The opinion of the court was delivered by: Karen E. Schreier Chief Judge
ORDER DENYING DEFENDANT NAU COUNTRY INSURANCE COMPANY'S MOTION TO DISMISS
Fin-Ag, Inc. brought this declaratory judgment action against NAU Country Insurance Co., Stroud NA, and Judy Roosa. NAU moves to dismiss the complaint. Fin-Ag opposes the motion. For the reasons stated below, the motion is denied.
The facts, viewed in the light most favorable to Fin-Ag, are as follows: Perle O'Daniel borrowed money from Fin-Ag to support his cattle operation, and the loans were secured by O'Daniel's cattle. To protect its interest in the cattle, NAU required O'Daniel to maintain insurance coverage over all risks, including theft, and required that the policy contain a lender loss payable clause. O'Daniel contacted Roosa to obtain an insurance policy and notified her of NAU's requirements. Roosa secured a policy with NAU. Fin-Ag was identified in the policy declarations as a "mortgagee with regard to the cows and calves.
In 2001, O'Daniel moved some of his cattle to Midwest Feeders because he sold his ranch. He maintained ownership of the cattle, which were being housed, fed, and watered by Midwest Feeders. On September 11, 2002, O'Daniel discovered that some of his cattle had been stolen. That month, O'Daniel removed his cattle from Midwest Feeders' property. Ultimately, he determined that 334 cows, 369 calves, and 15 bulls were missing. Fin-Ag had a secured interest in all of the cattle that were stolen by Midwest Feeders.
O'Daniel notified NAU of the loss and submitted a claim to Roosa seeking reimbursement under the insurance policy. NAU denied coverage, citing a policy exclusion. The policy covered the theft of property, but it excluded from coverage the conversion of the cattle. Fin-Ag also notified NAU of its loss and submitted a claim, which NAU denied.
On May 21, 2003, O'Daniel filed a lawsuit against NAU seeking recovery under the insurance policy. See CV03-5045-AWB. The district court granted O'Daniel's motion for summary judgment and denied NAU's similar motion, determining that the insurance policy provided coverage for O'Daniel's loss. CV03-5045-AWB, Docket 52 (judgment for plaintiff). O'Daniel appealed to the Eighth Circuit Court of Appeals, which reversed and ordered that judgment be entered in favor of NAU. O'Daniel v. NAU Country Ins. Co., 427 F.3d 1058 (8th Cir. 2005). The Eighth Circuit determined that the policy explicitly excluded from coverage conversion of the cattle, found that the cattle were indeed converted by Midwest Feeders, and ordered that judgment be entered for NAU. Id. at 1060.
On October 11, 2005, O'Daniel filed a suit against NAU, Roosa, and Stroud. See CV05-5089-LLP. Ultimately, NAU was awarded summary judgment in its favor regarding all claims against it. CV05-5089-LLP Docket 39 (breach of contract and bad faith claims); Docket 82 (fraud and deceit, negligent misrepresentation, and negligent procurement). A jury trial was held on O'Daniel's claims against Roosa and Straud, and the jury rendered a verdict in favor of O'Daniel in the amount of $519,525.
MOTION TO DISMISS STANDARD
Rule 12(b)(6) requires the court to review only the pleadings to determine whether they state a claim upon which relief can be granted. In considering a motion to dismiss, the court assumes all facts alleged in the complaint are true, construes the complaint liberally in the light most favorable to the plaintiff, and should dismiss only if "it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle the plaintiff to relief." Coleman v. Watt, 40 F.3d 255, 258 (8th Cir. 1994). "The issue is not whether a claimant will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed. 2d 90 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183, 191, 104 S.Ct. 3012, 3017, 82 L.Ed. 2d 139 (1984).
I. Evidence the Court May Consider
NAU requests that the court consider the content of the insurance policy between Fin-Ag and NAU. Fin-Ag did not attach the insurance contract to any of its pleadings, and it argues against the court's consideration of the insurance contract at this stage, contending that such consideration would convert this motion to dismiss into a motion for summary judgment.
If "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d). When such a conversion is made, the parties must be given a "reasonable opportunity" to present pertinent information. Id.; see also Airframe Sys. Inc. v. Raytheon Co., 520 F. Supp. 2d 258, 262-63 (D. Mass. 2007).
Most federal courts . . . have viewed the words "matters outside the pleading" as including any written or oral evidence introduced in support of or in opposition to the motion challenging the pleading that provides some substantiation for and does not merely reiterate what is said in the pleadings. Memoranda of points and authorities as well as briefs and oral arguments in connection with the motion, however, are not considered matters outside the pleadings for purposes of conversion. The same is true for various types of exhibits that are attached to the pleading, matters of which the district court can take judicial notice, and items of unquestioned authenticity that are referred to in the challenged pleading and are "central" or "integral" to the pleader's claim for relief.
