Owners Insurance Company et al v. The Mitchell Company Inc et al

Filing 48

ORDER granting 46 Motion to Dismiss. Ordered by Judge Hugh Lawson on 6/22/2011. (nbp)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
MACON DIVISION
OWNERS INSURANCE COMPANY and
AUTO-OWNERS INSURANCE COMPANY,
Plaintiffs,

Civil Action 5:09-CV-374 (HL)

v.
RIGHTWAY DRYWALL, INC.,
Defendant.
ORDER
Before the Court is Defendant Rightway Drywall, Inc.’s Motion to Dismiss
(Doc. 46). For the reasons discussed below, the Motion is granted.
In March of 2009, The Mitchell Company, Inc. filed a lawsuit in the United
States District Court for the Northern District of Florida. Rightway was named as a
defendant in the Florida case. Mitchell contends that Rightway and other defendants
manufactured, distributed, and sold defective Chinese drywall that was used by
Mitchell in the construction of homes in Alabama and Florida.
Plaintiffs Owners Insurance Company and Auto-Owners Insurance Company
issued commercial general liability insurance and commercial umbrella insurance
policies to Rightway. On October 22, 2009, Plaintiffs filed this declaratory judgment
action seeking a judgment that they have no duty to defend or indemnify Rightway
for the claims asserted in the Florida lawsuit.
Mitchell subsequently filed a motion to dismiss in this case, alleging that the
Court lacked personal jurisdiction over it. After the issue was fully briefed, the Court

determined that it in fact did not have personal jurisdiction over Mitchell. On
February 9, 2011, the Court entered an order dismissing Mitchell from the case.
Rightway now contends that because Mitchell has been dismissed from the
case, Plaintiffs’ complaint should be dismissed pursuant to Federal Rule of Civil
Procedure 19 because Mitchell is an indispensable party. The Court agrees.
Eleventh Circuit law is clear that the tort claimant is a required party to a declaratory
judgment action under Rule 19. Am. Safety Cas. Ins. Co. v. Condor Assocs. Ltd.,
129 Fed. Appx. 540, 542 (11th Cir. 2005). In American Safety, the Eleventh Circuit
held that it “probably would have been error” if the district court had not followed the
binding case of Ranger Insurance Co. v. United Housing of New Mexico, 488 F.2d
682 (5th Cir. 1974).1 In Ranger, after applying the Rule 19(b) factors, the court
determined that the absent tort claimants were indispensable parties to the insurer’s
declaratory judgment action against the insured because, were the case allowed to
proceed without the tort claimants, “the claimants’ interests would be prejudiced.” Id.
at 683. The Ranger court held that if the injured party, who was not included in the
declaratory judgment action, received a judgment against the insured in the
underlying lawsuit, the injured party would have to contend with the stare decisis
effect of a judgment in a case in which it was not involved or would be forced to relitigate the effect of the judgment in a separate, direct action against the insurer. Id.
The Court is bound by Ranger and its rule. See also Colony Nat’l Ins. Co. v. The
1

In Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit
adopted as binding precedent the decisions of the former Fifth Circuit handed down prior
to October 1, 1981.
2

Teaford Co., Inc., No. 2:10-CV-28, 2010 WL 4339369, at *2 (N.D. Ga. Oct. 26, 2010)
(dismissing declaratory judgment action after the injured tort claimants were
dismissed for lack of personal jurisdiction); Owners Ins. Co. v. Bryant, No.
305CV48CAR, 2006 WL 50488, at *4 (M.D. Ga. Jan. 9, 2006); Greenwich Ins. Co.
v. Rodgers, 729 F.Supp.2d 1158, 1165 (C.D. Cal. 2010).
The fact that Mitchell was originally joined as a defendant but was dismissed
does not change the outcome. Plaintiffs take the position that Mitchell could have
waived personal jurisdiction and litigated the coverage issue if it was concerned
about being prejudiced by the Court’s determination of those issues. Plaintiffs also
point out that Mitchell never argued in its motion to dismiss that it could be
prejudiced if the Court decides the coverage issues in its absence. The Court finds,
however, that Mitchell was not required to waive jurisdiction or make any arguments
regarding potential prejudice in its motion to dismiss. Mitchell was entitled to move
for dismissal under Rule 12 if it believed the Court did not have personal jurisdiction
over it. Mitchell was not required at that time to make arguments relating to anything
other than the jurisdictional issue.
Rightway’s Motion to Dismiss (Doc. 46) is granted, and Plaintiffs’ complaint
is dismissed. The Clerk of Court is directed to close this file.
SO ORDERED, this the 22nd day of June, 2011.
s/ Hugh Lawson
HUGH LAWSON, SENIOR JUDGE
mbh

3