United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 30, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 03-30570
DRS BETHEA, MOUSTOUKAS AND WEAVER LLC; MORRISON C BETHEA, MD, A
Professional Medical Corporation; NICK M MOUSTOUKAS, MD; MICHAEL T
WEAVER, MD; VICTOR E TEDESCO, IV, MD; JARED Y GILMORE, III, MD; and
acting on behalf of all others similarly situated,
Plaintiffs - Appellants,
versus
ST PAUL GUARDIAN INSURANCE CO; ET AL,
Defendants,
ST PAUL GUARDIAN INSURANCE CO; ST PAUL FIRE & MARINE INSURANCE CO,
in its own corporate capacity and as successor in interest to the
St Paul Insurance Company, ST PAUL MEDICAL LIABILITY INSURANCE
COMPANY,
Defendants - Appellees.
Appeals from the United States District Court
for the Eastern District of Louisiana
Before GARWOOD, HIGGINBOTHAM, and SMITH, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Plaintiffs, Drs. Bethea, Moustoukas and Weaver, LLC,
(“Bethea”) appeal the district court’s decision to grant St. Paul
Guardian Insurance Company’s motion to dismiss pursuant to Federal
Rule of Civil Procedure 12(b)(6). Bethea asserts that the facts
alleged in its Second Amended Complaint are sufficient to state
claims of detrimental reliance and unjust enrichment. St. Paul
asserts that the insurance policy, being valid and unambiguous,
precludes the possibility of any reasonable reliance on extra-
contractual representations and justifies any enrichment St. Paul
obtained. We agree with St. Paul and affirm the district court’s
dismissal with prejudice.
I
This is an insurance dispute between St. Paul Guardian
Insurance Company and a putative class of previous policyholders.
The medical malpractice policy at issue (1) provides that both
parties have the right to non-renewal; (2) includes an integration
clause that limits the way in which the policy can be modified;1
(3) entitles the doctors to purchase tail coverage in the event of
non-renewal;2 and (4) provides tail coverage at no additional
premium if a policyholder dies, becomes disabled, or retires during
the life of the policy.
A few weeks after Bethea’s 2002 renewal, St. Paul informed its
policyholders that it was exiting the medical malpractice market.
Although it would provide coverage for current policies and provide
1
The integration clause provides that the policy “contains
all the agreements between [Bethea] and [St. Paul] concerning this
insurance. . . . This policy can only be changed by a written form
included as part of the policy. This form must be signed by one of
our authorized representatives.”
2
Tail coverage provides insurance for any claims based on
injuries that occurred during the policy’s term, but are raised
after the policy has expired. Tail coverage is also referred to as
a reporting endorsement.
2
the free tail coverage to any doctor who had been insured by St.
Paul for five consecutive years and chose to retire before the
policy expired, it would no longer renew medical malpractice
policies. At the time of St. Paul’s notice, Bethea’s policy term
had eleven months remaining.
Bethea, as putative class representative, alleges that through
a letter explaining a policy change and St. Paul’s brochures, St.
Paul promised to provide free tail coverage upon the doctors’
retirement,3 and that St. Paul reneged on this promise by exiting
the medical malpractice insurance market before the doctors could
take advantage of the free tail coverage. Bethea alleges that they
detrimentally relied on the promise, resulting in damages to them
and in St. Paul’s unjust enrichment.
In response, St. Paul asserts that the insurance policy at
issue provides that St. Paul would provide free tail coverage in a
limited set of circumstances, the relevant circumstance here being
3
The letter was sent by Kevin O’Brien, a practice leader at
St. Paul, to explain changes in future policies. Specifically, it
stated, “If you permanently retire from all professional practice
and have been insured with The St. Paul [sic] continuously for five
years . . . , you will qualify for a free optional reporting
endorsement. This replaces the existing qualification of 10
consecutive years of St. Paul coverage and retiring at age 55, or
five continuous years of coverage, retiring at 65.”
The brochures include general statements about the strength of
St. Paul as an insurer and its commitment to the medical
malpractice market. They state, among other things, that (1) St.
Paul “will still be with you every step of the way” when needed;
(2) St. Paul “has the financial wherewithal to provide whatever
level of insurance protection you need”; and (3) “For a secure
tomorrow, look to St. Paul today.”
3
that the doctors retire while their insurance policy remained in
effect. The doctors did not retire during the policy’s term, so
St. Paul is not required to provide the tail coverage. St. Paul
disputes Bethea’s allegation that the letter and the brochures
provide to the contrary, and asserts that as a result of the
clarity of the policy, any reliance on extra-contractual
representations would be unreasonable. Finally, St. Paul asserts
that the existence of an enforceable contract between the parties
precludes Bethea’s unjust enrichment claims as a matter of law.
