THE COLLEGE NETWORK, INC. v. CINCINNATI INSURANCE COMPANY

Filing 137

ORDER denying 131 Cincinnati's Motion for Reconsideration - For the foregoing reasons (**SEE ORDER**), the Court DENIES Cincinnati's Motion for Reconsideration, Dkt. 131 . As has been the case since the Court's order dismissin g Mr. Murden, Mr. Gebauer, Mr. Luster, Mr. Radt, Ms. Mangold, and Ms. Lagemann almost fifteen months ago, Cincinnati remains free to file a state court claim against these individuals if it so chooses. Signed by Judge Jane Magnus-Stinson on 5/17/2012. (copies via US Mail to: Damon Luster, Chad Radt and Gene Murden) (JKS)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
CINCINNATI INSURANCE COMPANY, as partial
subrogee of The College Network, Inc.,
Plaintiff,1
vs.
SHANNON GREENE,
Defendant.

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1:10-cv-0370-JMS-DML

ORDER
Presently pending before the Court is Cincinnati Insurance Company’s (“Cincinnati”)
Motion to Reconsider and Reinstate its Amended Third-Party Complaint. [Dkt. 131.] Cincinnati
asks the Court to allow it to assert claims against non-parties Gene Murden, Clyde Gebauer,
Chad Radt, Damon Luster, Starla Mangold, and Rene Lagemann. [Id.] For the following reasons, the Court converts Cincinnati’s motion into a motion for leave to file an amended complaint and denies that motion.
I.
RELEVANT BACKGROUND
A brief review of the procedural posture of this case is necessary to address Cincinnati’s
motion.
In March 2010, The College Network (“TCN”) filed a Complaint against Cincinnati for
breach of contract and failure to deal in good faith. [Dkt. 1.] TCN’s Complaint was based on
Cincinnati’s denial of coverage for a $647,899.73 claim TCN made under an Employee Dishon1

In light of the settlement between former Plaintiff The College Network and Cincinnati Insurance Company (formerly listed as Defendant/Third-Party Plaintiff), the only remaining claim in
this action is the claim Cincinnati asserts against Shannon Greene (formerly listed as Third-Party
Defendant). Because the claim between Cincinnati and Ms. Greene is the only remaining claim,
Cincinnati is now the Plaintiff, Ms. Greene is now the Defendant, and there is no longer a thirdparty claim at issue. The docket shall so reflect.
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esty insurance policy. TCN’s claim was based on the alleged conduct of its Commissions Coordinator, Shannon Greene, who TCN claimed had been paying certain sales representatives inappropriate advances in addition to what they were owed for sales. [Dkt. 1-3 at 3.]
In response to TCN’s Complaint, Cincinnati both denied the allegations and filed a thirdparty claim against Ms. Greene, Gene Murden, Clyde Gebauer, Chad Radt, Damon Luster, Starla
Mangold, Rene Lagemann, Beryl Wilder, Chad Mitchell, Francis Murphy, and Nicole Waterford. [Dkt. 62.] Cincinnati’s Third-Party Complaint requested that if judgment were entered in
favor of TCN, judgment also be entered in favor of Cincinnati against the third-party defendants.
[Id. at 5-6.]
The Court reviewed Cincinnati’s claims in light of its independent duty to confirm
whether it has jurisdiction, see Thomas v. Guardsmark, LLC, 487 F.3d 531, 533 (7th Cir. 2007),
and ordered Cincinnati to file an Amended Third-Party Complaint alleging why the Court had
jurisdiction over its claims, [dkt. 60]. Ultimately, the Court held a hearing regarding its purported jurisdiction over Cincinnati’s claims, and Cincinnati asserted that the Court had supplemental
jurisdiction pursuant to 28 U.S.C. § 1367. [Dkt. 72 at 3.] Specifically, Cincinnati contended that
its third-party claim arises out of a “common nucleus of operative facts” that this Court must adjudicate in order to grant the relief TCN demands in its Complaint against Cincinnati. [Dkt. 72
at 6.]
In February 2011, the Court issued an order dismissing the third-party defendants without
prejudice, with the exception of Ms. Greene. [Dkt. 92.] The evidence in the record showed that
TCN had made a coverage claim based on Ms. Greene’s actions alone and that Cincinnati recognized in its denial letter that most of the sales representatives “who received ‘inappropriate advances’ did not even realize they were being overpaid.” [Dkt. 92 at 6 (citing dkt. 1-4 at 3).] The

