# Kretulskie v. Madison National Life Insurance Company, Inc.

> District Court, M.D. Pennsylvania · June 17, 2021

URL: https://www.frixlaw.com/law-library/cases/10410243

## Case

- **Court:** District Court, M.D. Pennsylvania
- **Decided:** June 17, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10410243

## How later opinions describe it (automated extraction)

- holding that plaintiffs theory that defendants acted for their business advantage and benefit belies the notice that defendants acted purely out of malice and without a business motive, thereby precluding a civil conspiracy claim
- declining to infer malice where complaint explicitly averred that “all parties reaped financial or career benefits, at Plaintiff's expense” as a result of the alleged conspiracy

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
RUTA KRETULSKIE,
Plaintiff, 3:18-CV-1357
V. : (JUDGE MARIANI)
MADISON NATIONAL LIFE
INSURANCE COMPANY, INC.,
ENCORE UNLIMITED, LLC, and :
DISABILITY INSURANCE :
SPECIALISTS, LLC,
Defendants.
MEMORANDUM OPINION
I. INTRODUCTION AND PROCEDURAL HISTORY
Presently before the Court is a Report and Recommendation (“R&R”) (Doc. 36) by
Magistrate Judge Carlson in which he recommends that Defendant Encore Unlimited, LLC’s
Motion to Dismiss (Doc. 27) be granted. Plaintiff Ruta Kretulskie filed Objections (Doc. 38)
to the Magistrate Judge’s R&R to which Defendant Encore Unlimited, LLC (“Encore”) filed a

response (Doc. 39).
On July 9, 2018, Plaintiff Kretulskie filed a Complaint in the Court of Common Pleas
of Schuylkill County against Defendants Madison National Life Insurance Company, Inc.
(“Madison”), Encore, and Disability Insurance Specialists, LLC (“DIS”). (Doc. 1-3).
Following the removal of this action to federal court, Plaintiff filed an Amended Complaint
alleging Breach of Contract by Madison (Count 1), violation of 42 Pa. C.S.A. § 8371 by

Madison (Count II), violation of 73 P.S. § 201-1 by Madison (Count Ill), Civil Conspiracy by
all Defendants (Count IV), and Common Law Bad Faith by Madison (Count V). (Doc. 6).
Madison and DIS, both filed Answers to the Amended Complaint (Docs. 8, 9) and Encore
filed a motion to dismiss the civil conspiracy claim against it (Doc. 27).
The Honorable A. Richard Caputo referred Defendant's motion to dismiss to
Magistrate Judge Carlson for the preparation of a Report and Recommendation. On
October 9, 2019, the Magistrate Judge issued the R&R (Doc. 36) presently pending before
this Court. Following the passing of Judge Caputo, this action was reassigned to the
undersigned on March 23, 2020.
Il. ANALYSIS
A District Court may “designate a magistrate judge to conduct hearings, including
evidentiary hearings, and to submit to a judge of the court proposed findings of fact and
recommendations for the disposition” of certain matters pending before the Court. 28 U.S.C.
§ 636(b)(1)(B). Ifa party timely and properly files a written objection to a Magistrate Judge's
Report and Recommendation, the District Court “shall make a de novo determination of those
portions of the report or specified proposed findings or recommendations to which objection
is made.” Id. at § 636(b)(1)(C); see also, Brown v. Astrue, 649 F.3d 193, 195 (3d Cir. 2011);
M.D. Pa. Loca Rule 72.3.
Here, following a careful analysis of the case law, the R&R recommended that Count
lV (Civil Conspiracy) be dismissed without prejudice on the basis that this claim “does not

fully satisfy the requisites of state law by adequately pleading that the defendants acted with

the sole purpose of injuring the plaintiff.” (Doc. 36, at 16). “Notably missing from this
conspiracy count in its current form [is] any allegation that the defendants acted with malice

as that term is defined under Pennsylvania law; that is, well-pleaded facts showing that the
sole purpose of the conspiracy was to injure the plaintiff and that this intent was without
justification.” (Id. at 4). In performing his analysis, Judge Carlson explained that
“Pennsylvania law requires what is described as a showing of ‘unadulterated malice,’
concerted activity undertaken for the sole purpose of harming the plaintiff, in order to sustain