The district court dismissed Bethea’s Second Amended Complaint
with prejudice. The court dismissed Bethea’s detrimental reliance
claim because, even taking Bethea’s allegations as true, “there was
no justifiable reliance on the part of plaintiffs that St. Paul
would always provide coverage.” The court based the dismissal on
(1) the plain language of the policy, which provides that either
party may non-renew and that free tail coverage is provided only if
the policy is in effect at the time of the death, disability, or
retirement; (2) the policy’s integration clause, which provides
that any changes must be in “a written form included as part of the
policy”; and (3) La. Rev. Stat. 22:628, which provides that any
change to an insurance policy must be in writing and physically
made part of the policy. The court dismissed the unjust enrichment
claim because a valid contract existing between the parties
justified any enrichment of St. Paul.
II
4
We review the district court’s Rule 12(b)(6) dismissal de
novo.4 Rule 12(b)(6) allows a defendant to move to dismiss a
complaint for “failure to state a claim upon which relief can be
granted.”5 We accept plaintiff’s factual allegations as true and
will not affirm a dismissal “unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.”6 However, “conclusory
allegations or legal conclusions masquerading as factual
conclusions will not suffice to prevent a motion to dismiss.”7
A
Article 1967 of Louisiana’s Civil Code defines detrimental
reliance.8 It provides that–
[a] party may be obligated by a promise when
he knew or should have known that the promise
would induce the other party to rely on it to
his detriment and the other party was
reasonable in so relying. . . . Reliance on a
gratuitous promise made without required
formalities is not reasonable.9
Detrimental reliance requires (1) a representation by conduct or
4
Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720,
725 (5th Cir. 2002).
5
FED. R. CIV. P. 12(b)(6).
6
Blackburn v. Marshall, 42 F.3d 925, 931 (5th Cir. 1995).
7
Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284
(5th Cir. 1993).
8
LA. CIV. CODE ANN. art. 1967 (2004).
9
Id.
5
word, (2) justifiable reliance on the representation, and (3) a
change in position to the plaintiff’s detriment as a result of the
reliance.10 The doctrine is “designed to prevent injustice by
barring a party from taking a position contrary to his prior acts,
admissions, representations, or silence.”11 The doctrine usually
functions when no written contract or an unenforceable contract
exists between the parties.12
Whether a plaintiff reasonably relied on a promise is
generally a fact-bound determination.13 However, Louisiana law
recognizes certain situations where a plaintiff’s reliance on a
promise is unreasonable as a matter of law.14 An unambiguous
contract may be interpreted as a matter of law,15 and, applying
10
Babkow v. Morris Bart, P.L.C., 726 So. 2d 423, 427 (La. Ct.
App. 1998).
11
Id.
12
Jackson v. Lare, 779 So. 2d 808, 814 n.1 (La. Ct. App.
2000).
13
Babkow, 726 So. 2d at 428 (characterizing the reasonable
reliance determination as “extremely fact intensive” and
distinguishing precedent on the unique facts of the case).
14
For example, a plaintiff’s reliance on an oral, gratuitous
promise to transfer land was held unreasonable as a matter of law
because Louisiana law provides that “reliance on a gratuitous
promise made without required formalities is not reasonable.” Gray
v. McCormick, 663 So. 2d 480, 486 (La. Ct. App. 1995). Considering
that Louisiana law requires various formalities when transferring
land, any reliance on an oral promise alone is unreasonable. Id.
15
Rutgers v. Martin Woodlands Gas Co., 974 F.2d 659, 661 (5th
Cir. 1992) (“Under Louisiana law, when a contract is subject to
interpretation from the four corners of the instrument, without
6
Louisiana law, we held in Omnitech International, Inc. v. Clorox
Company that a plaintiff’s reliance on promises made outside of an
unambiguous, fully-integrated agreement was unreasonable as a
matter of law.16 Omnitech brought a detrimental reliance claim
against Clorox, contending that it reasonably relied on extra-
contractual representations by Clorox that Clorox would not enter
the insecticide market without Omnitech as a partner.17 We rejected
Omnitech’s assertion because the parties’ fully integrated contract
defined the relationship of the parties, and any reliance on
outside assurances that moved beyond the well-defined relationship
was unreasonable as a matter of law.18 We concluded that Clorox’s
promises “if made, were outside the scope of the fully-integrated,
written agreements between Omnitech and Clorox,” and we therefore
“refuse[d] to look past the written terms of the agreements, and
hold that the trial court did not err in finding that any reliance
by Omnitech upon these representations was unreasonable as a matter
of law.”19
As in Omnitech, many courts have found a plaintiff’s reliance
necessity of extrinsic evidence, interpretation of the contract is
a matter of law subject to de novo review.”).
