.
IRVINGTON BOARD OF EDUCATION, Defendant-Counterclaimant.

          OPINION

          KEVIN MCNULTY. U.S.D.J.

         Now before the Court is the motion (DE 21) of the plaintiff, Star Insurance Company ("Star"), to dismiss Count IV of the Counterclaim of defendant Irvington Board of Education (the "Board"), for failure to state a claim. See Fed.R.Civ.P. 12(b)(6). For the reasons stated herein, I will grant Star's motion to dismiss Count IV of the Counterclaim.

         Star is the Board's liability insurer. Star's complaint seeks to recover funds Star expended to settle a personal injury lawsuit, Destiny Dickens, an infant, by her guardian ad litem Yvone Smith, and Yvone Smith, individually v. Irvington Board of Education, et at, docket No. ESX-L-4698-13 ( N.J.Super. Ct. Essex Co.) (the "Dickens Action"). The Board's Counterclaim (DE 16) asserts four causes of action. The gist of all is that Star, because of its misfeasance in relation to the Dickens Action or its settlement, should be required to pay virtually all of the settlement, which amounted to $ 1 million (following a $6 million jury verdict). Count I seeks a declaratory judgment to that effect. Count II asserts a claim of breach of contract, i.e., Star's failure to meet its obligations under the policy of insurance. Count III asserts a claim of breach of the covenant of good faith and fair dealing, or insurance carrier bad faith. Count IV, the one at issue on this motion, asserts a claim that Star's actions constitute "unlawful discrimination" with the meaning of the New Jersey Law Against Discrimination ("NJLAD"), N.J. Stat. Ann. § 10:5-12(1).[1]

         I. Legal Standard on Motion to Dismiss

         A counterclaim is a "claim for relief" for purposes of a motion to dismiss. See Fed. R. Civ. P. 12(b)(6); Smith v. Dir.'s Choice, LLP, Civ. No. 15-00081, 2017 WL 2955347, at *3 (D.N.J. July 11, 2017) ("Courts apply the same standard to counterclaims as they do to complaints in ruling on a Rule 12(b)(6) motion.).

         Federal Rule of Civil Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiffs obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (Rule 8 "requires a 'showing' rather than a blanket assertion of an entitlement to relief." (citation omitted)). Thus, the complaint's factual allegations must be sufficient to raise a plaintiffs right to relief above a speculative level, so that a claim is "plausible on its face." Twombly, 550 U.S. at 570; see also West Run Student Hous. Assocs., LLC v. Huntington Nat. Bank, 712 F.3d 165, 169 (3d Cir. 2013).

         That facial-plausibility standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a 'probability requirement'... it asks for more than a sheer possibility." Id.

         Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir, 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

         II. Discussion

         The Board alleges that Star neglected the Dickens Action, failed to abide by its obligations under the contract of insurance, and took a tough negotiating position with the Board. In Counts I, II, and III, these are alleged to be a breach of Star's duties as an insurer. What Count IV (NJLAD) adds is that Star allegedly did so secure in the "knowledge that the residents of the Township of Irvington are for the most part poor and black, and that the Irvington school district is a poor district-and its belief that the Board would not (as would a school board in a wealthy, non-minority town) have the resources or will to fight with a big, powerful insurance company with limitless resources." (Counterclaim Count IV ¶ 20).

         Star, in its motion to dismiss, argues that

         (a) Count IV fails to state a claim as a matter of law, because the NJLAD covers a party's discriminatory refusal to deal with another party, but does not cover a discriminatory breach of those parties' existing contract; and

         (b) even assuming such a NJLAD cause of action exists, the facts pled in the complaint fail to meet the Iqbal/Twombly standard.

         a. Viability of ...


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