Irby v. CSAA Insurance Exchange et al

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
KELLI IRBY,
Plaintiff,
v.
CSAA INSURANCE EXCHANGE, et al.,
Defendants.
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Case No. CIV-24-1142-D
ORDER
Before the Court is Defendant CSAA Fire and Casualty Insurance Company’s
(“CSAA Fire”) Motion to Dismiss [Doc. No. 5]. Plaintiff filed a Response [Doc. No. 6],
and CSAA Fire filed a Reply [Doc. No. 7]. The matter is fully briefed and at issue.
BACKGROUND AND FACTUAL ALLEGATIONS
This case arises from a motor-vehicle accident that occurred on December 8, 2022
in Oklahoma City.1 Plaintiff alleges that a non-party, Necole Tate, negligently caused the
accident, which led to Plaintiff suffering serious injuries. At the time of the accident,
Plaintiff was insured under an auto policy underwritten by Defendant CSAA General
Insurance 	Company, 	which 	provided 	$100,000 	in 	uninsured/underinsured 	motorist
coverage. Plaintiff alleges Ms. Tate did not have sufficient liability insurance coverage to
fully compensate Plaintiff for her injuries; therefore, Ms. Tate qualifies as an underinsured
motorist under the CSAA auto policy. Plaintiff filed a claim under the CSAA auto policy
1 The Court’s recitation of facts comes from Plaintiff’s state-court Petition, which CSAA Fire
attached to its Notice of Removal [Doc. No. 1] as Exhibit 1. The Court will, however, refer to the
Petition as the “Complaint.”
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for uninsured/underinsured motorist benefits, but she alleges Defendants failed to properly
investigate and pay her claim.
On July 29, 2024, Plaintiff filed suit in Oklahoma County District Court, naming as
defendants: (1) CSAA Insurance Exchange; (2) CSAA General Insurance Company d/b/a
AAA Insurance (“CSAA General”); (3) CSAA Fire; and (4) Automobile Club of Oklahoma
d/b/a AAA Oklahoma (“AAA Club”). 2 CSAA Fire subsequently removed the case to the
Western District of Oklahoma and now moves to dismiss Plaintiff’s claims against it. 3
STANDARD OF DECISION
A complaint must contain “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Court will accept as true all well-
pled factual allegations and construe them in the light most favorable to Plaintiff. Peterson
v. Grisham, 594 F.3d 723, 727 (10th Cir. 2010).
A complaint “attacked by a Rule 12(b)(6) motion to dismiss does not need detailed
factual allegations,” but it does need “more than labels and conclusions.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (citation omitted). To satisfy Rule 8’s pleading
standard, a complaint must “contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff
2 CSAA Fire states that the Automobile Club of Oklahoma is “no longer an entity,” having merged
with AAA Club Alliance, Inc. in November 2016. Notice of Removal at 7. Therefore, the Court
refers to this Defendant as “AAA Club.”
3 In its Notice of Removal, CSAA Fire states that only CSAA General had been served at the time
of removal. Notice of Removal at 2. CSAA Fire waived service, but it does not appear that either
CSAA Insurance Exchange or AAA Club have been served.
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pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. “[A] formulaic recitation of the
elements of a cause of action” does not provide grounds of a party’s entitlement to relief.
Twombly, 550 U.S. at 555.
“[T]he tenet that a court must accept as true all of the allegations contained in the
complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678; see also Twombly,
550 U.S. at 558 (“[O]n a motion to dismiss, courts ‘are not bound to accept as true a legal
conclusion couched as a factual allegation.’” (citation omitted)). Courts may “disregard
conclusory statements and look only to whether the remaining, factual allegations plausibly
suggest the defendant is liable.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir.
2012).
DISCUSSION
Plaintiff asserts a breach-of-contract and bad-faith claim against CSAA Fire, and
CSAA Fire moves to dismiss both claims. The analysis that follows applies equally to each
of Plaintiff’s claims.
I. 	Applying relevant choice-of-law principles, the Court finds that Indiana law
governs whether CSAA Fire’s corporate veil should be pierced.
CSAA Fire argues that Plaintiff’s claims against it “hinge entirely on the premise
that it is ‘part of a reciprocal insurance exchange, wherein [CSAA entities] pool and partner
their businesses under a regime of control such that all of [CSAA Insurance Exchange’s]
subsidiaries and affiliated companies can be held liable for bad faith and breach of
contract.” CSAA Fire Mot. to Dismiss at 4 (quoting Compl., ¶ 6). CSAA Fire contends
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Plaintiff’s allegations as to it would require the Court to pierce the corporate veil “and hold
CSAA Fire responsible for claims primarily asserted against CSAA General as if each
company is an alter-ego of the other.” Id. CSAA Fire contends that, under a proper choice-
of-law-analysis, Indiana law governs whether the Court may pierce the CSAA corporate
veil, and, applying Indiana law, Plaintiff fails to state a claim against CSAA Fire.