5C Wright & Miller, Federal Practice and Procedure § 1366 (adopted by the Eighth Circuit in Gibb v. Scott, 958 F.2d 814, 816 (8th Cir. 1992)). Furthermore, in a case involving a contract, "the court may examine the contract documents in deciding a motion to dismiss." Stahl v. U.S. Dep't of Agriculture, 327 F.3d 697, 700 (8th Cir. 2003) (citations omitted); Silver v. H&R Block, Inc., 105 F.3d 394, 397 (8th Cir. 1997) (stating that a plaintiff "cannot defeat a motion to dismiss by choosing not to attach" to the complaint documents on which it relies); cf. BJC Health Sys. v. Columbia Cas. Co., 348 F.3d 685, 688 (8th Cir. 2003) (finding conversion to summary judgment motion when additional documents considered by the court "were neither undisputed nor the sole basis for BJC's complaint").
In light of the above authorities, the court believes that it can and should consider the insurance contract, and that doing so does not convert this motion to dismiss into a motion for summary judgment. The insurance contract is the sole basis for Fin-Ag's allegations against NAU, and the authenticity of the insurance contract submitted by NAU is undisputed. Because the insurance contract is an item "of unquestioned authenticity that [is] referred to in the challenged pleading and [is] 'central' or 'integral' to the pleader's claim for relief," the court will consider it in evaluating NAU's motion to dismiss.
B. Related Court Opinions
NAU also moves the court to take judicial notice of the published opinions filed in the related case of O'Daniel v. Stroud NA & Judy Roosa, 05-5089-LLP (O'Daniel II), found at 2007 WL 4568991 (D.S.D. Dec. 21, 2007) and O'Daniel v. NAU, 427 F.3d 1058 (8th Cir. 2005) (O'Daniel I).
Federal Rule of Evidence 201 permits the court to take judicial notice of adjudicative facts which are "not subject to reasonable dispute" because they are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). A court "may take judicial notice of a document filed in another court . . . to establish the fact of such litigation and related filings." United States v. Jones, 29 F.3d 1549, 1553 (11th Cir. 1994) (reversing district court's finding of judicial notice with regard to facts included in the opinion); see also Fridman v. City of New York, 183 F. Supp. 2d 642, 655 n.6 (S.D.N.Y. 2002). The court opinions in O'Daniel I and O'Daniel II are not in dispute and are "capable of accurate and ready determination." See Fed. R. Evid. 201(b). Additionally, these court records are necessary to determine the applicability of res judicata and collateral estoppel. Furthermore, Fin-Ag does not dispute the appropriateness of taking judicial notice of these court opinions, other than to argue that consideration of the opinions converts the motion into one for summary judgment. Docket 16, page 6. As noted above, items that the court takes judicial notice of do not convert the motion to dismiss into a motion for summary judgment. See Levy v. Ohl, 477 F.3d 988, 991 (8th Cir. 2007) (stating that in considering a motion to dismiss, a court is "not precluded in [its] review of the complaint from taking notice of items on the public record"). Accordingly, the court grants NAU's motion to take judicial notice of the court opinions in O'Daniel I and O'Daniel II.
II. Grounds for Dismissal
In its motion to dismiss, NAU contends that the insurance contract creates only derivative rights for Fin-Ag, such that Fin-Ag cannot maintain an independent action against NAU, as a matter of law. Docket 10, page 7-8. Even if Fin-Ag could maintain an independent action, however, NAU argues that the plain language of the policy precludes coverage. Id. at 8-10. Finally, NAU contends that Fin-Ag's claims of fraud and misrepresentation, negligent misrepresentation, deceit, negligent procurement, equitable estoppel, and revision/reformation of contract are barred under the doctrines of res judicata and collateral estoppel. Id. at 10-11.
A. Breach of Contract and Bad Faith Claims
1. The Policy's Standard Mortgage Clause Confers On Fin-Ag An Independent Right To Bring An Action Under The Insurance Contract
As its first ground to dismiss Fin-Ag's breach of contract and bad faith claims, NAU argues that the insurance contract provides only derivative rights to Fin-Ag, a third-party beneficiary of O'Daniel, and that Fin-Ag does not have greater coverage under the contract than O'Daniel, the insured. NAU contends that because the Eighth Circuit has already stated that O'Daniel cannot collect under the terms of the contract, neither can Fin-Ag claim that the insurance policy provides coverage for its loss. In opposition, Fin-Ag argues that it has an independent right to sue under the policy.
The insurance contract discusses a mortgagee in two sections. First, the declarations page of the policy lists Fin-Ag as a mortgagee of O'Daniel's "cows and calves." Docket 9-2, page 2. Second, the policy discusses mortgagees at length in its "Mortgage, Secured Party, and Lender's Loss Payable Clause." Docket 9-3, page 24. The loss payable clause states:
If a secured party is named on the "declarations", a loss payable on property subject to the security interest will be paid to the secured party and "you" as interests appear. If there is more than one security interest in the same property, ...