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Daily Underwriters of America, Inc. v. Caudill

United States District Court, E.D. Kentucky, Southern Division, Pikeville

December 14, 2018

DAILY UNDERWRITERS OF AMERICA, INC., Plaintiff,
v.
JOHNNY CAUDILL, Defendant.

          MEMORANDUM OPINION AND ORDER DENYING PETITION FOR DECLARATORY JUDGMENT

          CLARIA HORN BOOM UNITED STATES DISTRICT COURT JUDGE.

         This matter is before the Court on Defendant Johnny Caudill's Motion to Dismiss, or in the Alternative, Motion to File Late Answer and Third Party Claims/Counterclaims. [R. 6] On March 19, 2018 Plaintiff Daily Underwriters of America, Inc. brought this action for declaratory judgment pursuant to 28 U.S.C. § 2201 (“Declaratory Judgment Act”). [R. 1] In lieu of an answer Defendant Caudill filed the Motion to Dismiss currently before the Court. [R. 6] On May 9, 2018 the plaintiff filed its motion in response [R. 12] and on May 17, 2018 defendant filed its reply [R. 13]. For the reasons stated below, the Court declines to exercise jurisdiction pursuant to the Declaratory Judgment Act.

         I. Factual Background

         On or about August 22, 2017 Defendant Caudill, an employee of L.M. Wright Trucking, Inc., was injured when the car he was driving collided with a vehicle operated by Ethan Adams. [R. 1 at p. 3] At all times relevant to this dispute L.M. Wright Trucking carried a Commercial Auto Policy of Insurance with Daily Underwriters covering their commercial vehicles, including the one driven by Caudill. Id. at 2-3. As a result of the collision Caudill made a liability claim against Ethan Adams, who tendered to Caudill the liability limits of his policy of motor vehicle insurance provided by Kentucky Farm Bureau. Id. at 4. After asserting this claim against Adams, Caudill tendered a claim for underinsured motorist insurance benefits to Daily Underwriters, contending that he was entitled to “stack” underinsured motorists coverage for each of the 13 company vehicles covered by the Policy. Id. Daily Underwriters denied Caudill's claim that he is entitled to stack coverage, claiming that he is limited to recovery of $60, 000 because he is not a named insured or family member as defined by the policy. [R. 12 at p. 3] On March 19, 2018 Daily Underwriters brought this declaratory judgment action seeking a declaration of rights with regard to whether or not Caudill was entitled to “stacked” benefits under the Policy. [R. 1] On April 11, 2018 Defendant Caudill brought suit in Letcher Circuit Court against the estate of Ethan Adams, Kentucky Farm Bureau Insurance Company, Daily Underwriters of America, and Rockhill Insurance Company seeking damages for allegedly significant personal injuries resulting from the crash. [R. 6-1]

         II. Legal Background

         a. Subject Matter Jurisdiction

         Federal courts are courts of limited jurisdiction and therefore must have subject matter jurisdiction to hear a case. 28 U.S.C. § 1332 provides subject matter jurisdiction if the parties are from different states and the amount in controversy exceeds $75, 000. Plaintiff claims that diversity of citizenship is met as the amount in controversy exceeds $75, 000 and the parties are completely diverse. [R. 1] Because the defendant seeks $780, 000 in the state insurance dispute [R. 1 at p. 4], the Court agrees that the amount in controversy requirement is satisfied and therefore the only question at hand is whether or not diversity is improper given the existence of non-diverse, mandatory parties. Grange Mut. Cas. Co. v. Safeco Ins. Co. of America, 565 F.Supp.2d 779, 784 (E.D.Ky. 2008) (“when the applicability of an insurance policy to a particular occurrence is the question, the amount in controversy is measured by the value of the underlying claim”).

