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New Hampshire Insurance Co. v. Cincinnati Insurance Co.

United States District Court, S.D. Alabama, Southern Division

June 25, 2014



KATHERINE P. NELSON, Magistrate Judge.

Defendant Cincinnati Insurance Company ("CIC") and Defendants All Crane Rental of Alabama, LLC ("All Crane") and TEK Aerial Lifts, LLC ("TEK") have filed two motions (Docs. 19 and 23 respectively) to dismiss the complaint for declaratory judgment filed by Plaintiff New Hampshire Insurance Company ("NHIC"), both asserting NHIC has failed to join, as an indispensable party, SMP Welding, LLC ("SMP"). NHIC has responded ( see Doc. 26), and the defendants have filed replies (Docs. 27 and 28). The motions are now before the undersigned United States Magistrate Judge, pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 72.2, for entry of a report and recommendation. And for the reasons explained below, it is RECOMMENDED that the motions be DENIED.

I. Applicable Background

NHIC issued a commercial general liability policy to ThyssenKrupp Steel & Stainless USA, LLP ("TK") as part of an Owner-Controlled Insurance Program ("OCIP") for a one-year period, from February 8, 2009 to February 8, 2010. NHIC's four-count complaint for declaratory judgment, filed in this Court on March 6, 2014, stems from a state-court judgment awarded to Defendant Christopher Hill as a result of injuries he sustained because of a manlift accident on or about October 30, 2009 while working at TK's plant near Mobile, Alabama ($1, 000, 000 in compensatory damages against SMP, [1] All Crane, and TEK; and $700, 000 in punitive damages on a wantonness claim against All Crane).[2] Appeals of that judgment are currently pending before the Alabama Supreme Court.

Through this action, NHIC asks that this Court make four determinations: (1) determine that NHIC has no duty to defend or indemnify All Crane under the policy it issued to TK; (2) determine that NHIC has no duty to fund the judgment awarded Hill against All Crane and/or TEK; (3) apportion payment of the compensatory damages award among the parties; and (4) apportion payment of the damages award against All Crane between NHIC and CIC.

NHIC's response to the motions to dismiss (Doc. 26) is lengthy. The replies, however, are short. Through their reply to NHIC (Doc. 27), "[b]ased on representations made by NHIC and its counsel in its Response, " All Crane and TEK withdrew their motion to dismiss ( see id., ¶ 3). While in its reply (Doc. 28), CIC has made clear that its concern-presumably the sole reason now underlying its motion to dismiss-is that, "disposing of [this declaratory judgment] action in [SMP's] absence may... leave [CIC] subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of [SMP's] interest... relating to the subject of [this] action...." FED. R. CIV. P. 19(a)(1)(B)(ii). Specifically,

CIC is not concerned with what might happen should SMP or some other party file a second lawsuit; CIC is primarily concerned with the appeal of the underlying [state] lawsuit. The Alabama Supreme Court is being asked to review the judgment entered against All Crane, TEK, and SMP, and could affirm as to all three, reverse as to all three, affirm as to one or more, affirm or reverse as to punitive damages, affirm or reverse as to compensatory damages, and in doing so will discuss the liability and culpability of all three Defendants.... [In sum, the] relief [NHIC seeks in this Court] would most definitely put the parties to this declaratory action potentially at odds with any decision of the Alabama Supreme Court, making it impossible for one or more of these Defendants to comply with the Orders of both Courts.

(Doc. 28 at 2-3.)[3]

II. Legal Standard ("Required Party" under Rule 19(a))

Dismissal of an action pursuant to Rule 12(b)(7), for failure to join a party under Rule 19, is "a two-step inquiry":

First, [a court must] decide whether an absent party is required in the case under Rule 19(a). See Molinos Valle del Cibao v. Lama, 633 F.3d 1330, 1344 (11th Cir. 2011). If the party is a required party, "the court must order that the person be made a party." FED. R. CIV. P. 19(a)(2). Second, if the parties cannot join the new party, the court must consider if, "in equity and good conscience, the action should proceed among the existing parties or should be dismissed." FED. R. CIV. P. 19(b).

International Importers, Inc. v. International Spirits & Wines, LLC, No. 10-61856-CIV, 2011 WL 7807548, at *8 (S.D. Fla. July 26, 2011); see also Challenge Homes, Inc. v. Greater Naples Care Ctr., Inc., 669 F.2d 667, 669 (11th Cir. 1982) ("[T]he court must [first] ascertain under the standards of Rule 19(a) whether the person in question is one who should be joined if feasible. If the person should be joined but cannot be (because, for example, joinder would divest the court of jurisdiction) then the court must inquire whether, applying the factors enumerated in Rule 19(b), the litigation may continue."); accord Focus on the Family v. Pinellas Suncoat Transit Auth., 344 F.3d 1263, 1279-80 (11th Cir. 2003).[4]

Rule 19 provides for joinder of an indispensable party where there is substantial risk of the defendant being subjected to a multiplicity of suits. It is well established under Rule 19 that all claimants to a fund must be joined to determine the disposition of that fund.[5] However, findings of indispensability must be based on stated pragmatic considerations, especially the effect on parties and on litigation. [Therefore, ] Rule 19 does not prevent the assertion of compelling substantive interests; it merely commands the courts to examine each controversy to make certain that the interests really exist. [That is, t]o say a court "must" dismiss in the absence of an indispensable party and that it "cannot proceed" without him puts the matter the wrong way around: a court does not know whether a particular person is "indispensable" until it has examined the situation to determine whether it can proceed without him.

In re Torcise, 116 F.3d 860, 865-66 (11th Cir. 1997) (internal citations omitted and footnote and emphasis added); see also Bates v. Laminack, 938 F.Supp.2d 649, 661 (S.D. Tex. 2013) ("To be a necessary and indispensable party, that party must have interests that they are unable to protect if the case goes forward without them. [However, s]ome interest and some adverse effect is insufficient." (citing ...

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