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Vogt v. State Farm Life Insurance Co.

United States District Court, W.D. Missouri, Central Division

April 26, 2017

MICHAEL VOGT, on behalf of himself and all others similarly situated Plaintiff,


          NANETTE K. LAUGHREY United States District Judge

         Plaintiff Michael Vogt moves for reconsideration of the Court's dismissal of his conversion claim (Count III), Doc. 52. [Doc. 56]. For the following reasons, Vogt's motion is granted, and the Court's dismissal of his conversion claim is vacated.

         I. Background

         Plaintiff Michael Vogt filed this class action for claims arising out of his life insurance policy with Defendant State Farm Life Insurance Company. Under this policy, State Farm maintains an interest-bearing account in trust for the insured, and this account's value, which is owned by the insured, grows over time. The policy authorizes State Farm to take a monthly deduction from this interest-bearing account, which is to be calculated based on particular factors listed in the policy. However, Vogt alleges that State Farm uses additional, undisclosed factors in its rate calculations, resulting in higher monthly charges than if State Farm relied only on the factors listed in the policy. Vogt brought claims for declaratory relief, conversion, and breach of contract based on State Farm's alleged overcharges to his account.

         On February 3, 2017, the Court granted in part State Farm's motion to dismiss with respect to Vogt's conversion claim, concluding that it was barred by Missouri's economic loss doctrine. [Doc. 56]. Vogt now moves this Court under Rule 59(e) or 60(b) to reconsider this dismissal, which he contends was a manifest error of law. Specifically, Vogt argues that this Court overstated the reach of the economic loss doctrine in Missouri, which he argues has never been applied to a claim like his.

         II. Discussion

         A district court has broad discretion in determining whether to grant Rule 59(e) and Rule 60(b) motions. In re Levaquin Products Liab. Litig., 739 F.3d 401, 404 (8th Cir. 2014), and Innovative Home Health Care, Inc. v. P.T.-O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1286 (8th Cir. 1998). However, a motion to reconsider generally “serve[s] a limited function: to correct manifest errors of law or fact or to present newly discovered evidence.” Arnold v. Sec. Servs., Inc., 627 F.3d 716, 721 (8th Cir. 2010).

         As stated in the Court's original order, Vogt's claim for conversion requires him to show that “(1) he owned the property or was entitled to possess it; (2) the defendant took possession of the property with the intent to exercise some control over it; and (3) the defendant thereby deprived the plaintiff of the right to possession.” Hunt v. Estate of Hunt, 348 S.W.3d 103, 114 (Mo.Ct.App. 2011). For his conversion claim, Vogt alleges that State Farm deducted unauthorized amounts each month from his account; that he placed money in his account in State Farm's possession for a specific purpose to be applied consistently with the terms of the policy; and that State Farm misappropriated his money by diverting it for its own use contrary to the policy.

         A. The Economic Loss Doctrine

         In its motion to dismiss, State Farm argued that Vogt's conversion claim was barred by the economic loss doctrine, which “bars recovery of purely pecuniary losses in tort where the injury results from a breach of a contractual duty.” Dubinsky v. Mermart, LLC, 595 F.3d 812, 819 (8th Cir. 2010). Vogt responded by contending that the doctrine did not apply because he had a “possessory right [to the converted funds], independent of [hi]s rights under the contract.” [Doc. 22, p. 19 of 22]. After assessing the parties' briefing on the economic loss doctrine, the Court ultimately concluded that the doctrine did bar Vogt's conversion claim because it “[wa]s dependent on his breach of contract claim” and “w[ould] rise or fall based on the Court's interpretation of the policy contract.” [Doc. 52, p. 10 (Order on Motion to Dismiss)].

         Now, however, Vogt submits extensive briefing in support of reconsideration, within which he cites nineteen additional cases in support of the economic loss doctrine's inapplicability, as well as provides the history and policy rationales behind this doctrine in Missouri. Having reconsidered its decision in light of these new authorities and the parties' substantial briefing on the issue, the Court is persuaded that Missouri's economic loss doctrine does not apply to bar Vogt's conversion claim.

