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`Case 3:20-cv-00948-D Document 42 Filed 01/12/21 Page 1 of 16 PageID 1025Case 3:20-cv-00948-D Document 42 Filed 01/12/21 Page 1 of 16 PageID 1025
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF TEXAS
`DALLAS DIVISION
`
`CHRISTIE JO BERKSETH-ROJAS
`DDS, individually and on behalf of all
`others similarly situated,
`
`Plaintiff,
`
`VS.
`
` §
` §
` §
` §
` §
` § Civil Action No. 3:20-CV-0948-D
` §
` §
`ASPEN AMERICAN INSURANCE §
`COMPANY,
` §
` §
` §
`
`Defendant.
`
`MEMORANDUM OPINION
` AND ORDER
`
`The instant motion to dismiss under Fed. R. Civ. P. 12(b)(6) presents the question
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`whether plaintiff, a dentist, has plausibly pleaded a breach of contract or declaratory
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`judgment claim based on an insurer’s failure to cover COVID-19 virus-based losses under
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`an “all risk” commercial property insurance policy that requires direct physical damage or
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`loss to property. Concluding that she has not, the court grants the insurer’s motion to dismiss
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`and also grants plaintiff leave to replead.
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`I
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`This is an action by plaintiff Christie Jo Berkseth-Rojas DDS (“Dr. Berkseth-Rojas”)1
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`against defendant Aspen American Insurance Company (“Aspen”) arising from Aspen’s
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`denial of business interruption insurance coverage for losses Dr. Berkseth-Rojas alleges she
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`1Dr. Berkseth-Rojas has also filed a motion to certify a class of plaintiffs similarly
`situated to her. This motion remains pending.
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`has suffered to her dental practice due to the COVID-192 pandemic. Dr. Berkseth-Rojas
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`purchased an “all risk” commercial property insurance policy (the “Policy”) from Aspen that
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`insured her Minneapolis, Minnesota dental practice for certain losses for the period
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`December 6, 2019 to December 6, 2020.
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`According to her first amended complaint,3 on March 19, 2020 the Governor of the
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`State of Minnesota issued an executive order that “all non-essential or elective surgeries and
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`procedures, including non-emerg[ency] or elective dental care, that utilize PPE or ventilators
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`must be postponed indefinitely.” Am. Compl. ¶ 42 (internal quotation marks omitted;
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`brackets in original). Dr. Berkseth-Rojas alleges that the presence of COVID-19 and this and
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`similar executive orders (the “Orders”) caused her to lose practice income and incur extra
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`expenses covered by the Policy, such as the cost of installing a sneeze-guard plexiglass shield
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`in the reception area. She provided a notice of a claim under the Policy to Aspen on March
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`27, 2020. On the same day, Aspen denied the claim.
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`Shortly thereafter, Dr. Berkseth-Rojas filed this lawsuit, alleging claims for breach of
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`contract and seeking a declaratory judgment that the Policy covers her business losses due
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`2I.e., “coronavirus” or “SARS-CoV-2.”
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`3In deciding Aspen’s Rule 12(b)(6) motion, the court construes the first amended
`complaint in the light most favorable to Dr. Berkseth-Rojas, accepts as true all well-pleaded
`factual allegations, and draws all reasonable inferences in her favor. See, e.g., Lovick v.
`Ritemoney Ltd., 378 F.3d 433, 437 (5th Cir. 2004).
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`to the COVID-19 pandemic and executive orders.4 Aspen moves to dismiss the suit under
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`Rule 12(b)(6) for failure to state a claim on which relief can be granted.
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`II
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` “In deciding a Rule 12(b)(6) motion to dismiss, the court evaluates the sufficiency
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`of [plaintiff’s] amended complaint by ‘accepting all well-pleaded facts as true, viewing them
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`in the light most favorable to the plaintiff.’” Bramlett v. Med. Protective Co. of Fort Wayne,
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`Inc., 855 F.Supp.2d 615, 618 (N.D. Tex.2012) (Fitzwater, C.J.) (quoting In re Katrina Canal
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`Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks and alteration
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`omitted)). To survive Aspen’s motion to dismiss under Rule 12(b)(6), Dr. Berkseth-Rojas
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`must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.
