Out West Restaurant Group Inc. v. Affiliated FM Insurance Company

Background

Out West Restaurant Group Inc., Cerca Trova Steakhouse, and Cerca Trova Southwest Restaurant Group sued Affiliated FM Insurance Company over insurance coverage. The plaintiffs alleged that Affiliated refused to pay claims under a policy covering “all risks of physical loss or damage,” including additional coverage for communicable disease and business interruption. They claimed that the COVID-19 pandemic and the virus’s presence at their restaurant locations caused covered physical loss or damage and triggered coverage.

The plaintiffs asserted claims for declaratory judgment, breach of contract, and breach of the implied covenant of good faith and fair dealing. They alleged that Affiliated failed to conduct a thorough, fair, and objective investigation of their claims.

Motion and Analysis

Affiliated moved to dismiss under Federal Rule of Civil Procedure 41 and to strike allegations under Rule 12(f). It argued that the complaint violated Rule 8 because it was unnecessarily long, repetitive, contained immaterial material and legal arguments, and included needless citations to evidence. Affiliated alternatively asked for a more definite statement or for specific allegations to be stricken.

The court rejected most of these objections. It held that length alone was not enough to dismiss a complaint under Rule 8, which requires a short and plain statement giving the defendant fair notice of the claims and their grounds. The court found that the complaint was organized, understandable, and sufficiently clear about the losses alleged and the reasons the plaintiffs believed those losses were covered. The court also found that the COVID-19 allegations and the descriptions of the restaurant business were relevant to the plaintiffs’ coverage theories. For those reasons, it declined to order a more definite statement or strike the challenged allegations.

The court separately held that the complaint’s extensive use of footnotes did not comply with Rule 10(b), which requires claims and defenses to be stated in numbered paragraphs, each limited as far as practicable to a single set of circumstances. The court also noted that pleading evidence, rather than ultimate facts, is disfavored under the federal rules.

Disposition

The court granted Affiliated’s motion and dismissed the complaint with leave to amend. It ordered the plaintiffs to file an amended complaint within 30 days. The opinion addressed the complaint’s compliance with the pleading rules and did not decide whether the plaintiffs were entitled to insurance coverage or whether Affiliated breached the policy or its duty of good faith.