         In his motion to dismiss the defendant claims that this Court does not have subject matter jurisdiction to hear the case as there are indispensable parties that would destroy diversity but which have not been joined to this suit. [R. 6] The defendant's motion is short on specifics and simply states that due to Fed.R.Civ.P. 19 the other parties to the underlying state court action must be joined “in order to prevent potentially inconsistent or unfair verdicts and for judicial economy.” Id. The defendant does not give any reasons why the declaratory judgment action would cause potentially inconsistent or unfair verdicts or reduce judicial economy. Under the Sixth Circuit's three-part test a party is indispensable under Rule 19 if: (1) it is necessary, (2) its joinder cannot be effected, and (3) the court determines that it will dismiss the pending case rather than proceed in the case without the absentee. Laethem Equipment Co. v. Deere & Co., 485 Fed.Appx. 39, 44 (6th Cir. 2012). The initial burden rests with the moving party to show that the missing party is indispensable. Boles v. Greeneville Hous. Auth., 468 F.2d 476, 478 (6th Cir. 1972).

         Under Rule 19(a) a party is necessary if “in that person's absence, the court cannot accord complete relief among existing parties” or the un-joined party “claims an interest relating to the subject of the action and is so situated that disposing of the action in that person's absence” may impede on their rights or cause them to incur multiple or inconsistent obligations. Fed.R.Civ.P. 19(a)(1)(A)-(B). The Sixth Circuit has held that Rule 19 is “not to be applied in a rigid manner but should instead be governed by the practicalities of the individual case.” Smith v. United Bhd. of Carpenters & Joiners of Am., 685 F.2d 164, 166 (6th Cir. 1982). Further, “simply because some forms of relief might not be available due to the absence of certain parties, the entire suit should not be dismissed if meaningful relief can still be accorded.” Id.

         Defendant has failed to show that the absent parties are required under Rule 19(a)(1)(A) because complete relief is possible between the present parties. Regarding completeness, the possibility of future litigation amongst the relevant parties does not mandate joinder, as Rule 19(a)(1) is concerned only with those who are already parties. Sch. Dist. of Pontiac v. Sec'y of the United States Dep't of Educ., 584 F.3d 253, 265 (6th Cir. 2009). The relief being requested - a determination of the potential total liability between the defendant insured and the plaintiff insurer - can be completely decided without input from the other two insurers in the state action, neither of which is a party to the disputed insurance contract. Even though there exist other parties to whom a portion of the fault may be allocated, this does not mean that complete relief is impossible between the parties named in the suit. See, e.g. Laethem Equipment Co., 485 Fed.Appx. at 44. The fact that one of the other insurers might face some future claim for contribution or indemnification, as argued by the defendant, does not make them necessary parties for the purposes of Rule 19 as the Court can provide complete relief as to the question of stacking between the insurer and the insured named in this action.

         The Court must next determine if the absent parties are necessary under Rule 19(a)(1)(B), considering if they have an interest relating to the subject of the action and whether or not their absence would risk impeding their ability to protect that interest or create a substantial risk of incurring multiple or otherwise inconsistent obligations. Fed.R.Civ.P. 19(a)(1)(B). First, it does not appear that the absent parties even have an interest in the subject of this action. PrePaid Lab, LLC v. Lab. Corp. of Am. Holdings, No. 5:11-cv-00509, 2011 WL 2532405, *5 (N.D. Ohio June 24, 2011) (finding that absent party was not a necessary party because, inter alia, it “is not a signatory to the parties' contract and has no express legal rights or duties pursuant to the contract”). As noted by plaintiff in its response “[n]either Duke nor KFB are parties to the Policy, have duties or obligations that arise out of the Policy, or have any direct or indirect interest in the determination of rights and obligations under the Policy.” [R. 12 at p. 8] Next, this action would not subject the absent parties to multiple or inconsistent obligations as the issue at stake only involves the parties to this action and any judgment rendered by this court would be binding in the state court action.

         Because the Court finds that the absent parties are not required under Rule 19(a), it is not required to analyze joinder under 19(b). Temple v. Synthes Corp., 498 U.S. 5, 8 (1990). Therefore, the Court will not dismiss the suit for failure to join an indispensable party under Rule 19.

         b. Declaratory Judgment Act, 28 U.S.C. § 2201

         While the Court has jurisdiction to hear this action, under 28 U.S.C. § 2201 it must still decide whether jurisdiction is appropriate. The Declaratory Judgment Act provides that “[i]n a case or actual controversy within its jurisdiction … any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a) (emphasis added). The Court is granted wide discretion and is “under no compulsion to exercise jurisdiction.” Brillhart v. Excess Ins. Co. of Am., 316 U.S. ...


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