a civil conspiracy claim.” (/d. at 12) (emphasis in original). The R&R further recognized that
“some federal District courts have suggested a differing opinion regarding the definition of
‘malice’ and whether the sole purpose of a civil conspiracy must be to injure the plaintiff’,
but noted that the reasoning of those courts “goes beyond existing Pennsylvania's civil
conspiracy precedent to allow more claims to proceed” and that “the majority of courts
within this circuit follow the ‘unadulterated malice’ standard.” (/d. at 12 n.2).
As noted by Judge Carlson, a large number of courts within the Third Circuit have
found that the “malice”, i.e. intent to injure, element of a Pennsylvania law civil conspiracy
Claim, requires an allegation that the sole purpose of the conspiracy was to injure the
plaintiff. (See R&R, Doc. 36, at 11-12) (collecting cases). As similarly explained by a Court
in the Eastern District of Pennsylvania:
“Malice requires an allegation that the sole purpose of the conspiracy was to
injure the plaintiff,” and that this intent was without justification. Doltz v. Harris

& Assoc., 280 F.Supp.2d 377, 389 (E.D. Pa. 2003). Thus, a showing that a
person acted for professional reasons, and not solely to injure the plaintiff,
negates a finding of malice. See Sarpolis v. Tereshko, 26 F.Supp.3d 407, 423-
24 (E.D. Pa. 2014) (declining to infer malice where complaint explicitly averred
that “all parties reaped financial or career benefits, at Plaintiff's expense” as a
result of the alleged conspiracy), affd, 625 Fed.Appx. 594 (3d Cir. 2016);
Giordano v. Claudio, 714 F.Supp.2d 508, 534 (E.D. Pa. 2010) (“A showing that
an alleged conspirator acted for professional or business benefit will preclude
a finding of malice.”); Bro-Tech Corp. v. Thermax, Inc., 651 F.Supp.2d 378, 419
(E.D. Pa. 2009) (holding that plaintiffs theory that defendants acted for their
business advantage and benefit belies the notice that defendants acted purely
out of malice and without a business motive, thereby precluding a civil
conspiracy claim); Thompson Coal Co., 412 A.2d at 472 (noting that the intent
to injure must be without justification, which cannot exist when an act is merely
done “with the intention of causing temporal harm, without reference to one's
own lawful gain, or the lawful enjoyment of one's own rights”), quoting
Rosenblum v. Rosenblum, 320 Pa. 103, 181 A. 583, 585 (1935).
DePuy Synthes Sales, Inc. v. Globus Med., Inc., 259 F.Supp.3d 225, 248 (E.D. Pa. 2017).
See also, Spear v. Fenkell, 2016 WL 5661720, *55 n.68 (E.D. Pa. 2016) (“The federal cases
in this district applying Thompson's malice standard to dismiss conspiracy counts are
legion.”) (collecting cases); Agrofresh Inc. v. Essentiv LLC, 2020 WL 7024867, *12 (D.Del.
2020) (“Many . . . cases have relied on Thompson Coal to find that civil conspiracy under
Pennsylvania law requires evidence that the co-conspirators acted with the sole purpose of
harming the plaintiff.”) (collecting cases); PDC Machines. Inc. v. Nel Hydrogen A/S, 2018
WL 3008531, “5 (E.D. Pa. 2018) (recognizing that “numerous courts in this district -

including this Cour: — have interpreted [Thompson] as construing the malice element
narrowly to require proof that the sole purpose of the conspiracy is to cause harm to the
party who has been injured” but acknowledging that a “minority of courts have taken a

different view, holding that when improper actions form the basis for the civil conspiracy
claim, then the injured party can adequately allege an intent to injure even if the
conspirators also monetarily benefitted from the conspiracy.”) (internal quotation marks
omitted).
In addressing the R&R, Plaintiff properly “acknowledges that proof of malice is an
essential part of a cause of action for conspiracy as well as the case law that holds that
‘concerted action motivated by a desire to promote some gain for the defendant does not
meet this malice requirement.” (Doc. 38, at 10). However, as recognized in the R&R,
Plaintiff points to the “split in authority on the issue of whether or not a malicious
undertaking for personal gain takes the concerted action outside of the bounds of the
elements of a civil conspiracy”, and argues that this Court should adopt the reasoning of
those courts which have found that proof of malice does not require that the sole purpose of
the conspiracy was to injure the plaintiff.
Nonetheless, Plaintiff, without citation, first appears to argue that she did allege that
the sole purpose of the civil conspiracy was to injure her. Plaintiff states that she “alleges in
her Amended Complaint that Defendant Encore clearly acted for the sole purpose of injuring
Plaintiff by denying her claims and effectuating the non-payment benefits under the Policy to
which she was clearly entitled and [did] so to appease Defendant Madison...” (Doc. 38, at
see also, id. at 17 (claiming Defendants “clearly combined to act overtly in an otherwise
legal act for the unlawful and sole purposes of injuring Plaintiff by denying Plaintiff the

