AMCO Insurance Company v. Keim Properties, LLC

Filing 28

MEMORANDUM AND ORDER granting 27 Defendant's Supplemental Motion for Leave to File Amended Answer and Third-Party Petition; and denying 25 Defendant's renewed Motion for Leave to File Amended Answer and Cross-Claim. Defendant is hereby granted leave to file its Amended Answer and Third-Party Petition in the form attached to its motion and shall electronically file it forthwith. Defendant shall serve summons and its filed Amended Answer and Third-Party Petition upon newly added third-party defendants Porter-Spears and Bundy Insurance Agency, Inc. and Sarah Porter on or before 7/25/2017. Signed by Magistrate Judge Teresa J. James on 6/27/2017. (byk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

AMCO INSURANCE COMPANY,
Plaintiff,
v.
KEIM PROPERTIES, LLC,
Defendant.

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Case No. 16-cv-2842-JAR-TJJ

MEMORANDUM AND ORDER
This matter is before the Court on Defendant Keim Properties, LLC’s Motion for Leave to
File Amended Answer and Cross-Claim (ECF No. 25) and Supplemental Motion for Leave to File
Amended Answer and Third-Party Petition (ECF No. 27). In the first motion, Defendant requests
leave to file an amended answer and crossclaim, which asserts claims for negligence, interference
with contractual relationship, breach of fiduciary duty, and negligent misrepresentation against
two third parties. In its supplemental motion, Defendant seeks leave to assert these claims in an
amended answer and third-party petition pursuant to Fed. R. Civ. P. 14. Plaintiff has advised the
Court that it does not oppose Defendant’s motions. For the reasons stated below, the Court grants
Defendant leave to file its amended answer and third-party petition.
I.

Factual and Procedural Background
Plaintiff filed its Complaint for Declaratory Judgment against Defendant on December 30,

2016, asking the Court to declare that there is no insurance coverage under Policy Number ACP
BPF 7254949419 (the “Policy”) for losses Defendant sustained to its bakery from a July 26, 2016
fire. Plaintiff alleges that it denied coverage based upon Defendant’s failure to maintain the
automated fire protective alarm system required by the protective safeguards endorsement of the

Policy. Plaintiff alleges Defendant suspended use of the central station fire alarm system on or
about October 26, 2012 without notifying Plaintiff about the suspension.
On February 6, 2017, Defendant filed its answer asking the Court to declare that there is
insurance coverage under the Policy for the losses it sustained. Defendant denies that it failed to
maintain the required protective devices or services required by the Policy.
II.

Motion for Leave to File Crossclaim Petition
The first motion before the Court is Defendant’s renewed Motion for Leave to File

Amended Answer and Cross-Claim (ECF No. 25). Defendant seeks leave to file an amended
answer and crossclaim petition that asserts claims for negligence, interference with contractual
relationship, breach of fiduciary duty, and negligent misrepresentation against its insurance
agency and agent, Porter-Spears and Bundy Insurance Agency, Inc. and Sarah Porter, who are not
parties to this action. The Court previously denied an earlier motion without prejudice, finding the
motion requesting leave to file a crossclaim was not procedurally proper in that a crossclaim may
not be asserted solely against persons who are not already parties to the original action, but must
involve at least one existing party.1 Defendant’s renewed motion is similar to its first motion, but
includes additional sections discussing Fed. R. Civ. P. 14(a)(5) and joinder under Fed. R. Civ. P.
19.
While Fed. R. Civ. P. 13(g) provides the procedure for asserting a crossclaim against a
coparty, Rule 13(h) addresses the joinder of additional nonparties in a counterclaim or crossclaim.
It merely provides that “Rules 19 and 20 govern the addition of a person as a party to a
counterclaim or crossclaim.” Cases from this District, however, limit Rule 13(h) to only authorize

1

See Order, ECF No. 21.