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`Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the
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`plaintiff pleads factual content that allows the court to draw the reasonable inference that the
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`defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
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`“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than
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`a sheer possibility that a defendant has acted unlawfully.” Id.; see also Twombly, 550 U.S.
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`at 555 (“Factual allegations must be enough to raise a right to relief above the speculative
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`level[.]”). “[W]here the well-pleaded facts do not permit the court to infer more than the
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`mere possibility of misconduct, the complaint has alleged—but it has not ‘shown’—‘that the
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`4The first amended complaint alleges eight counts. The four breach of contract counts
`(counts I-IV) are based, respectively, on the Practice Income, Civil Authority, Extra Expense,
`and Sue and Labor provisions. Each breach of contract claim has a corresponding
`declaratory judgment claim (counts V-VIII) based on the same provision.
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`pleader is entitled to relief.’” Iqbal, 556 U.S. at 679 (quoting Rule 8(a)(2)) (alteration
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`omitted). “Threadbare recitals of the elements of a cause of action, supported by mere
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`conclusory statements, do not suffice.” Id. at 678 (citation omitted).
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` The court turns first to Dr. Berkseth-Rojas’s claims for breach of the Policy.5
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`III
`
`A
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`Dr. Berkseth-Rojas alleges that she has suffered covered business losses due to (1) the
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`presence or spread of the COVID-19 virus generally and (2) the Orders prohibiting full
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`operation of her dental practice. She avers that these are covered causes of loss that trigger
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`Policy coverage under (1) the Practice Income provision, (2) the Extra Expense provision,
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`(3) the Civil Authority provision, and (4) the Sue and Labor provision. Dr. Berkseth-Rojas
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`asserts that the following are covered causes of loss: “[b]ecause of the spread or presence of
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`COVID-19, the air in Plaintiff’s property has become unsafe, necessitating repairs such as
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`the installation of a sneeze-guard plexiglass shield at the reception to protect patients and
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`staff.” Am. Compl. ¶ 53.
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`In addition, the functional space in the building has been
`diminished by the spread or presence of COVID-19. For
`example, the waiting room and reception area have lost their
`normal functionality and their space has been diminished.
`Plaintiff has instituted measures to repair the physical loss or
`damage such as requiring patients to wait in their cars until
`called or texted by staff, allowing only one person in the
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`5These claims are alleged in counts I-IV, based, respectively, on the Practice Income,
`Civil Authority, Extra Expense, and Sue and Labor provisions.
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`reception area at a time, and preventing adult patients from
`being accompanied.
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`Id. at ¶ 54. “The [Orders] . . . prohibited access to Plaintiff’s and the other Class member’s
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`Covered Property, and the area immediately surrounding Covered Property, in response to
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`dangerous physical conditions resulting from a Covered Cause of Loss.” Id. at ¶ 55.
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`Aspen maintains that Dr. Berkseth-Rojas has not alleged a covered loss within the
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`scope of the Policy under any of the provisions she claims. It contends that, under the
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`Practice Income, Extra Expense, Civil Authority, and Sue and Labor provisions of the Policy,
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`coverage is only triggered by direct physical damage or loss to the dental practice; likewise,
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`direct physical damage or loss to property other than the dental practice is required to trigger
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`coverage under the Civil Authority provision. Aspen contends that, to sufficiently allege that
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`any Policy provision applies, Dr. Berkseth-Rojas must assert that there has been direct
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`physical damage or loss to some property. Aspen further maintains that, under Minnesota
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`law, direct physical damage or loss means tangible, discernible alteration of insured property,
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`not merely loss of use or functional impairment of property. See D. Mot. at 10-11 (citing
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`Pentair, Inc. v. Am. Guarantee & Liability Ins. Co., 400 F.3d 613, 616 (8th Cir. 2005)
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`(rejecting argument that “direct physical loss or damage is established whenever property
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`cannot be used for its intended purpose”); Source Food Tech., Inc. v. U.S. Fid. & Guarantee
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`Co., 465 F.3d 834, 836 (8th Cir. 2006) (rejecting argument that losses due to government
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`regulation are direct physical losses to property)). On this point, Aspen notes that Dr.
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`Berkseth-Rojas alleges that “the air in [her] property has become unsafe” and that “functional
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`space in [her] building has been diminished by the spread or presence of COVID-19.” Am.