16
11 F.3d 1316, 1330 (5th Cir. 1994).
17
Id. at 1328.
18
Id. at 1329-30.
19
Id. at 1330.
7
to be unreasonable as a matter of law when the parties have a valid
contract defining their rights and limiting the ways in which the
contract may be modified.20
B
We find no error in the district court’s dismissal. Bethea’s
allegation of reasonable reliance on the O’Brien letter and St.
Paul’s brochures as a promise that St. Paul would provide
unconditional free tail coverage, or at least that St. Paul would
renew Bethea’s policy until the doctors could take advantage of the
free tail coverage, is belied by the clarity of the insurance
policy and the content of the documents at issue. The insurance
policy, which is indisputably valid and not breached, provides that
either party may non-renew at any time and that tail coverage will
be provided for no additional premium only upon retirement during
20
Wardley Corp. v. Meredith Corp., 2004 WL 339593 at *3-4
(10th Cir. Feb. 24, 2004) (unpublished) (“[W]hen the alleged
promises made are contrary to the terms of the contract, reliance
on such promises would be unreasonable. Under the contract before
us, [Defendant] could transfer or assign its rights and
obligations. Any reliance on statements that [Defendant] would
never sell, or that its obligations would continue after it
assigned the obligations under the contract, would therefore have
been unreasonable.”); Kirkland v. St. Elizabeth Hosp., 120 F. Supp.
2d 660 (N.D. Ohio 2000), affirmed, 34 Fed. Appx. 174 (6th Cir.
2002) (unpublished); Kleinberg v. Radian Group, Inc., 240 F. Supp.
2d 260, 262 (S.D. N.Y. 2002); Phoenix Technologies, Inc. v. TRW,
Inc., 840 F. Supp. 1055, 1067 (E.D. Pa. 1994); Blue Mountain
Mushroom Co., Inc. v. Monterey Mushroom, Inc., 246 F. Supp. 2d 394
(E.D. Pa. 2002).
8
the policy’s term.21 Both the contract’s integration clause and
Louisiana law require that any change to the policy be in written
form and incorporated into the policy. One could not reasonably
rely on a renewal letter explaining policy changes and marketing
brochures as a promise to provide free tail coverage without limit,
especially considering that such a promise is not mentioned in the
documents and would directly conflict with the policy. Given that
the insurance policy unambiguously defines the parties’ rights and
limits the way to alter the policy, it was unreasonable to rely on
informal documents as modifying material aspects of the policy.
Relying on Law v. Eunice,22 Bethea asserts that the
reasonableness of its reliance is a fact question that must be
determined at trial. However, Law does not require a party’s
reliance to be determined at trial in every case.23 In Law, the
parties had no written contract defining their rights and
obligations; the plaintiff asserted only an oral agreement. The
court found that based on these facts, the plaintiff’s
reasonableness should be determined at trial. Furthermore,
Bethea’s assertion ignores the many precedents we have mentioned
21
The policy also provides tail coverage at no additional
premium upon death or disability during the policy’s term.
Bethea’s argument focuses solely on the right of tail coverage upon
retirement.
22
626 So. 2d 575, 577-78 (La. Ct. App. 1993).
23
Id. at 577-78.
9
where courts find reliance unreasonable as a matter of law. Courts
have found unreasonable reliance as matter of law when a plaintiff
relies on oral representations despite the law’s insistence on
certain formalities,24 when a plaintiff relies on a representation
that is clearly not intended to bind the defendant or induce the
plaintiff into reliance,25 and when a plaintiff relies on extra-
contractual representations despite the existence of an
unambiguous, fully integrated contract that provides limited ways
of altering the parties’ relationship.26
Despite Bethea’s allegation of reasonable reliance on the
O’Brien letter, the context and facts of the parties’ relationship
make any reliance on the letter unreasonable. When faced with the
letter, which was included as part of a package describing St.
Paul’s insurance coverage, Bethea claims that it reasonably
believed St. Paul would provide the free tail coverage regardless
of whether a policyholder claimed it before or after the policy
expired, or at least that St. Paul would continue to insure the
policyholders in the future, allowing them to take advantage of the
free tail coverage. Although the letter does not mention that the
policyholder must retire during the policy term to be entitled to
free tail coverage, the letter is clearly meant to explain
24
Gray v. McCormick, 663 So. 2d 480, 486 (La. Ct. App. 1995).
