Bank of Brewton v. TheTravelers Companies, Inc. et al

Filing 44

ORDER denying 36 Motion to Dismiss counterclaim. Signed by Chief Judge William H. Steele on 10/25/2013. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
BANK OF BREWTON,

)
)
Plaintiff,
)
)
v.
) CIVIL ACTION 13-0176-WS-B
)
THE TRAVELERS COMPANIES, INC., )
et al.,
)
)
Defendants.
)
ORDER
This matter is before the Court on the plaintiff’s motion to dismiss the
defendants’ counterclaim for declaratory relief. (Doc. 36). The parties have filed
briefs in support of their respective positions, (Docs. 37, 42, 43), and the motion is
ripe for resolution.
The complaint alleges that the defendants breached a contract of insurance
and refused in bad faith to pay the plaintiff’s claim. (Doc. 17 at 41-42). The
counterclaim quotes a policy provision, asserts that the plaintiff’s loss fails to meet
two of the stated requirements for coverage, and seeks a declaration either that the
defendants are not obligated to the plaintiff on its claim or, in the alternative,
establishing the amount owed on the claim. (Doc. 21 at 15-18).
The plaintiff’s motion invokes Rules 12(b)(6) and 12(f). The plaintiff does
not offer to explain how the counterclaim fails to state a claim for relief, so the
Court focuses on Rule 12(f).
“The court may strike from a pleading an insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).
The plaintiff argues the counterclaim is a “mirror image” of the complaint and
thus redundant, and it cites cases for the proposition that a counterclaim

completely redundant with the complaint may properly be eliminated by Rule
12(f). (Doc. 37 at 2).
The defendants respond that a counterclaim for declaratory relief is not
redundant with the complaint when the counterclaim hinges on a particular
construction of a disputed contract term, because dismissing the counterclaim
might deprive the defendant of a judgment resolving the interpretation issue.
(Doc. 42 at 2-3). The plaintiff acknowledges this line of cases but finds them
inapplicable because the counterclaim does not expressly demand in its conclusion
that a particular construction be given to either of the two contract terms it
identifies as central to coverage. (Doc. 43 at 2). But the counterclaim does clearly
hinge on the construction given the phrase, “acquired, sold or delivered or given
value, extended credit or assumed liability on the fate of” the disputed document,
since the defendants contend that the phrase requires that the insured “disburse …
new loan funds to its customer based upon the assumed validity” of the document
(which apparently did not occur) and that the phrase is not satisfied when the
insured merely requests the document as “additional collateral security for existing
loans,” as the defendants apparently maintain did occur.
Both sides recognize the “broad discretion” invested in the Court whether
to strike even a questionable pleading. (Doc. 37 at 2; Doc. 42 at 1). Given the
defendants’ plausible invocation of a contract interpretation issue in the
counterclaim, and given the plaintiff’s inability to articulate any colorable
prejudice from the presence of the counterclaim, the Court exercises its discretion
in favor of retaining the counterclaim. See Charles A. Wright & Arthur R. Miller,
Federal Practice and Procedure § 1406 (3rd ed. 2004) (“[T]he safer course for the
court to follow is to deny a request to dismiss a counterclaim for declaratory relief
unless there is no doubt that it will be rendered moot by the adjudication of the
main action.”).
For the reasons set forth above, the plaintiff’s motion to dismiss is denied.

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DONE and ORDERED this 25th day of October, 2013.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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