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Ex parte Nautilus Insurance Co.

Supreme Court of Alabama

March 30, 2018

Ex parte Nautilus Insurance Company
v.
Precision Sand Products, LLC, et al. In re: Terry Williams and Zandra Williams Ex parte Lyon Fry Cadden Insurance Agency, Inc. In re: Terry Williams and Zandra Williams
v.
Precision Sand Products, LLC, et al.

          Baldwin Circuit Court, CV-16-900328

          PETITION FOR WRIT OF MANDAMUS

          BRYAN, Justice.

         Nautilus Insurance Company ("Nautilus") and Lyon Fry Cadden Insurance Agency, Inc. ("LFC"), separately petition this Court for writs of mandamus directing the Baldwin Circuit Court ("the trial court") to vacate its orders denying their motions to dismiss the action filed against them by Precision Sand Products, LLC ("Precision"). For the reasons set forth herein, we grant Nautilus's petition and deny LFC's petition.

         Facts and Procedural History

         During the period from June 10, 2015, to June 10, 2016, Precision had in place a commercial general-liability insurance policy ("the policy") it had purchased from Nautilus through LFC, an insurance broker. In March 2016, Terry Williams sued Precision in the trial court, seeking recovery for injuries he allegedly suffered on Precision's property during the period the policy was in effect.[1] Williams later amended his complaint to add his wife, Zandra Williams, as a plaintiff. Pursuant to the terms of the policy, Precision demanded that Nautilus defend and indemnify it against the Williamses' claims. Nautilus agreed, under reservation of rights, to defend Precision against the Williamses' claims and is currently doing so.

         On July 3, 2017, Nautilus filed a declaratory-judgment action against Precision and the Williamses in the United States District Court for the Southern District of Alabama ("the district court"), seeking a judgment declaring that, pursuant to an exclusion in the policy, Nautilus was not obligated to defend and indemnify Precision against the Williamses' claims ("the federal action"). Precision filed a motion to dismiss or, alternatively, to stay the federal action, asking the district court to refuse to exercise its discretionary jurisdiction. See Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995) (noting that "district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, [28 U.S.C. § 2201(a), ] even when the suit otherwise satisfies subject matter jurisdictional prerequisites"). As of the filing of these petitions, the district court has not yet ruled on that motion, and the federal action remains pending.

         On October 13, 2017, Precision filed in the Williamses' action in the trial court a "crossclaim complaint" against Nautilus and LFC ("the state action").[2] In its complaint, Precision asserted the following claims against both Nautilus and LFC: (1) a claim seeking a judgment declaring that Nautilus and LFC are obligated to defend and indemnify Precision against the Williamses' claims; (2) an abnormal bad-faith claim; (3) a bad-faith-failure-to-settle claim; (4) a breach-of-the-enhanced-duty-of-good-faith claim; (5) a fraud claim, alleging that Nautilus and LFC misrepresented to Precision that the policy provided coverage for claims such as the Williamses'; and (6) a negligence claim, alleging that Nautilus and LFC "had a duty to sell an insurance policy to Precision ... that provides coverage for its business operations and for any potential claims [to which it] might be exposed ...."

         Nautilus filed a motion to dismiss the claims against it in the state action, arguing that Precision's claims against it were compulsory counterclaims that Precision was required to file in the federal action pursuant to § 6-5-440, Ala. Code 1975, the abatement statute. LFC, arguing that Precision's complaint failed to state a claim against LFC upon which relief could be granted, filed a motion to dismiss the claims against it in the state action pursuant to Rule 12(b)(6), Ala. R. Civ. P. Alternatively, LFC argued that, if the trial court dismissed Nautilus from the state action, then LFC was also entitled to a dismissal under Rule 19, Ala. R. Civ. P., which provides for the joinder of persons needed for just adjudication, because, according to LFC, Nautilus is an indispensable party to Precision's claims against LFC.

         On November 15, 2017, the trial court, without specifying its reasons, entered separate orders denying Nautilus's and LFC's motions to dismiss, and Nautilus and LFC separately petitioned this Court for writs of mandamus directing the trial court to vacate those orders. Nautilus's petition was assigned case no. 1170170; LFC's petition was assigned case no. 1170235. We consolidated the two petitions for the purpose of writing a single opinion, but because the petitions assert different grounds for issuing the writs, we address the petitions separately.

         Standard of Review

         "The standard of review applied to a petition seeking the issuance of a writ of mandamus is well settled:

"'Mandamus is a drastic and extraordinary writ, to be issued only where there is (1) a clear legal right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court.'"

Ex parte Caremark Rx, LLC, 229 So.3d 751, 756 (Ala. 2017) (quoting Ex parte Integon Corp., 672 So.2d 497, 499 (Ala. 1995)).

         Case no. 1170170 (Nautilus)

         In its petition to this Court, Nautilus makes the same argument it made in its motion to dismiss the state action, i.e., that it is entitled to a dismissal from the state action under § 6-5-440 because, Nautilus says, Precision's claims against it are compulsory counterclaims in the federal action, which was pending when Precision commenced the state action. "Mandamus is the appropriate remedy to correct a trial court's failure to properly apply § 6-5-440." Ex parte J.E. Estes Wood Co., 42 So.3d 104, 108 (Ala. 2010). "When the facts underlying a motion filed pursuant to § 6-5-440 are undisputed, as is the case here, our review of the application of the law to the facts is de novo." Ex parte Metropolitan Prop. & Cas. Ins. Co., 974 So.2d 967, 969 (Ala. 2007).

         Section 6-5-440 provides:

"No plaintiff is entitled to prosecute two actions in the courts of this state at the same time for the same cause and against the same party. In such a case, the defendant may require the plaintiff to elect which he will prosecute, if commenced simultaneously, and the pendency of the former is a ...

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