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`Compl. ¶¶ 53-54. According to Aspen, Dr. Berkseth-Rojas has not plausibly alleged that
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`COVID-19 was ever present in her building or that it damaged or altered any property.
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`Rather, Aspen maintains that any loss Dr. Berkseth-Rojas has suffered is due to the
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`COVID-19 pandemic generally and the related Orders.
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` Dr. Berkseth-Rojas responds that structural alteration is not required to show “direct
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`physical loss or damage” under the Policy, and that physical loss may exist even if the
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`structure of property remains unchanged. P. Resp. at 8. Quoting General Mills, Inc. v. Gold
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`Medal Insurance Co., 622 N.W. 2d 147, 152 (Minn. Ct. App. 2001), she maintains that,
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`under Minnesota law, “‘it is sufficient [to allege direct physical loss] to show that insured
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`property is injured in some way.’” Id. (quoting Gen. Mills, Inc., 622 N.W.2d at 152). Dr.
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`Berkseth-Rojas argues that “loss” must be interpreted differently from “damage” to avoid
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`rendering Policy terms meaningless. She posits that the presence and threat of COVID-19
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`physically alters the environment “by rendering a premises dangerous to human health.” P.
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`Resp. at 11. And she cites a number of cases in which the court found direct physical loss
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`or damage due to contamination or infestation of harmful, unseen agents like these:
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`salmonella (citing Netherlands Insurance Co. v. Main St. Ingredients, LLC, 745 F.3d 909,
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`916-17 (8th Cir. 2014)); asbestos (citing Sentinel Management Co. v. New Hampshire
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`Insurance Co., 563 N.W.2d 296, 299 (Minn. Ct. App. 1997)); lead particles (citing Stack
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`Metallurgical Services, Inc. v. Travelers Indemnity Co. of Connecticut, 2007 WL 464715,
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`at *6-9 (D. Or. 2007)); mold (citing Prudential Property & Casualty Insurance Co. v.
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`Lillard-Roberts, 2002 WL 31495830, at *8 (D. Or. 2002)); smoke (citing Oregon
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`Shakespeare Festival Association v. Great American Ins. Co., 2016 WL 3267247, at *9 (D.
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`Or. 2016), vacated by stipulation, 2017 WL 1034203 (D. Or. 2017)); and ammonia gas
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`(citing Gregory Packaging, Inc. v. Travelers Property Casualty Co., 2014 WL 6675934, at
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`*3, *6 (D.N.J. 2014)). Relying on the following allegations, Dr. Berkseth-Rojas asserts that
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`her property suffered tangible, discernible alteration due to COVID-19: “COVID-19
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`impaired her family dental office and made the property unusable in the way it had been used
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`before,” Am. Compl. ¶ 9; “[she] is unable to use her interior space in the way she had
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`previously used that space” because “[t]he probability of illness prevents the use of the
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`property,” id. at ¶ 12; she had to “drastically reduce operations at her office, and even to
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`close entirely,” because “[t]o do anything else would lead to the emergence or reemergence
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`of COVID-19 at the property,” id. at ¶ 10; “the air in [her] property has become unsafe,
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`necessitating repairs,” id. at ¶ 53; and “the functional space in the building has been
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`diminished by the spread of COVID-19,” id. at ¶ 54.
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`Finally, Dr. Berkseth-Rojas argues that the presence or suspected presence of
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`COVID-19 makes it too dangerous to use her property as it was designed to be used. She
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`maintains that she had to reduce her operations and could not perform her business as usual
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`because that could cause the “emergence or reemergence of COVID-[19] at the property.”
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`D. Resp. at 17.
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`Aspen maintains that Dr. Berkseth-Rojas essentially seeks coverage not for physical
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`loss or damage to her property, but for loss due to her inability to fully use her property for
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`its intended purpose. It points to her allegations that she is “unable to use her interior space
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`in the way she had previously used that space,” D. Reply at 3 (quoting Am. Compl. ¶ 12),
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`and argues that, under Minnesota law, loss of intended use does not trigger coverage under
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`the Policy. According to Aspen, “physical loss” means permanent dispossession of property,
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`not impaired use of property. Regarding physical damage, Aspen maintains that Dr.
