Great American Insurance Company v. PowerSouth Energy Cooperative et al

Filing 59

ORDER DENYING 43 Motion to Strike, as set out. Signed by District Judge William H. Steele on 09/15/2022. (cjr)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
GREAT AMERICAN INSURANCE
COMPANY,
Plaintiff,
v.
POWERSOUTH ENERGY
COOPERATIVE, et al.,
Defendants.

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) CIVIL ACTION 22-0002-WS-B
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ORDER

This matter is before the Court on the plaintiff’s motion to strike a thirdparty complaint. (Doc. 43). The parties have filed briefs in support of their
respective positions, (Docs. 43, 45, 46, 47), and the motion is ripe for resolution.
After careful consideration, the Court concludes the motion is due to be denied.
BACKGROUND
According to the amended complaint, (Doc. 14), Tractor & Equipment
Company (“TEC”) performed work for defendant PowerSouth Energy
Cooperative (“PowerSouth”), in the course of which work TEC’s employee
(“Kelly”) was injured. Kelly sued PowerSouth in state court. (Id. at 2, 6).
A non-party (“State Auto”) was TEC’s insurer under a commercial general
liability (“CGL”) policy. State Auto defended PowerSouth as an additional
insured under this policy. Defendant Liberty Mutual Fire Insurance Company
(“Liberty”) provided PowerSouth with CGL coverage on a primary basis, with
policy limits of $25 million per occurrence and a self-insured retention of
$350,000. The plaintiff issued an umbrella policy to TEC, under which
PowerSouth claimed to be an additional insured. (Doc. 14 at 2-3, 7-8, 13).

Trial of the Kelly lawsuit was specially set for August 23, 2021. On
August 16, 2021, State Auto tendered its policy limits of $1 million in partial
settlement of the lawsuit. On August 19, 2021, the plaintiff paid an additional $1
million in full settlement of the Kelly lawsuit. (Doc. 14 at 3-4).
The plaintiff filed this action against PowerSouth and Liberty, seeking: (1)
a declaration that it has no indemnity obligation with respect to the Kelly lawsuit;
(2) a declaration that its policy is excess to that of Liberty or, in the alternative,
that the two policies apply pro rata by limits; and (3) recovery from the
defendants of the $1 million the plaintiff paid to settle the Kelly lawsuit. (Doc. 14
at 4, 15-16).
On June 27, 2022, the Court denied the defendants’ motions to dismiss.
(Doc. 36). On July 1, 2022, before filing an answer, PowerSouth filed a thirdparty complaint against TEC.1 PowerSouth alleges that Kelly was injured in the
course of delivering and setting up a bulldozer that PowerSouth had recently
purchased from TEC. PowerSouth asserts that TEC executed a purchase order
relative to the bulldozer, pursuant to which TEC agreed to defend and indemnify
PowerSouth from any claims by any person arising from the purchase order or the
goods delivered under it. PowerSouth seeks a declaration that TEC owes
PowerSouth defense and indemnity from the plaintiff’s claims in this lawsuit, and
it seeks damages for breach of TEC’s alleged defense and indemnity obligations.
(Doc. 37 at 1-8).
DISCUSSION
“Any party may move to strike the third-party claim, to sever it, or to try it
separately.” Fed. R. Civ. P. 14(a)(4). “After the third-party defendant is brought
in, the court has discretion to strike the third-party claim if it is obviously
unmeritorious and can only delay or prejudice the disposition of the plaintiff’s
1

Due to this timing, PowerSouth was not required to obtain leave of court. Fed.
R. Civ. P. 14(a)(1).
2

claim ….” Fed. R. Civ. P. 14 advisory committee’s note to 1963 amendment. The
plaintiff argues the third-party complaint should be stricken because it is obviously
unmeritorious.2 In the alternative, the plaintiff argues the third-party complaint
should be stricken in accordance with Rule 12(f). (Doc. 43 at 4-5; Doc. 47 at 5-7).
A. “Obviously Unmeritorious.”
Since at least its 1946 amendment, Rule 14(a) has provided that “the thirdparty defendant … shall make his defenses to the third-party plaintiff’s claim as
provided in Rule 12.” Knell v. Feltman, 174 F.2d 662, 664 (D.C. Cir. 1949). The
1963 amendments added that “[a]ny party may move to strike the third party
claim, or for its severance or separate trial.” Cox v. E.I. DuPont de Nemours &
Co., 39 F.R.D. 47, 50 n.6 (D.S.C. 1965). With slight stylistic changes, these
provisions remain intact today. Fed. R. Civ. P. 14(a)(2)(A), (a)(4).
Rule 14 thus distinguishes between third-party defendants and other parties.
Because a third-party defendant is in the same situation vis-à-vis a third-party
complaint as is a defendant vis-à-vis a complaint, Rule 14(a)(2)(A) opens up to
third-party defendants the entire arsenal of threshold motions available to
defendants. Included in this arsenal is a motion to dismiss, under Rule 12(b)(6),
for failure to state a claim upon which relief can be granted. Other parties to the
lawsuit – chiefly, plaintiffs and co-defendants – are not enabled to file such
motions but are limited to a single recourse – a motion to strike.
The rationale for this difference in treatment seems clear. Because only a
third-party defendant is exposed to liability under a third-party complaint, only a