disability benefits to which she is clearly entitled under the terms of the Policy for their own
selfish purposes”). However, Plaintiffs Amended Complaint does not anywhere allege that
Encore acted “for the sole purpose of injuring Plaintiff’. Further, Plaintiffs own argument
that Defendants acted for the “sole purpose” of injuring Plaintiff is contradicted by her
statements that Encore’s actions were done to “appease Defendant Madison’, that Encore

was “captive” to Madison for “substantial business referrals”, and that the Defendants acted
“for their own selfish purposes” (id. at 7, 17).
Additionally, Plaintiff cannot escape the factual allegations set forth in her Amended
Complaint which repeatedly plead that Defendants acted to further their own financial and
business purposes. The Amended Complaint alleges that
Defendant Madison knows that Defendant Encore and Defendant DIS are
captive to and dependent upon referrals from insurance carriers like Defendant
Madison, will be biased in favor of Defendant Madison, and will deny otherwise
legitimate claims in order to save Defendant Madison money and earn
themselves money by supporting the denial of otherwise legitimate claims.
(Doc. 6, J 86). The Amended Complaint also alleges that Encore and DIS denied Plaintiff's
claim in order to “appease” Madison, that Encore and DIS are “captive” to Madison for
“substantial business referrals”, and that Defendants “conspired to wrongfully deny Plaintiffs
Claim for their own selfish purposes.” (/d. at ff] 87, 89). Plaintiffs Amended Complaint
lacks any allegation that Encore acted for the “sole purpose” of injuring Kretulskie, nor does
Plaintiff's Amended Complaint even allege that one of Encore’s purposes was to injure
Plaintiff.

Although the Amended Complaint is clearly devoid of aiiegations to support a

reasonable inference that the defendants’ “sole purpose” was to injure Plaintiff, even if this
Court were to accept Plaintiffs argument that the injury to a plaintiff need not be the “sole
purpose”, Plaintiff has failed to set forth any allegations to support a claim that the injury to
Plaintiff was one of the purposes.
Plaintiff, citing to a small number of cases where courts have permitted a civil
conspiracy claim to proceed in the absence of allegations that the “sole purpose” was to
harm the plaintiff, argues that “the fact that an action for civil conspiracy advances one’s
business interest is not sufficient to warrant summary dismissal.” (Doc. 38, at 17) (underline
in original; bold omitted); (see also, id. at 10-17). Nonetheless, the cases cited by Plaintiff in
support of her argument require that the defendants in the conspiracy had an intent to injure
the plaintiff and that the injury was not merely an incidental side effect. Plaintiff has failed to
set forth well-pleaded facts to support such a claim.
Plaintiff relies heavily on RDK Truck Sales and Service Inc., v. Mack Trucks, Inc.,
2009 WL 1441578 (E.D.Pa. 2009). (See Doc. 38, at 10-12). In relevant part, in RDK, the
Defendant, Mack Trucks, filed a counterclaim against Plaintiff RDK seeking “recovery for
damages caused by RDK's long standing conspiracy to deceive and defraud Mack.” RDK,
2009 WL 1441578 at *1 (internal quotation marks omitted). Defendant alleged that “RDK
and several Mack dealers agreed that the dealers would purchase trucks from Mack for
resale to RDK by misrepresenting to Mack that the trucks were to be sold to other

customers. Through this ruse, the conspirators induced Mack to provide inflated discounts,
thereby both damaging Mack and unjustly enriching RDK.” /d. (internal quotation marks
omitted). In analyzing Plaintiffs motion for summary judgment on Defendant's civil
conspiracy claim, Judge Buckwalter first noted that “Thompson Coal and its progeny are
clear, ... to sustain a claim of civil conspiracy, malice or an intent to injure must be the sole
intent. Thompson Coal, 412 A.2d at 472. But the fact that an action advances one's
business interest is not sufficient to warrant summary dismissal.” Id. at * 32. The Court
found that Defendant's allegations and supporting evidence “could lead a reasonable fact-
finder to infer that Mack's injuries were not simply an incidental side-effect of otherwise
legitimate business interests, but rather the fruits of an unlawful conspiracy.” /d. at “33.
However, in a subsequent opinion in a different case, Judge Buckwalter dismissed a civil
conspiracy claim, stating that “according to Plaintiff's own allegations, the Defendants’
alleged improper actions were taken for the purpose of economically benefitting them in
their new endeavor, but had the side effect of affecting Synthes's operations and
profitability. At no point in the Amended Complaint does Plaintiff expressly state that any
purpose of the conspiracy — let alone the sole purpose — was to injure Synthes.” Synthes,
Inc. v. Emerge Med., Inc., 2012 WL 4205476, *37 (E.D. Pa. 2012). The Court distinguished
the facts of its prior opinion in RDK, explaining that “[i]n the foregoing cases [including
RDK], the complaints contained at least some allegations that the purpose of the conspiracy
was to injure the plaintiff. A thorough review of the present case, on the other hand, reveals