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`Berkseth-Rojas has not alleged any infestation by a harmful agent; instead, she only
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`speculates generally that “the air in [her] property has become unsafe,” Am. Compl.¶ 9, and
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`that the “probability of illness prevents the use of [the] property,” Am. Compl. ¶ 53. Aspen
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`further complains that Dr. Berkseth-Rojas has failed to address Seifert v. IMT Insurance Co.,
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`___ F.Supp.3d ___, 2020 WL 6120002 (D. Minn. Oct. 16, 2020), in which a Minnesota
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`district court dismissed a complaint like hers for the reasons adduced by Aspen, and she
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`relies instead on cases decided by a federal court in Missouri under Missouri law.6
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`B
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`The parties agree that Dr. Berkseth-Rojas’ claims are governed by Minnesota law.
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`Under Minnesota law, “the interpretation of an insurance contract is a question of law.”
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`Seifert, 2020 WL 6120002, at *2 (citation omitted). If the language of an insurance policy
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`is clear and unambiguous, courts must enforce it as written. Selective Ins. Co. of Am. v.
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`Cmty. Living Options, Inc., 2019 WL 4011335, at *2 (D. Minn. 2019). The policy should
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`be construed as a whole, giving effect to each contract term and provision. Sherwin-Williams
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`6Dr. Berkseth-Rojas filed a notice of supplemental authority on December 2, 2020.
`This notice relies as well on decisions of non-Minnesota courts.
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`Co. v. Beazley Ins. Co., Inc., 2020 WL 4226866, at *3 (D. Minn. 2020). It is the insured’s
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`burden to demonstrate that coverage exists, and it is the insurer’s burden to establish that any
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`exclusion applies. Midwest Family Mut. Ins. Co. v. Justkyle, Inc., 2018 WL 3475486, at *6
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`(D. Minn. 2018).
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`C
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` The Policy is an “all risk” policy that provides coverage “for all direct physical
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`damage”—except for damage that is expressly excluded—“caused by or resulting from any
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`covered cause of loss.” P. Am. Compl. Supp. at 50 (bold font omitted). “Covered cause of
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`loss” is defined as “ALL RISK OF DIRECT PHYSICAL LOSS” except as expressly
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`excluded by the Policy. Id. at 67.
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`Dr. Berkseth-Rojas seeks payment under the Policy under four provisions: the Practice
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`Income provision, the Extra Expense provision, the Civil Authority provision, and the Sue
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`and Labor provision.
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` The Practice Income provision states:
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`[Aspen] will pay for the actual loss of practice income you
`sustain, or the Valued Daily Limit, as described under Limits of
`Insurance provision III.E.6., due to the necessary suspension of
`your practice during the period of restoration. The suspension
`must be caused by direct physical damage to the building or
`blanket dental practice personal property at the described
`premises caused by or resulting from a covered cause of loss or
`power failure as described under Paragraph I.B.8.
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`[Aspen] will only pay for loss of practice income that occurs
`within 12 consecutive months after the date of direct physical
`damage or power failure as described under Paragraph I.B.8.
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`Practice income coverage shall apply separately to each location
`affected by such suspension of practice.
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`P. Am. Compl. Supp. at 52 (bold font omitted).
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`The Extra Expenses provision states:
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`Extra expense means the extra expenses necessarily incurred by
`you during the period of restoration to continue normal services
`and operations which are interrupted due to damage by a
`covered cause of loss to the premises described, or power failure
`as described under Paragraph I.B.8. You will exercise due
`diligence and dispatch to restore normal practice services.
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`[Aspen] will only pay for extra expenses that you incur within
`12 consecutive months after the date of direct physical damage
`or power failure as described under Paragraph I.B.8.
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`Id. at 53 (bold font omitted).
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`The Civil Authority provision states:
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`[Aspen] will pay for the actual loss of practice income and rents
`you sustain caused by action of civil authority that prohibits
`access to the described premises due to the direct physical
`damage to property, other than at the described premises, caused
`by or resulting from any covered cause of loss. This coverage
`will apply for a period of up to 30 consecutive day from the time
`of that action.
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`Id. at 56 (bold font omitted).
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`Under the “Sue and Labor” provision,
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`[Dr. Berkseth-Rojas] must see that the following [is] done in the
`event of damage to covered property: . . . 4. Take all reasonable
`steps to protect the covered property from further damage by a
`covered cause of loss. If feasible, set the damaged property
`aside and in the best possible order for examination. Also keep
`a record of your expenses for emergency and temporary repairs,
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`for consideration in the settlement of the claim. This will not
`increase the limit of insurance.