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The plaintiff does not suggest that the third-party complaint fails to allege that
TEC “is or may be liable to [PowerSouth]] for all or part of the claim against
[PowerSouth].” Fed. R. Civ. P. 14(a)(1). Instead, the plaintiff argues that the third-party
claims “wholly lack merit” because the purchase order is ambiguous as to
indemnification, which ambiguity must be resolved against PowerSouth as its drafter.
(Doc. 43 at 5-9; Doc. 47 at 5-7).

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third-party defendant may obtain dismissal simply by showing the third-party
complaint fails to state a claim. The mere presence of a third-party complaint,
even one that fails to state a claim, visits no meaningful harm on the plaintiff or
co-defendants, so they are not empowered to seek dismissal for failure to state a
claim. In this they are treated no differently than a plaintiff that cannot move to
dismiss a crossclaim or a defendant that cannot move to dismiss a count to the
extent directed against a co-defendant.3
The plaintiff seeks to ignore these differences between third-party
defendants and other parties by reading the advisory committee note to require the
granting of a motion to strike whenever the “third-party claims lacks [sic] any
basis.” (Doc. 47 at 2). The advisory committee note, however, itself refutes the
plaintiff’s argument. First, the note requires not simply a meritless claim but an
“obviously” meritless claim. While the precise degree of clarity required by this
adverb may remain uncertain, it clearly imposes a higher standard than does Rule
12(b)(6), which requires dismissal even when the failure to state a claim is not
obvious but is discernible only with much effort.
Second, under the advisory committee note, even an obviously
unmeritorious claim is alone insufficient to support striking the third-party
complaint. What the note demands is both that the claim be obviously
unmeritorious “and” that the claim “can only delay or prejudice the disposition of
the plaintiff’s claim.” The use of the conjunctive cannot easily be imagined to
have been accidental or meaningless, and the plaintiff – which ignores the quoted
3

See, e.g., Mantin v. Broadcast Music, Inc., 248 F.2d 530, 531 (9th Cir. 1957)
(“[T]he moving defendants, obviously, had no standing to seek dismissal of the action as
to the nonmoving defendants.”); Essex Builders Group, Inc. v. Amerisure Insurance Co.,
429 F. Supp. 2d 1274, 1291 (M.D. Fla. 2005) (“The Court cannot conceive how [the
plaintiff] has standing to seek dismissal of Amerisure’s cross-claim against OneBeacon
….”); Synovus Bank v. Estate of Haynie, 2012 WL 13027250 at *2 (N.D. Ala. 2012)
(“Bloom does not have standing to seek dismissal of the counterclaims to which she is
not a party.”). In sum, “[i]t is generally accepted that parties lack standing to seek
dismissal of parties other than themselves.” Equal Employment Opportunity Commission
v. Brooks Run Mining Co., 2008 WL 2543545 at *2 (S.D.W. Va. 2008).
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language entirely – offers no principled basis for reading the “delay or prejudice”
clause out of the standard governing its motion to strike.
The purpose of the “delay or prejudice” clause seems clear. Again, the
mere existence of a third-party complaint does not meaningfully harm a plaintiff
or co-defendant. However, a third-party complaint that can only delay the
disposition of the plaintiff’s claim, or that can only prejudice the disposition of the
plaintiff’s claim, does give the plaintiff a stake in the third-party claim’s continued
presence in the lawsuit. If the third-party complaint states a plausible claim, any
delay or prejudice is regrettable but insufficient to outweigh the third-party
plaintiff’s right to pursue such a claim. But if the claim obviously lacks merit, the
delay or prejudice that the maintenance of such a claim is shown to inflict on other
parties can support striking it.
The Court need not resolve whether PowerSouth’s third-party claims are
either meritless or obviously so4 because, as PowerSouth notes,5 the plaintiff
makes no assertion that the continued presence of even an obviously
unmeritorious third-party claim against TEC will either delay or prejudice the
disposition of the plaintiff’s claims.6 Because making such an assertion and

4

It is telling that TEC elected to file an answer to the third-party complaint
without moving to dismiss it under Rule 12(b)(6). (Doc. 50).
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(Doc. 45 at 5).