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Court noted that for TCN to prove its claim, it would have to prove that Ms. Greene acted in a
dishonest manner covered by the policy and that “as Cincinnati admits, Ms. Greene’s intentions
are the key issue for determining the amount of covered loss.” [Dkt. 92 at 6 (original emphasis).]
Accordingly, the Court held that with the exception of the claim against Ms. Greene, Cincinnati’s third-party claim was too attenuated from TCN’s coverage claim to constitute the same
case or controversy for purposes of supplemental jurisdiction. Id.
TCN and Cincinnati subsequently settled TCN’s claim on January 25, 2012, [dkt. 132 at
2], and that claim was dismissed, [dkt. 128]. Under the terms of the settlement, Cincinnati paid
TCN $342,000 and, in exchange, TCN assigned its right to “pursue recovery of its payment from
Greene and the [employees] who were direct beneficiaries of Greene’s misconduct in paying the
[employees] money they did not earn and were not entitled to receive from TCN.” [Id. at 2.]
On March 27, 2012, Cincinnati filed the instant motion, asking the Court to “reinstate”
Cincinnati’s third-party claims against six of the ten former TCN sales representatives who had
been dismissed—Mr. Murden, Mr. Gebauer, Mr. Luster, Mr. Radt, Ms. Mangold, and Ms.
Lagemann. [Dkt. 132 at 2-3.] Cincinnati argues that the Court should reinstate its claims against
these six individuals because the Court has diversity jurisdiction over four of them and supplemental jurisdiction over all of them. [Id. at 5-6.]
II.
DISCUSSION
Cincinnati’s motion asks the Court to “reconsider” its previous decision pursuant to Federal Rule of Civil Procedure 54(b), which allows a Court to revise a previous order at any time
before the entry of a judgment adjudicating all of the claims and all of the parties’ rights and liabilities. [Dkt. 132 at 4.] As relief, Cincinnati “seeks reinstatement” of its previously dismissed
claim against six of ten former TCN employees it sued. [Id.]
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Because Cincinnati’s motion asks the Court to allow it to assert a claim against six individuals who are not currently parties to this suit, Cincinnati’s motion is actually a request for
leave to file an amended complaint adding additional parties.2 Consequently, the Court will address Cincinnati’s argument through that lens.
The Court analyzes jurisdiction over a claim at the claim it is asserted. See Hukic v. Aurora Loan Servs., 588 F.3d 420, 427 (7th Cir. 2009) (analyzing federal jurisdiction for purposes
of removal at time claim is filed in federal court); see also 28 U.S.C. § 1367(b) (detailing jurisdictional analysis for claims brought pursuant to various Federal Rules of Civil Procedure if jurisdiction over the original claim is based in diversity).
Cincinnati contends that the Court has diversity jurisdiction over the new claim it seeks to
assert against the six former TCN employees previously dismissed from this action. [Dkt. 132 at
5.] The diversity jurisdiction statute has “consistently” been interpreted “as requiring complete
diversity.” Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 553 (2005) (citing
Strawbridge v. Curtiss, 3 Cranch 267, 2 L.Ed. 435 (1806)). The presence in the action of a sin-

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As Cincinnati acknowledges in its brief, this case has materially changed since the Court’s decision because of the subsequent settlement between Cincinnati and TCN. [Dkt. 132 at 6 (noting
that Court’s finding at the time of its February 2011 decision that “Cincinnati was not yet subrogated to TCN’s claims” and arguing that in light of the January 2012 settlement, Cincinnati “is
therefore subrogated to TCN’s claims to the extent of Cincinnati’s payment”).] These changed
circumstances are not the proper basis for a motion to reconsider. See, e.g., Mungongo v. Gonzales, 479 F.3d 531, 535 (7th Cir. 2007) (noting in the context of an immigration appeal that a motion to reconsider requires the adjudicator to “place itself back in time and consider the case as
though a decision in the case on record before it had never been entered”). Instead, a motion to
reconsider is appropriate where the court has misunderstood a party, where the court has made a
decision outside the adversarial issues presented to the court by the parties, where the court has
made an error of apprehension (not of reasoning), where a significant change in the law has occurred, or where significant new facts have been discovered. Bank of Waunakee v. Rochester
Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990). To the extent that Cincinnati asks the
Court to reconsider its previous decision, [dkt. 92], Cincinnati has failed to make the requisite
showing, and the Court denies that request and reaffirms its previous ruling in all respects.
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gle plaintiff from the same state as a single defendant deprives the district court of original diversity jurisdiction over the entire action. Id.
Determining a party’s citizenship for purposes of a subrogation claim requires determining whether the subrogation was total or partial. “[T]otal subrogation . . . results in focusing
solely on the subrogee’s citizenship for diversity purposes, [while] partial subrogation forces a
look at both subrogee and subrogor . . . .” Allianz Global Risks U.S. Ins. Co. v. Goshen Air Ctr.,
Inc., 2011 WL 843950 (N.D. Ind. 2011). When an insurer “paid only part of the loss, both the
insured and insurer . . . have substantive rights against the tortfeasor which qualify them as real
parties in interest.” United States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 380-81 (1949). “Although total subrogation (which is absent here) results in focusing solely on the subrogee’s citizenship for diversity purposes, partial subrogation forces a look at both subrogee and subrogor—
that is the teaching in Aetna Casualty.” Pepsico Do Brasil, Ltda v. Oxy-Dry Corp., 534 F. Supp.
2d 846, 848 (N.D. Ill. 2008).
Cincinnati became a partial subrogee when it entered into a “compromised settlement”
with TCN and paid $342,000 of TCN’s $647,899.73 claim.3 [Dkt. 132 at 2.] Although Cincinnati is an Ohio citizen because it is organized under the laws of Ohio with its principal place of
business in Ohio, [dkts. 1 at 1; 17 at 1; 132 at 5], it also acquires TCN’s Indiana citizenship because it is TCN’s partial subrogee, [dkt. 1 at 1; 17 at 1]. Because Cincinnati is a citizen of Ohio
and Indiana for purposes of the claim it seeks to assert and two of the named individuals are In-