25
Miller v. Loyola Univ. of New Orleans, 829 So. 2d 1057, 1062
(La. Ct. App. 2002).
26
Omnitech, 11 F.3d at 1329-30.
10
modifications in the renewal policy Bethea was considering. The
insurance packet included the policy itself and a cover letter from
Bethea’s insurance agent instructing Bethea to read the policy and
raise any concerns it may have. It is clear from the policy that
(1) St. Paul may choose to non-renew at any time, (2) free tail
coverage is provided only if a policyholder retires during the life
of the policy, and (3) no provision is made for guaranteed free
tail coverage or automatic renewal. The clarity of the policy and
the informality of the letter make any reliance on the letter as
significantly altering its insurance policy unreasonable.
An independent provision of the policy and Louisiana law also
make any reliance unreasonable. The contract includes an
integration clause stating that the “policy contains all the
agreements between you and us concerning this insurance,” and that
it “can only be changed by a [signed] written form included as part
of the policy.” Similarly, Louisiana law limits the ways in which
an insurance policy may be amended.27 Bethea claims that its
reliance on the letter could be reasonable despite the integration
clause and § 22:628 because the letter, being in written form,
signed by a St. Paul representative, and sent to Bethea, meets the
27
LA. REV. STAT. ANN. § 22:628 (West 2004) (“No agreement in
conflict with, modifying, or extending the coverage of any contract
of insurance shall be valid unless it is in writing and physically
made a part of the policy or other written evidence of insurance,
or it is incorporated in the policy or other written evidence of
insurance by specific reference to another policy or written
evidence of insurance.”).
11
clause’s and the law’s requirements. Although the letter is a
written form and is signed by an agent of St. Paul, it is clearly
a letter explaining the new policy that Bethea purchased. The
letter refers to the renewal policy included in the packet, notes
that the change in the requisite number of years replaces the
previous ten-year requirement, and appears to be intended as a
marketing tool to encourage policy renewal. The letter opens, “One
of the industry’s broadest medical professional liability coverages
has become even broader!” Any reliance that this letter served as
a formal modification to the policy was unreasonable, especially
considering that the letter was included with Bethea’s current
policy containing provisions contrary to Bethea’s interpretation of
the letter.28
Any reliance on St. Paul’s brochures was likewise
unreasonable. The brochures’ informality and use of general
statements of future intent, coupled with the clear policy language
contradicting Bethea’s interpretation, make any reliance on them
unreasonable.29
Bethea relies on Aker v. Sabatier30 for the proposition that
an insurance brochure can modify an insurance policy and bind the
company to provide the coverage described. Aker, however, is
28
See Omnitech, 11 F.3d at 1329-30.
29
Id.
30
200 So. 2d 94 (La. Ct. App. 1967).
12
inapposite. The plaintiff in Aker sued another doctor for libel
and slander, and the doctor’s insurance company was joined in the
lawsuit. The insurance company moved for summary judgment,
claiming that the insurance policy did not cover damages resulting
from libel and slander because they were not the result of
“professional services rendered.” Although the policy did not
expressly cover libel and slander, the company’s brochure assured
the policyholder that claims of libel and slander would be
covered.31 Because the brochure directly contradicted the policy,
an ambiguity was created that needed to be resolved at trial, not
on summary judgment. Further, it was not clear from the record
whether the insurance company was responsible for the brochure at
issue.32 The court reversed the summary judgment and remanded for
further proceedings.
Unlike Aker, the facts here present no direct discrepancy
between the insurance policy and the brochure. The brochures imply
that St. Paul is a strong company that will remain in the medical
malpractice market for the foreseeable future, but they do not
create a patent ambiguity between two definitions of coverage as in
Aker. Claiming that they are a strong company and implying that
31
Id. at 97.
32
Id. (“If, in fact, the brochure was issued by St. Paul and
describes the coverage provided by the policy herein, we cannot see
how St. Paul can how be heard to deny that such coverage is
afforded thereby.”).
13
they will remain in the market do not contradict the policy
provision entitling either party to cancel or non-renew at any
time.
On the facts of this case, Bethea could not reasonably rely on
the marketing brochures as modifying the clear language of its
policy. The brochures do not state that St. Paul would abandon
various contractual provisions and provide free tail coverage
without limitation. In light of the unambiguous contract, the
integration clause, and caselaw providing that reliance on extra-
contractual representations are unreasonable as a matter of law
when the parties’ rights and obligations are clearly defined by
contract, the district court did not err in finding that Bethea
could not allege reasonable reliance and dismissing the case.33
33
Two of its arguments - that the insurance policy no longer
gives St. Paul the right to non-renew because the letter and
brochures modified the policy and that the policy does not allow
St. Paul to non-renew without reimbursing Bethea for premiums it
paid for the tail coverage - are relevant only to a breach of
contract claim. Bethea has not appealed the dismissal of its
breach of contract claim, however, and we need not resolve these
arguments.