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Unaccompanied by any relevant discussion, the plaintiff posits that the thirdparty claim will “unjustifiably expand this proceeding.” (Doc. 47 at 8). A third-party
claim by definition “expands” the proceeding, since it necessarily asserts a claim not
previously presented. The plaintiff’s unamplified announcement of this truism does not
constitute an assertion that the third-party complaint will delay or prejudice the
disposition of its claims.
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supplying a showing in support thereof is essential to its motion to strike,7 the
plaintiff’s failure to do so is fatal to its motion.8
B. Rule 12(f).
The plaintiff does not explain how Rule 12(f) could apply. It is true that
both Rule 12(f) and Rule 14(a)(4) address motions to strike, but there is no
indication the latter rule implicates the former, and there are overwhelming
indications it does not.
First, as noted in Part A, the drafters required third-party defendants to
assert as against the third-party claim any defense “under Rule 12.” They did
likewise with respect to the third-party defendant’s assertion of counterclaims
“under Rule 13(a)” and “under Rule 13(b),” and of crossclaims “under Rule
13(g).” Fed. R. Civ. P. 14(a)(3)(B), (D). They did so again with respect to the

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The Court is aware of cases appearing to assume that an obviously
unmeritorious third-party claim necessarily will delay or prejudice the disposition of the
plaintiff’s claim. E.g., Dixon v. Caesars Entertainment Corp., 2022 WL 3445764 at *1
n.1 (N.D. Ill. 2022); Marchionda v. Embassy Suites Franchise, LLC, 2017 WL 11179923
at *9 (S.D. Iowa 2017). The Court rejects any such assumption as a substitute for a
plaintiff’s assertion and demonstration of delay or prejudice. To delay disposition of the
main claim would require that the third-party claim delay trial, and it seems plain that not
all additional claims implicate such extensive additional discovery or motion practice that
a later trial date is required. It seems equally clear that not all third-party claims would
prejudice the plaintiff in its pursuit of its main claim. See Mahaffey v. First Coast
Intermodal Service, Inc., 2001 WL 37126679 at *4 (M.D. La. 2001) (finding minimal
delay or prejudice, if any).
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PowerSouth argues that the plaintiff has failed to show “a personal stake in the
outcome of the controversy” and thus lacks “standing” to seek elimination of the thirdparty complaint. (Doc. 45 at 5). Rule 14(a)(4), however, allows “[a]ny party” to file a
motion to strike. As discussed in note 2, supra, “standing” in this context addresses a
party’s ability “to seek dismissal,” and the Court agrees with those cases holding that
Rule 14(a)(4) supplies such authorization. United States Fidelity & Guaranty Co. v. E.L.
Habetz Builders, Inc., 642 F. Supp. 2d 560, 568 (W.D. La. 2007); Driver v. W.E. Pegues,
Inc., 2012 WL 13020156 at *1 (N.D. Ala. 2012). A plaintiff’s inability to show it will be
prejudiced by the maintenance of the third-party complaint goes to the merits of its
motion to strike, not to its authorization to bring such a motion.

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third-party defendant’s assertion against the plaintiff of defenses “under Rule 12,”
counterclaims “under Rule 13(a)” and “under Rule 13(b),” and crossclaims “under
Rule 13(g).” Id. Rule 14(a)(3); advisory committee’s note to 1963 amendment.
Against this background of consistent specificity, it is exceedingly improbable that
the drafters of the 1963 amendment adding Rule 14(a)(4) would have omitted
“Rule 12” or “Rule 12(f)” had they intended motions to strike under Rule 14 to be
governed by Rule 12(f).
Second, and as discussed in Part A, the advisory committee notes expressly
set forth a test for measuring motions to strike under Rule 14(a)(4). The plaintiff
offers no reason the drafters would have created such a test had they actually
intended such motions to be governed instead by Rule 12(f).
Third, Rule 12(f) cannot support striking a third party complaint, because
the rule addresses striking “from a pleading,” Fed. R. Civ. P. 12(f) (emphasis
added), not striking of a pleading. That is, the rule permits selective deletions
from a pleading, not the elimination of the entire pleading, as the plaintiff seeks.
Fourth, Rule 12(f) addresses only the striking of defenses and of
“redundant, immaterial, impertinent, or scandalous matter,” and, as PowerSouth
notes, (Doc. 45 at 6), the plaintiff does not assert the presence of any such material
in the third party complaint.
Given these circumstances, it is unsurprising that the plaintiff identifies no
case that has employed Rule 12(f) to resolve a motion to strike a third-party
complaint, and the few cases the Court has located on the subject reject Rule 12(f)
as governing motions to strike under Rule 14(a)(4). First-Citizens Bank & Trust
Co. v. Whitaker, 2017 WL 7550763 at *7 (N.D. Ga. 2017); Alert Centre, Inc. v.
Alarm Protection Services, Inc., 1991 WL 2712 at *2 (E.D. La. 1991). The Court
concurs.

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CONCLUSION
For the reasons set forth above, the plaintiff’s motion to strike is denied.
DONE and ORDERED this 15th day of September, 2022.
s/ WILLIAM H. STEELE
UNITED STATES DISTRICT JUDGE

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