no such allegation to indicate that Defendants acted with the sole intent to injure Plaintiff,
with economic benefit being only an incidental side effect.” /d. at “37 n. 31.
Similar to Synthes, the Court's decision in RDK is distinguishable from the facts in

this case. Kretulskie’s Amended Complaint lacks any allegation that the purpose of the

conspiracy was to injure her, let alone the sole purpose. As noted above, Plaintiff's
Amended Complaint specifically alleges that Defendants acted to further their own financial
and business purposes and “conspired to wrongfully deny Plaintiffs Claim for their own
selfish purposes.” (Id. at ]{] 86, 87, 89) (emphasis added). Thus, in the absence of any
factual allegations in the Amended Complaint that the purpose of the conspiracy was to
injure Kretulskie, and the explicit allegations that the defendants conspired to advance their

own business interests, it is evident that Plaintiff has failed to state a claim for civil
conspiracy. See DePuy, 259 F.Supp.3d at 248-249 (“Plaintiff cites RDK Truck Sales &
Serv. v. Mack Trucks, Inc... . for the proposition that the mere fact that the defendants’
improper actions were economically beneficial to them does not preclude a civil conspiracy
claim. . . . Unlike that case, however, the complaint in this matter explicitly alleges that an
aim of the conspiracy, and not merely a side effect, was to benefit Globus Medical. Such
allegations belie any notion that defendants were acting solely to injure plaintiff. Therefore, |
will dismiss the claim.”).
Plaintiffs reliance on several other cases (Doc. 38, at 13-17) is equally misplaced
where those cases required, at minimum, an allegation of “mixed motives”, one of which

must be to injure the plaintiff. See Ozburn-Hessey Logistics, LLC v. 721 Lagistics, LLC, 40

F.Supp.3d 437, 454 n.4 (E.D.Pa. 2014) (expressing doubt that civil conspiracy claim

requires the “sole purpose” was to injure the plaintiff and suggesting Thompson left open
the question of whether defendants may be liable if they act with “mixed motives.’);’
Minehart v. McElhinny, 2017 WL 5885730, *5 (E.D.Pa. 2017) (“While Judge Minehart does

assert numerous goals of the conspiracy that may constitute ‘legitimate business interests,
he also asserts that PMA promoted a book that it knew or should have known contained
false statements of fact and that PMA ignored the truth, failed to investigate the truth and/or
purposely made false statements about him with malice and without legal justification.
Therefore, pursuant to Ozburn-Hessey, the Complaint plausibly alleges that one of the
motives of the conspiracy was to injure Judge Minehart. Likewise, under the Daniel Boone
[Area School Dist. v. Lehman Bros., Inc., 187 F.Supp.2d 400 (W.D.Pa. 2002) interpretation

1 Although only a small number of courts have cited to Ozburn-Hessey’s interpretation of
Thompson, and even fewer have followed its reasoning, those that have agreed with its analysis of
Thompson have nonetheless required a specific intent to injure the plaintiff. See e.g Aetna Inc. v. Insys
Therapeutics, Inc., 324 F.Supp.3d 541, 558-559 (E.D. Pa. 2018) (explaining that “[w]hile some courts have
construed [Thompson] as requiring proof that the alleged conspirators acted ‘solely to injure’ the plaintiffs,
with no objective of personal gain, such an interpretation does not comport with the decision’s reasoning. . .
. The court [in Thompson] does not hold that a defendant's interest in economic gain would, in itself, justify
or negate specific intent to cause injury, particularly if the intended means for achieving such gain were
unlawful and illegitimate” and thus finding that ‘if the Court accepts as true that [Defendant] Insys
employees acted within the scope of their employment and intentionally used false information to induce
[Plaintiff] Aetna to pay claims it otherwise would not have paid, then the Court can reasonably infer that
Insys harbored specific intent to injure Aetna that satisfies the malice element of a civil conspiracy
claim.”)(emphasis added); Minehart v. McElhinny, 2017 WL 5885730, *5 (E.D.Pa. 2017) (“pursuant to
Ozburn-Hessey, the Complaint plausibly alleges that one of the motives of the conspiracy was to injure
Judge Minehart’)(emphasis added).
As discussed herein, Plaintiff Kretulskie has not pleaded any intent to harm her and thus the
reasoning of these courts does not operate to save Plaintiff's civil conspiracy claim.
10

