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Forrest v. United States Department of Agriculture

United States District Court, D. South Carolina, Greenwood Division

November 20, 2014

Clark M. Forrest, d/b/a Clark Forrest Farms, Plaintiff,
United States Department of Agriculture, National Appeals Division, Risk Management Agency, Federal Crop Insurance Corporation, and Rain and Hail Insurance, LLC, Defendants.


MARY G. LEWIS, District Judge.

Before this Court is Defendant Rain & Hail LLC ("R & H")'s Motion to Dismiss the Defendant's Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), or in the alternative, compel arbitration under the terms of Section 20 of the Common Crop Insurance Policy. (ECF No. 15.) Having considered the motion and the response filed in light of the applicable law, the Court denies the motion.


Plaintiff Clark M. Forrest, d/b/a Clark Forrest Farms ("Plaintiff") filed an amended complaint on June 17, 2014 against Defendants United States Department of Agriculture, National Appeals Division, Risk Management Agency, Federal Crop Insurance Corporation, and Rain and Hail, LLC: 1) seeking judicial review of the adverse determinations made by Agency Defendants United States Department of Agriculture, Federal Crop Insurance Corporation, Risk Management Agency and National Appeals Division ("Agency Defendants"); 2) seeking declaratory judgment as to all defendants; and 3) alleging multiple claims of negligence against R & H for failure to properly communicate policy requirements, failure to properly complete an appraisal relative to Plaintiff's peach crop, and failure to give prompt notice of Plaintiff's claim to the Risk Management Agency; and 4) asserting a breach of contract claim against R & H for failure to perform its contractual obligations to adjust and handle his claim in accordance with Risk Management Agency regulations. (ECF No. 9.)

This case involves a Federal Crop Insurance Corporation ("FCIC") federally reinsured Multiple Peril Crop Insurance ("MPCI") policy sold and serviced by R & H, a managing general agent, in affiliation with ACE Property and Casualty Company ("ACE"). ACE is a private sector Approved Insurance Provider ("AIP") within the meaning of the Federal Crop Insurance Act. ACE has a Standard Reinsurance Agreement ("SRA") with the FCIC which provides reinsurance to the AIPs. Plaintiff was an R & H policy holder for the 2012 peach crop year and this action arises out of a 2012 peach claim Plaintiff submitted under the MPCI policy after a production loss of his peaches. Because the potential indemnity resulting from Plaintiff's peach claim exceeded the amount of $500, 000.00, the consideration and determination of Plaintiff's claim transferred to the Risk Management Agency ("RMA"), which supervises the FCIC.

On July 7, 2014, R & H filed the instant motion, claiming that it is not responsible for the adverse determination that resulted in the denial of Plaintiff's claim. R & H claims that under the applicable terms of the SRA, the MPCI policy between R & H and Plaintiff, and relevant RMA procedures, RMA, not R & H, is liable for the adverse determination. In the alternative, R & H maintains that an arbitration clause in the federal crop insurance policy at issue is binding and enforceable under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., and that the claims asserted in this action involve disputes within the scope of the agreement. (ECF No. 15.) Thus, R & H seeks dismissal of claims II, III, IV, V, and VI of Plaintiff's Amended Complaint, based on either Rule 12(b)(1) or 12(b)(6).


R & H has moved to dismiss Plaintiff's Amended Complaint and to compel arbitration pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure.

1. Rule 12(b)(1)

A motion to dismiss pursuant to Rule 12(b)(1) raises the fundamental question of whether a court is competent to hear and adjudicate claims. "Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction." Pinkley, Inc. v. City of Fredrick, Md., 191 F.3d 394, 399 (4th Cir. 1999). Unless a matter involves an area of a federal court's exclusive jurisdiction, a plaintiff may bring suit in federal court only if the matter involves a federal question arising "under the Constitution, laws or treatises of the United States, " 28 U.S.C. § 1331, or if "the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between citizens of different states, " 28 U.S.C. § 1332(a)(1). In reviewing a motion to dismiss under Rule 12(b)(1), the court is to "regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991).

The Federal Arbitration Act, 9 U.S.C. § 1, et seq., embodies a federal policy favoring arbitration. Drews Dist., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001). A litigant can compel arbitration under the FAA, if the litigant can demonstrate: "(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the [party] to arbitrate the dispute." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002) (internal citation and quotations omitted). The FAA mandates that written agreements to arbitrate disputes "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the avoidance of any contract." 9 U.S.C. § 2. "A district court therefore has no choice but to grant a motion to compel arbitration where a valid arbitration agreement exists and the issues in a case fall within its purview." Adkins, 303 F.3d at 500.

"The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a complaint." Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir.1999). In considering a motion to dismiss, a plaintiff's well-pled allegations are taken as true, and the complaint and all reasonable inferences are liberally construed in the plaintiff's favor. Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). A plaintiff is required to allege "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court may consider only the facts alleged in the complaint, which may include any documents either attached to or incorporated in the complaint, and matters of which the court may take judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). "If, on a motion under Rule 12(b)(6)... 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). Despite this general rule, the United States Court of Appeals for the Fourth Circuit has explained that courts "may consider official public records, documents central to plaintiff's claim, and documents sufficiently referred to in the complaint so long as the authenticity of these documents is not disputed." W itthohn v. Fed. Ins. Co., 164 F.Appx. 395, 396-97 (4th Cir.2006) (unpublished per curiam opinion).


Having reviewed and considered the submissions of the parties[1] in light of the applicable law, R & H's motion must be denied. First, Plaintiff's primary business before the Court is to appeal from an underlying adverse determination of the Agency Defendants, namely Defendant RMA. Plaintiff's claims for judicial review and declaratory judgment concern this underlying adverse determination. The decision of the National Appeals Division's director affirming the adverse determination of the RMA is a final administrative action, which may be reviewed by the district court. See 5 U.S.C. § 704 (right to judicial review of final agency action); 7 U.S.C. § 6999 ("a final determination by the National Appeals Division shall be reviewable and enforceable by any United States district court of competent jurisdiction in accordance with chapter 7 of Title 5."). It is clear that Plaintiff has already exhausted the process of seeking administrative review concerning the Agency Defendants' participation in the large claim review process and did so prior to bringing the instant suit. R & H was a participant in that action as an interested party and remains so here upon ...

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