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`Id. at 72 (bold font omitted).
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`D
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`Under the Practice Income, Extra Expense, and Civil Authority provisions, coverage
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`is only triggered for “direct physical damage or loss.” The court therefore begins by
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`addressing whether Dr. Berkseth-Rojas has plausibly pleaded that her property—or, for
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`coverage under the Civil Authority provision, other property—has suffered direct physical
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`damage or loss.
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` Under Minnesota law, “‘it is sufficient to show that the ‘insured property is injured
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`in some way, which may be something less than structural damage or some other tangible
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`injury.’” Seifert, 2020 WL 6120002, at *3 (quoting Archer Daniels Midland Co. v. Aon Risk
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`Servs., Inc. of Minn., 2002 WL 31185884, at *3 (D. Minn. 2002), aff’d, 356 F.3d 850 (8th
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`Cir. 2004)). For example, there may be direct physical loss or damage when a premises is
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`contaminated or infiltrated by asbestos or smoke. Id. (citing examples). But to sufficiently
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`plead direct physical loss or damage, “[a]ctual physical contamination of the insured property
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`is still required.” Id. (citing Source Food Tech., Inc., 465 F.3d at 837-38). It is not enough
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`to allege only that the property has suffered a loss of use or function. Id. (citing Pentair, Inc.,
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`400 F.3d at 616). Stated another way, it is legally insufficient for a plaintiff merely to allege
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`that steps taken to address a threat to human health have caused her property to suffer a loss
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`of use or function, without also plausibly pleading that the insured property has itself been
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`physically contaminated.
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`In Seifert a hair salon owner sued his insurer for denying his claim for lost business
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`income resulting from the closure of his salon due to COVID-19 and the Orders. Id. at *1.
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`The owner could not allege that his property was actually contaminated or damaged by
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`COVID-19. Id. at *3. The court granted the insurer’s motion to dismiss and explained that,
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`unlike cases in which a property was actually contaminated by asbestos or smoke, the
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`owner’s inability to provide haircuts and salon services was not due to “actual infiltration and
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`contamination of the properties.” Id.
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`Dr. Berkseth-Rojas alleges that she has had to undertake measures to prevent the
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`spread or transmission of COVID-19 and has lost the full functionality of her dental practice
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`in so doing. For example, she asserts that it has been necessary for her to guard against the
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`“spread or presence of COVID-[19]” by installing a plexiglass shield at the reception desk,
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`Am. Compl. ¶ 53, and that she has lost functional space in her office because of the “spread
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`or presence of COVID-19,” id. at ¶ 54. She alleges that she “was required to drastically
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`reduce operations at her office, and even to close entirely. To do anything else would lead
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`to the emergence or reemergence of COVID-19 at the property.” Am. Compl. ¶ 10. But the
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`amended complaint is defective under this court’s conclusion above that it is legally
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`insufficient for a plaintiff merely to allege that steps taken to address a threat to human health
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`have caused her property to suffer a loss of use or function, without also plausibly pleading
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`that the insured property has itself been physically contaminated.
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`Like the salon owner in Seifert, Dr. Berkseth-Rojas has failed to sufficiently allege
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`that her property, or any other property, has been actually contaminated or infiltrated by
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`COVID-19, or that her claimed losses are due to infiltration or contamination of property by
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`COVID-19. Rather, she pleads that she was unable to use her property in the way she did
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`before the pandemic due to the Orders and due to steps taken to prevent the “emergence or
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`reemergence” of COVID-19. As the Seifert court explained, direct physical loss or damage
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`requires something more than mere loss of use or function. Seifert, 2020 WL 6120002, at
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`*3 (citing Pentair, Inc., 400 F.3d at 616). Dr. Berkseth-Rojas has only alleged loss of use
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`and function of her dental practice. She has not asserted that her property has been actually
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`contaminated by COVID-19; therefore, under Minnesota law, she has not sufficiently alleged
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`that she suffered direct physical loss or damage to trigger coverage under the Policy. See
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`Source Food Tech., Inc., 465 F.3d at 837-38.
