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Vehicle Protection Plus, L.L.C. v. Premier Dealer Services

September 6, 2007

VEHICLE PROTECTION PLUS, L.L.C., PLAINTIFF,
v.
PREMIER DEALER SERVICES, INC., AND GREAT AMERICAN INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Leon Jordan United States District Judge

MEMORANDUM OPINION

This civil action is before the court on the defendants' partial motion to dismiss the complaint [doc. 6]. The plaintiff has responded [doc. 17], and the defendants have filed a reply memorandum [doc. 19]. Oral argument on the motion was heard on April 19, 2007, and the motion is ripe for the court's consideration. For the reasons discussed below, the defendants' motion will be granted in part and denied in part.

I. FACTUAL ALLEGATIONS

In its complaint, the plaintiff states that it sells vehicle services (extended warranty) contracts through agents to automobile dealerships nationwide. Since the plaintiff is not an insurance company, it must maintain insurance coverage on each of the vehicle services contracts it sells. In September 2000, the plaintiff obtained the necessary policy through defendant Great American Insurance Company ("GAIC"). By the terms of the insurance policy, GAIC was obligated to pay all of the plaintiff's obligations for the vehicle services contracts if the plaintiff fails to meet those obligations. The plaintiff alleges that GAIC understood that this was a unique policy, and any cancellation of the policy would jeopardize the plaintiff's existence in the marketplace.

The insurance policy set out specific events or circumstances that would allow GAIC to cancel the policy if the policy was in effect for more than sixty days. Even if GAIC cancelled the policy, GAIC was liable for all of the plaintiff's obligations for the unexpired terms of the existing vehicle services contracts. The plaintiff alleges that none of the cancellation events or circumstances occurred, nor did GAIC ever give the plaintiff notice of any claim that would give it the right to cancel the policy.

The plaintiff contracted with other entities to administer the claims filed on the vehicle services contracts. In May 2000, the plaintiff contracted with Warrantech Automotive, Inc. to be a third party administrator of its vehicle services contracts. This was not an exclusive contract for either party. In fact, the plaintiff alleges that Warrantech had other business dealings with GAIC and came to owe GAIC a great deal of money. GAIC told the plaintiff about its concern that GAIC and Warrantech would end up in litigation over the disputes between them and suggested that the plaintiff find another third party administrator for its vehicle services contracts. GAIC encouraged the plaintiff to contract with defendant Premier Dealer Services, Inc. ("PDS") for its future vehicle services contracts. The plaintiff knew that GAIC had a substantial ownership interest in PDS.

The plaintiff and PDS entered into a contractual relationship, effective December 1, 2004, whereby PDS was to be a third party administrator for the plaintiff's vehicle services contracts. The plaintiff avers that it undertook all the necessary steps to begin its new relationship with PDS. Nevertheless, GAIC requested that the plaintiff delay implementing the contract because of GAIC's relationship with Warrantech. GAIC told the plaintiff that allowing PDS to take over the claims administration would "seriously impair" GAIC's ability to collect monies owed to it by Warrantech. The plaintiff delayed its transfer of vehicle services contracts to PDS and continued using Warrantech. Over eight months later, a meeting was arranged to discuss proceeding with PDS, at which time the plaintiff learned that all the computer information sent to PDS had been deleted and would have to be reproduced before PDS could take over as claims administrator.

In November 2005, the plaintiff believed that PDS was ready to begin administering its claims, but PDS announced it would not be accepting any business from the plaintiff because GAIC would not allow it to proceed. The plaintiff alleges that it was against the economic interest of PDS for GAIC to prohibit PDS to proceed with the contract it had entered into with the plaintiff.

The plaintiff then arranged a conference call with representatives from PDS and GAIC. During the call, GAIC affirmed that it was prohibiting PDS from administering vehicle services contracts for the plaintiff, including the plaintiff's customers who had never had vehicle services contracts administered by Warrantech and customers who refused to do business with Warrantech.

Soon thereafter, the plaintiff learned that GAIC was canceling its policy with the plaintiff, effective December 31, 2005, evidently because GAIC was severing its relationship with Warrantech. This was confirmed in a second conference call. No valid ground for canceling the policy was ever given, nor did GAIC ever send the plaintiff written notice of the cancellation. The plaintiff alleges that GAIC knew this position would likely force the plaintiff out of business.

The plaintiff asked Warrantech if it would agree to allow PDS to administer its vehicle service contracts. Warrantech refused. The plaintiff asked GAIC to continue insuring its contracts for several more months so the plaintiff could find another insurer. GAIC refused unless Warrantech agreed in writing and the plaintiff agreed to new terms. Specifically, GAIC would continue to insure the plaintiff's vehicle service contracts for four more months, but PDS would only be allowed to administer service vehicle contracts for those customers who refused to do business with Warrantech, for each of which the plaintiff would pay Warrantech $10 in addition to the fees to PDS for the contracts. The plaintiff believed that it had no recourse but to sign the new Memorandum of Understanding prepared by GAIC so that it could stay in business long enough to find another insurer. The plaintiff alleges that PDS did not perform its part of the new agreement, demanded more money, and refused or failed to remit monies due the plaintiff.

The plaintiff claims seven causes of action under statutory and common law, and seeks damages for its loss of income, expenses, and other damages. In their motion to dismiss, the defendants argue that the plaintiff has failed to state a claim on all the causes of action except breach of contract.

II. LEGAL DISCUSSION

A. Standard of Review

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a defendant may move for dismissal of claims based on the plaintiff's "failure to state a claim upon which relief can be granted." When considering such a motion, the court must construe the complaint in a light most favorable to the plaintiff, accept all of the factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief. . . . When an allegation is capable of more than one inference, it must be ...


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