Finally, based on its assertion that St. Paul cannot non-renew
without providing the free tail coverage or reimbursing the
doctors, Bethea asserts that if a contract provision allows St.
Paul’s action, it is invalid because it leads to absurd
consequences. This argument is without merit. It is based on a
faulty premise - that the policy allows St. Paul to “take the money
and run” without providing any service. The policy clearly
provides that in consideration for the premium, the policyholder
receives an option to purchase tail coverage in the event of non-
renewal, as well as the right to tail coverage at no additional
premium if the policyholder retires while the policy remains in
effect. If the conditions entitling a policyholder to the free
tail coverage are not fulfilled, then the policyholder has no right
to free tail coverage. This does not mean that the protection was
14
III
We turn next to the dismissal of Bethea’s unjust enrichment
claim. In Louisiana there are five requisite elements for a
successful unjust enrichment claim:
(1) there must be an enrichment, (2) there
must be an impoverishment, (3) there must be a
connection between the enrichment and
resulting impoverishment, (4) there must be an
absence of ‘justification’ or ‘cause’ for the
enrichment and impoverishment, and finally (5)
the action will only be allowed when there is
no other remedy at law, i.e., the action is
subsidiary or corrective in nature.34
“[I]f there is a contract between the parties it serves as a legal
cause, an explanation, for the enrichment. ‘[O]nly the unjust
enrichment for which there is no justification in law or contract
allows equity a role in the adjudication.’”35 We review the
dismissal of Bethea’s unjust enrichment claim de novo.36
not provided during the life of the policy. Even if St. Paul did
not disclose what portion of the premium covered the cost of the
tail coverage, St. Paul provided a service in exchange for the
premium. As a result, refusing to provide free tail coverage or a
reimbursement when St. Paul is not contractually bound to do so is
not absurd.
34
Minyard v. Curtis Products, Inc., 205 So. 2d 422, 432 (La.
1968); see also LA. CIV. CODE ANN. art. 2055 (West 2004) (“Equity, as
intended in the preceding articles, is based on the principles that
no one is allowed to take unfair advantage of another and that no
one is allowed to enrich himself unjustly at the expense of
another.”).
35
Edwards v. Conforto, 636 So. 2d 901, 907 (La. 1993) (quoting
Edmonston v. A-Second Mortg. Co. of Slidell, Inc., 289 So. 2d 116,
122 (La. 1974)).
36
Manguno, 276 F.3d at 725.
15
Bethea claims that St. Paul was enriched by receiving the
higher premiums, and Bethea was impoverished by paying the higher
fees without receiving the free tail coverage. Bethea asserts that
there is no justification for the enrichment because the contract
does not allow St. Paul to keep the premiums without providing free
tail coverage. Finally, Bethea contends that there is no remedy at
law available because the court dismissed its breach of contract
claim.
In response, St. Paul first asserts that any alleged
enrichment is justified by a valid contract governing the parties’
relationship. Second, Bethea was not impoverished by paying the
higher premium; the policy provided free tail coverage only if the
policyholder died, became disabled, or retired during the life of
the policy. Policyholders received the benefit of this protection
even if the conditions were not realized. Finally, there is an
adequate remedy at law because a valid contract exists.
Louisiana law provides that no unjust enrichment claim shall
lie when the claim is based on a relationship that is controlled by
an enforceable contract.37 Given the valid contract defining
Bethea’s insurance coverage, Louisiana law bars Bethea’s unjust
enrichment claim.38 The contract collected premiums for claims-made
coverage as well as for tail coverage “for no additional premium”
37
Edwards, 636 So. 2d at 907.
38
Id.
16
if the policyholder retires during the life of the policy.
Bethea’s only response is that the rule does not apply “where
the contract does not speak to the specific conduct at issue,” and
alleges that the conduct here - charging higher premiums for tail
coverage - is not authorized by the policy. Bethea’s assertion
that St. Paul secretly collected higher premiums while
characterizing this tail coverage as “free” is specious. The
policy makes clear that there is tail coverage upon the happening
of certain conditions, and a reasonable policyholder would
understand that any coverage an insurance company provides will be
paid for in the premium.
IV
We AFFIRM the judgment of the district court dismissing
Bethea’s claims with prejudice.
17