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`E
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`Nor has Dr. Berkseth-Rojas sufficiently alleged a breach of contract claim based on
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`the “Sue and Labor” provision of the Policy. That provision obligates her to “[t]ake all
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`reasonable steps to protect the covered property from further damage by a covered cause of
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`loss. If feasible, set the damaged property aside and in the best possible order for
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`examination.” P. Am. Compl. Supp. at 72 (bold font omitted). Assuming arguendo that this
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`provision confers some insurance coverage and is not merely an obligation on Dr.
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`Berkseth-Rojas as the insured, the court holds for the same reasons set out above that she has
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`not alleged that there is any “further damage” or “damaged property” so as to trigger this
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`provision.
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`The court therefore grants Aspen’s motion to the extent it seeks dismissal of Dr.
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`Berkseth-Rojas’ breach of contract claims.
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`IV
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` Dr. Berkseth-Rojas’s corresponding declaratory judgment claims7 must also be
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`dismissed.
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`A
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` Dr. Berkseth-Rojas seeks declarations that she has suffered insured losses under the
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`Policy as covered by the Practice Income, Civil Authority, Extra Expense, and Sue and Labor
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`provisions and that Aspen is obligated to pay for the full amount of these losses incurred
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`related to COVID-19 and the Orders. These declarations track Dr. Berkseth-Rojas’ breach
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`of contract claims. For the same reasons that she has failed to plausibly allege breach of
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`contract claims, she has also failed to plausibly allege declaratory judgment claims.
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`B
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`But even had Dr. Berkseth-Rojas alleged plausible declaratory judgment claims, these
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`claims would still be subject to dismissal.
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`The corresponding declaratory judgments that she seeks overlap with the allegations
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`underlying her contract claims and will be “resolved in the context of [her] breach of contract
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`7These claims are alleged in counts V-VIII, based, respectively, on the Practice
`Income, Civil Authority, Extra Expense, and Sue and Labor provisions.
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`actions.” Xtria LLC v. Tracking Sys., Inc., 2007 WL 1791252, at *3 (N.D. Tex. June 21,
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`2007) (Fitzwater, J.) (citation omitted). Accordingly, her declaratory judgment claims are
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`subject to dismissal as well because they are duplicative of her contract claims. See Kougl
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`v. Xspedius Mgmt. Co. of Dall./Fort Worth, L.L.C., 2005 WL 1421446, at *4 (N.D. Tex. June
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`1, 2005) (Fitzwater, J.) (dismissing claims for declaratory relief when they would be resolved
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`in context of breach of contract actions); Landscape Design & Constr., Inc. v. Transport
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`Leasing/Contract, Inc., 2002 WL 257573, at *10 (N.D. Tex. Feb.19, 2002) (Fitzwater, J.)
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`(dismissing declaratory judgment action that sought resolution of substantive claims that
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`were already basis of lawsuit).
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`The court grants Dr. Berkseth-Rojas leave to replead.
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`V
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`“[D]istrict courts often afford plaintiffs at least one opportunity to cure pleading
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`deficiencies before dismissing a case, unless it is clear that the defects are incurable or the
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`plaintiffs advise the court that they are unwilling or unable to amend in a manner that will
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`avoid dismissal.” In re Am. Airlines, Inc., Privacy Litig., 370 F.Supp.2d 552, 567-68 (N.D.
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`Tex. 2005) (Fitzwater, J.) (quoting Great Plains Tr. Co. v. Morgan Stanley Dean Witter &
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`Co., 313 F.3d 305, 329 (5th Cir. 2002)). Because Dr. Berkseth-Rojas has not stated that she
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`cannot, or is unwilling to, cure the defects that the court has identified, the court grants her
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`28 days from the date this memorandum opinion and order is filed to file a second amended
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`complaint.
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`* * *
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`For the reasons explained, the court grants Aspen’s motion to dismiss and grants Dr.
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`Berkseth-Rojas leave to file a second amended complaint.8
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`SO ORDERED.
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`January 12, 2021.
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`_________________________________
`SIDNEY A. FITZWATER
`SENIOR JUDGE
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`8Aspen also moves for a protective order staying all discovery pending a decision on
`Aspen’s motion to dismiss. Because the court is today deciding that motion to dismiss, it
`denies Aspen’s motion to stay.
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