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The Court notes that the claims Cincinnati seeks to assert against the six former TCN employees at issue total $489,316.28, which is almost $150,000 more than it paid TCN. [Dkts. 132 at 5;
62 at 3-4.] This difference confirms that Cincinnati is a partial subrogee.
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diana citizens (Starla Mangold and Rene Lagemann), [dkt. 62 at 2], there is not complete diversity and the suit against the six former TCN employees at issue cannot be maintained.4
III.
CONCLUSION
For the foregoing reasons, the Court DENIES Cincinnati’s Motion for Reconsideration.
[Dkt. 131.] As has been the case since the Court’s order dismissing Mr. Murden, Mr. Gebauer,
Mr. Luster, Mr. Radt, Ms. Mangold, and Ms. Lagemann almost fifteen months ago, Cincinnati
remains free to file a state court claim against these individuals if it so chooses.

05/17/2012

_______________________________
Hon. Jane Magnus-Stinson, Judge
United States District Court
Southern District of Indiana

Distribution via Mail:
Damon Luster
14687 Juliana Ave.
Eastpointe, MI 48021
Chad Radt
18840 Duquesne Drive
Tampa, FL 33647
4

While Cincinnati makes a cursory plea for the Court to exercise supplemental jurisdiction over
its claims, Cincinnati cannot use the supplemental jurisdiction statute to avoid the requirement of
complete diversity of citizenship See 28 U.S.C. § 1367(b) (providing that in cases where the
Court’s jurisdiction is founded on diversity, supplemental jurisdiction cannot be invoked “when
exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of [diversity jurisdiction]”); see Sta-Rite Indus., Inc. v. Allstate Ins. Co., 96
F.3d 281, 285 (7th Cir. 1996) (“Under the supplementary jurisdiction statute, if federal jurisdiction is predicated solely on diversity, a district court cannot have supplemental jurisdiction over
claims by plaintiffs against persons made parties under Rule 19 “when exercising supplemental
jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.”).
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Gene Murden
41641 Carol Terrace
Fremont, CA 94538

Distribution via ECF only:
Thomas A. Brodnik
DONINGER TUOHY & BAILEY LLP
[e-mail]
Jonathan M. Bryan
MCNAMARA AND MCNAMARA, LLP
[e-mail]
Bernie W. (Too) Keller
KELLER MACALUSO LLC
[e-mail]
Robert H. Little
ROBERT H. LITTLE LAW OFFICE
[e-mail]
Robert John Little
ROBERT LITTLE LAW OFFICES
[e-mail]
Eric C. McNamar
KELLER MACALUSO LLC
[e-mail]
Jeffrey S. McQuary
BROWN TOMPKINS LORY
[e-mail]
John J. Moore
DONINGER TUOHY & BAILEY LLP
[e-mail]
Anthony B. Ratliff
DONINGER TUOHY & BAILEY LLP
[e-mail]
Jon Kenneth Stowell
LAW OFFICE OF CINCINNATI INSURANCE
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[e-mail]
Rebecca A. Trent
ROBERT H. LITTLE LAW OFFICE
[e-mail]
William H. Woods
MCNAMARA AND MCNAMARA LLP
[e-mail]
J. David Young
LAW OFFICE OF J. DAVID YOUNG
[e-mail]

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