A. 	There is a conflict in Oklahoma and Indiana law governing what a party
must show to pierce the corporate veil.
The Court agrees with CSAA Fire that Plaintiff appears to plead an alter-ego theory
of liability, which would, in turn, require the Court to pierce the CSAA corporate veil.
Because CSAA Fire has raised the choice-of-law issue, the Court will conduct an
appropriate analysis to determine which state’s law governs Plaintiff’s alter-ego theory.
First, the Court must decide whether there is a conflict between Indiana law (the state in
which CSAA Fire is incorporated) and Oklahoma law (the state in which this case was
filed). See Canal Ins. Co. v. Montello, Inc., 822 F. Supp. 2d 1177, 1181 (N.D. Okla. 2011).
“If there is no conflict between the laws of the two states, the court will apply Oklahoma
law. If there is a conflict between the two laws, the court will look to Oklahoma choice of
law rules to determine whether the application of Indiana or Oklahoma law is appropriate.”
Id.
Upon review, there is a conflict of law in the two states’ requirements for piercing
the corporate veil. Under Oklahoma law, “[o]ne corporation may be held liable for the acts
of another under the theory of alter-ego liability if (1) the separate existence is a design or
scheme to perpetuate a fraud or (2) one corporation is merely an instrumentality or agent
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of the other.” Gilbert v. Sec. Fin. Corp. of Okla., Inc., 152 P.3d 165, 175 (Okla. 2006),
abrogated on other grounds by Montgomery v. Airbus Helicopters, Inc., 414 P.3d 824
(Okla. 2018). Under Indiana law, however, a party seeking to pierce the corporate veil must
show “by a preponderance of the evidence ‘that [1] the corporate form was so ignored,
controlled or manipulated that it was merely the instrumentality of another and [2] that the
misuse of the corporate form would constitute a fraud or promote injustice.’” Escobedo v.
BHM Health Assocs., Inc., 818 N.E.2d 930, 933 (Ind. 2004) (quoting Aronson v. Price, 644
N.E.2d 864, 867 (Ind. 1994)).
As shown by the above-quoted caselaw, there “is a clear distinction between
Oklahoma and Indiana law regarding the piercing of the corporate veil: Oklahoma law
requires the party attempting to pierce the corporate veil to demonstrate either (1) the
corporate scheme is a design to perpetrate a fraud or (2) one corporation is merely an
instrumentality of the other while Indiana law requires the plaintiff to meet the more
onerous standard of demonstrating both (1) one corporation was merely an instrumentality
of another, and (2) the misuse of the corporate form would ‘constitute a fraud or promote
injustice.’” Canal, 822 F. Supp. 2d at 1183 (citing Escobedo, 818 N.E.2d at 933 and
Gilbert, 152 P.3d at 175) (emphasis in original). This distinction is not meaningless; indeed,
“application of Indiana's more onerous burden while interpreting a pleading under Rule
12(b)(6) standards could result in a different outcome, i.e. dismissal of the claim under
Indiana law, and allowing the claim to proceed under Oklahoma law.” Id.
Because Indiana employs a more onerous standard for piercing the corporate veil
than does Oklahoma, the Court finds that the laws of the two states conflict. See id.
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(“Because the difference between the conjunctive and disjunctive could be dispositive on
a 12(b)(6) motion, the court finds that the laws of Oklahoma and Indiana conflict.”); see
also Crabb v. CSAA Gen. Ins. Co., No. CIV-21-0303-F, 2021 WL 3115393, at *5 (W.D.
Okla. July 22, 2021) (following Canal in finding that “[t]he law of Indiana and Oklahoma
differ with respect to the requirements for piercing the corporate veil”).
B. 	Indiana law governs the instant Motion.
Because Oklahoma and Indiana law conflict, the Court must next determine which
state’s law applies to the instant Motion. In diversity cases, such as this, “the choice of law
is determined by the law of the forum state, in this case Oklahoma.” Canal, 822 F. Supp.
2d at 1183 (citing Elec. Distribs. Inc. v. SFR, Inc., 166 F.3d 1074, 1083 (10th Cir. 1999)).
Therefore, the Court, like the Canal and Crabb courts, will look to Oklahoma’s choice-of-
law rules to determine whether Oklahoma or Indiana law applies.