         “Missouri's economic loss doctrine grew out of claims of tort which were alleged against builders of homes, or instances where a plaintiff sought to hold a manufacturer or distributor of a product liable in tort, as opposed to a contract action from which a fiduciary duty arose.” Autry Morlan Chevrolet Cadillac, Inc. v. RJF Agencies, Inc., 332 S.W.3d 184, 194 (Mo.Ct.App. 2010). The doctrine was derived from negligence and strict-liability cases and was created to preserve the distinction between tort claims sounding in warranty. See Crowder v. Vandendeale, 564 S.W.2d 879, 881 (Mo. banc 1978) (“[L]iability imposed for mere deterioration or loss of bargain resulting from latent structural defects is contractual.”); Autry Morlan Chevrolet Cadillac, Inc. v. RJF Agencies, Inc., 332 S.W.2d 184, 193 (Mo.Ct.App. 2010) (“[T]he common thread running through these cases is the effort to impose tort liability on the builder of a home, or to recover in tort for the failure of a product which is alleged to be defective”); see also Self v. Equilon Enterprises, LLC, 2005 WL 3763533, at *8 (E.D. Mo. Mar. 30, 2005) (“The doctrine was judicially created to protect the integrity of the UCC bargaining process.”). The Missouri Supreme Court adopted the doctrine to preserve the distinction between tort and contract where a claim is based on the “loss of [the] bargain.” See Crowder, 564 S.W.2d at 882 (“[W]here mere deterioration or loss of bargain is claimed, the concern is with a failure to meet some standard of quality . . . [and] [i]n the absence of some express agreement to the contrary, the standard of quality will be presumed to be that of the implied warranty term of reasonable fitness for use.”).

         To be sure, Missouri courts “have never recognized a mere breach of contract as providing a basis for tort liability.” Khulusi v. Sw. Bell Yellow Pages, Inc. 916 S.W.2d 227, 230 (Mo.Ct.App. 1995) (citing American Mortg. Inv. Co. v. Hardin-Stockton Corp, 671 S.W.2d 283, 293 (Mo.Ct.App. 1984)). This is because “[t]he act, not the breach gives rise to tort liability.” Id. Therefore, if the act done independently of the contract would result in a tort, and is not dependent on the elements of the contract claim, a tort claim may be asserted alongside a claim for breach of contract. See Id. Accordingly, Missouri law is clear that a single act can constitute both a breach of contract and a tort without the tort being barred by the economic loss doctrine. See, e.g., Autry, 332 S.W.3d at 193 (The mere fact that “the complained of act or omission which breaches a contract may also be a negligent act which would give rise to a liability in tort” is no bar to recovery).

         In this case, Vogt's conversion claim arises from the independent duty not to appropriate another's funds, a duty that exists regardless of and independently of Vogt's life insurance contract with State Farm. See, e.g., Cook v. John Hancock Life Ins. Co., 2015 WL 178108 (W.D. Va. Jan 14, 2015) (finding Virginia's economic loss doctrine did not bar plaintiff's conversion claim where “Virginia courts routinely have held that the duty not to convert others' property is a common law duty owed by all, and would exist even in the absence of a contract between the parties”). In other words, State Farm's taking of Vogt's money and the resulting deprivation of Vogt's possessory right to his money would still result in the tortious claim of conversion independently of the parties' contract. Therefore, the mere fact that State Farm's alleged unauthorized deductions from Vogt's account may constitute both a breach of that independent duty and a breach of the contract does not preclude Vogt's tort claim for conversion. See Davidson v. Hess, 673 S.W.2d 111, 112-13 (Mo.Ct.App. 1984) (“[T]he action may be one in tort, even though the breach of duty may also be a violation of the ...

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