of Thompson Coal Co., the Complaint plausibly alleges malice because it can be inferred
that Judge Minehart’s injuries ‘were not simply an accidental side-effect’ of PMA’s otherwise
legitimate business interests because PMA allegedly promoted a book that it knew
contained false statements about Judge Minehart.”) (emphasis added); PDC Machines,
2018 WL 3008531 at *5 (even if a defendant benefits economically from improper actions
undertaken as part of a conspiracy, Plaintiffs allegation in the Complaint that “Nel and
Adams conspired to knowingly and intentionally misappropriate trade secrets they had
agreed to protect under their respective NDAs with PDC so as to harm PDC’s competitive
advantage” was “sufficient at the motion to dismiss stage to support the inference that
Defendants intended to harm PDC without legal justification.”) (emphasis added).
In the present action, even applying the reasoning of Minehart, PDC Machines, and
Ozburn-Hessey, Kretulskie’s civil conspiracy claim still fails where Plaintiff has not, even
inferentially, set forth any allegations of an intent to harm her by Encore and the other
defendants. Rather, even drawing all reasonable inferences in favor of Plaintiff, at best she
has set forth factual allegations which demonstrate that her injuries were an incidental side-
effect of Defendants’ actions in furthering their own business interests.
For the afore-stated reasons, the Court agrees with Judge Carlson that Plaintiff has
failed to set forth sufficient factual allegations to support the malice element of her civil
conspiracy claim. Encore’s Motion to Dismiss (Doc. 27) will thus be granted. However,
consistent with Judge Carlson’s recognition that “plaintiffs often should be afforded an

11

opportunity to amend a complaint before the complaint is dismissed in its entirety” (Doc. 36,
at 16), the Court will dismiss Count IV without prejudice to Plaintiff filing a Second Amended

Complaint to allege facts satisfying the requirements of a civil conspiracy claim pursuant to

Pennsylvania law.2
Ill. CONCLUSION
For the reasons set forth above, upon de novo review of Magistrate Judge Carlson's

R&R (Doc. 36), the Court will adopt the R&R and overrule Plaintiff's Objections (Doc. 38).
The Court will grant Defendant Encore’s Motion to Dismiss (Doc. 27) and dismiss Court IV

with leave to amend. A separate Order follows.

f
Lh Milicr _
Robert D. Mariani
United States District Judge

2 As Judge Carlson cautioned, the other elements of a civil conspiracy claim “combined with malice
pose a high burden as she amends her pleadings going forward.” (Doc. 36, at 14 n.3). Although the Court
is equally skeptical that Plaintiff can set forth sufficient factual allegations to properly plead a claim for civil
conspiracy, this Court cannot say that granting further leave would necessarily be futile. In addition, the
Court notes that the time for the completion of fact discovery ended on February 29, 2020. (Doc. 37).
Thus, this case is in a procedural posture wherein the existence of factual disputes underlying Plaintiff's
civil conspiracy claim would be better addressed on summary judgment. While the Court recognizes that
the time for filing dispositive motions expired on April 15, 2020 (Doc. 37), in light of the ruling herein, that
deadline will be extended.
Should Plaintiff believe she has a good faith basis to amend Count IV so as to include allegations
that the sole purpose of the conspiracy was to injure her, the Court suggests that the parties, should any
wish to revisit this issue, give strong consideration to doing so in the context of a motion, or cross-motions,
for summary judgment. The basis of the Court’s suggestion is easily discerned from the prior paragraph of
this footnote which points out the reality of the procedural posture of this case and strongly indicates that all
parties could benefit from presenting the validity of an amended Count IV to the Court on summary
judgment with a factual record to support their respective positions and of which the Court could avail itself.
12

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10410243. Public record. Not legal advice.