As detailed by the Canal court, § 307 of the Restatement (Second) of Conflicts of
Laws directs courts to apply “[t]he local law of the state of incorporation . . . to determine
the existence and extent of a shareholder's liability to the corporation for assessments or
contributions and to its creditors for corporate debts.” Id. at 1184. Although the Oklahoma
Supreme Court has not addressed § 307 in the veil-piercing context, “Oklahoma courts
have previously followed other provisions of the Restatement (Second) of Conflicts of
Laws.” Id. (quoting Tomlinson v. Combined Underwriters Life Ins. Co., No. 08-CV-259-
TCK-(FHM), 2009 WL 2601940, at *2 (N.D. Okla. Aug. 21, 2009)). Therefore, “based on
citation to [the] Restatement (Second) of Conflicts of Laws in other circumstances, the
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Court finds that the Oklahoma Supreme Court would follow § 307 in holding that the state
of incorporation's law applies to issues of piercing the corporate veil.” Id.
The Court agrees that “Oklahoma would apply the law of the state in which the
corporation in question is incorporated (here, as in Canal, Indiana) to determine whether
the corporate structure of CSAA General should be disregarded.” Crabb, 2021 WL
3115393, at *5; see also Canal, 822 F. Supp. 2d at 1184. The Court will, therefore, apply
Indiana law in determining whether Plaintiff’s Complaint includes allegations sufficient to
support piercing the CSAA corporate veil.
II. 	Having determined that Indiana law governs, the Court finds that Plaintiff fails
to state a plausible claim against CSAA Fire.
Recall, under Indiana law, Plaintiff must plead sufficient facts tending to show “that
the corporate form was so ignored, controlled or manipulated that it was merely the
instrumentality of another and that the misuse of the corporate form would constitute a
fraud or promote injustice.” Escobedo, 818 N.E.2d at 933 (emphasis added).4
Regarding the first prong of Indiana’s test, Plaintiff alleges as follows:
Defendants CSAA and [CSAA Fire] are all part of a reciprocal inter-
insurance exchange, in which they pool their business among other insureds
and “exchange policies” within the CSAA Insurance Group of companies
and share all premiums, changes and losses. By and through this inter-
insurance exchange, Defendant CSAA directly or through its subsidiaries,
4 Although not directly raised by either party, the Court further agrees with the Canal court that
Rule 8(a)(2)’s pleading standard—as opposed to the heightened, fraud-based standard set forth in
Rule 9(b)—governs Plaintiff’s current Complaint. See Canal, 822 F. Supp. 2d at 1185 (finding that
Rule 8(a)(2) governed the plaintiff’s complaint, as it included no fraud-related allegations). If
Plaintiff is granted leave and files an amended complaint that includes fraud-based allegations, the
Court reserves a ruling on whether Rule 9(b)’s heightened standard would apply to those
allegations.
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issues policies, collects premiums, pays commissions to agents, and handles
every aspect of the [CSAA Fire] auto claims handling.
***
Further, CSAA, [CSAA Fire], and AAA Oklahoma all operate and are parts
of a reciprocal insurance exchange, wherein they pool and partner their
businesses under a regime of control such that all of its subsidiaries and
affiliated companies can be held liable for bad faith and breach of contract.
Compl., ¶¶ 4, 6
Upon review of Plaintiff’s Complaint, as well as the policy declaration [Doc. No. 5-
1], the Court finds that Plaintiff fails to plead sufficient allegations related to either prong
of Indiana’s test. 5 At most, Plaintiff alleges that CSAA Fire is part of the AAA “reciprocal
insurance exchange,” and, therefore, all AAA “subsidiaries and affiliated companies can
be held liable for bad faith and breach of contract.” But the Court is not convinced that
these generalized allegations tend to show that CSAA Fire was a “mere instrumentality” of
any other AAA entity, as required under Indiana law.
Further, the Complaint is devoid of any allegations going to the second prong of
Indiana’s test—i.e., that misuse of the corporate form would constitute a fraud or promote
injustice.6 Plaintiff’s allegations are the type of “conclusory statements” that the Court may
5 Typically, the Court accepts the “well-pleaded factual allegations of the complaint as true for
purposes of resolving a motion under Rule 12(b)(6).” Toone v. Wells Fargo Bank, N.A., 716 F.3d
516, 521 (10th Cir. 2013). But the Court may review “documents referred to in the complaint if
the documents are central to the plaintiff's claim and the parties do not dispute the documents'
authenticity.” Id. (quoting Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010)). Here, the
policy’s declarations page is central to Plaintiff’s claims, and Plaintiff does not dispute its
authenticity.
6 The Court’s conclusion is further supported by the policy’s declaration page, which references
“CSAA General Insurance Company,” not CSAA Fire.
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disregard, and, in so doing, there are no other factual allegations to support Plaintiff’s
claims against CSAA Fire. See Khalik, 671 F.3d at 1191.
CONCLUSION
For these reasons, as fully set forth herein, CSAA Fire’s Motion to Dismiss [Doc.
No. 5] is GRANTED. Plaintiff’s claims against CSAA Fire are DISMISSED without
prejudice.
IT IS SO ORDERED this 21 st day of January, 2025.
TIMOTHY 	. DeGIUSTI
Chief United States District Judge
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