2

joinder of additional persons in order to “adjudicate a counterclaim or cross-claim that already is
before the court or one that is being asserted at the same time the addition of a nonparty is
sought. This means that a counterclaim or cross-claim may not be directed solely against persons
who are not already parties to the original action, but must involve at least one existing party.”2
Cases from other Districts have similarly held Rule 13(h) cannot be used to assert a counterclaim
or crossclaim solely against an unnamed party.3
In this case, Defendant is the sole defendant and thus it cannot use Rule 13(h) to join third
parties insurance agency and agent through its proposed crossclaim petition. Without at least one
other co-defendant already in the case, the Court concludes that Rule 13(h) is not applicable and
that Defendant’s attempt to join third parties Porter-Spears and Bundy Insurance Agency, Inc. and
Sarah Porter through its proposed crossclaim pursuant to Rule 13(h) is not procedurally proper.
Defendant’s renewed motion for leave to file a cross claim petition is therefore denied.
2

Raytheon Aircraft Credit Corp. v. Pal Air Int'l, Inc., 923 F. Supp. 1408, 1414 (D. Kan. 1996)
(quoting 6 Charles Wright, Arthur Miller & Mary Kane, Federal Practice & Procedure § 1435 (3d ed.
2010)). See also Indep. Drug Wholesalers Grp., Inc. v. Denton, No. 92-2164-JWL, 1993 WL 62142, at *5
(D. Kan. Feb. 12, 1993) (allowing defendant to add new parties as additional counterclaim defendants
pursuant to Rule 13(h) and 20 because the plaintiff was a party to the counterclaim).
3

See FDIC v. Bathgate, 27 F.3d 850, 873 n.13 (3d Cir. 1994) (finding the better understanding is
that “Rule 13(h) only authorizes the court to join additional persons in order to adjudicate a counterclaim
or cross-claim that already is before the court or one that is being asserted at the same time the addition of
a nonparty is sought. This means that a counterclaim or cross-claim may not be directed solely against
persons who are not already parties to the original action, but must involve at least one existing party”)
(quoting 6 Wright, Miller & Kane, Federal Practice & Procedure § 1435); Sundance Energy Okla., LLC
v. Dan D. Drilling Corp., No. CIV-13-991-R, 2014 WL 12160769, at *1 (W.D. Okla. July 3, 2014) (“The
weight of authority holds that Rule 13(h) cannot be used to assert a counterclaim or crossclaim solely
against an unnamed party.”); Jalin Realty Capital Advisors, LLC v. A Better Wireless, NISP, LLC, No.
CV 11-165 (JRT/LIB), 2011 WL 13136511, at *3 (D. Minn. Aug. 30, 2011) (persons other than the
parties to the original action may be made parties under Rule 13(h), but such a “counterclaim or
cross-claim may not be directed solely against persons who are not already parties to the original action
but must involve at least one existing party”); Hawkins v. Berkeley Unified Sch. Dist., 250 F.R.D. 459,
462 (N.D. Cal. 2008) (Rule 13(h) requires joinder of a new party “be anchored to a counterclaim or
cross-claim against an original party”); Brown v. Int'l Union, United Auto., Aerospace & Agric.
Implement Workers of Am., 85 F.R.D. 328, 333 (D. Mich. 1980) (“It is well established, however, that the
cross-claim must include as cross-defendant at least one existing co-party. An additional party . . . may
not be brought in where the cross-claim is directed solely against the new party.”).

3

III.

Motion for Leave to File Third-Party Petition
Defendant has also filed its Supplemental Motion for Leave to File Amended Answer and

Third-Party Petition (ECF No. 27). In this supplemental motion, Defendant indicates it is
supplementing its earlier motion “to clarify that it seeks leave of the Court to file a Third-Party
Petition against new defendants rather than cross-claims against new defendants.”4 Defendant
attached its proposed Amended Answer and Third-Party Petition to its supplemental motion. The
Court construes this supplemental motion as Defendant’s alternate request for leave to assert its
claims against the third parties through its proposed third-party petition under Rule 14.
Federal Rule of Civil Procedure 14 governs the filing of a third-party complaint. Under
Rule 14(a)(1), a defending party may file a third-party complaint against a nonparty “who is or
may be liable to it for all or part of the claim against it.”5 The defendant must obtain leave of court
by motion if the third-party complaint is filed more than 14 days after its original answer.6
Whether to grant or deny leave to file a third-party complaint is a matter within the court’s sound
discretion.7
A third-party claim may be asserted under Rule 14 “only when the third party’s liability
is in some way dependent on the outcome of the main claim or when the third party is
secondarily liable to the defendant.”8 The original defendant’s claim against a third-party

4

Def.’s Supp. Mot., ECF No. 27.

5

Fed. R. Civ. P. 14(a)(1).

6

Id.

7

See First Nat'l Bank of Nocona v. Duncan Sav. & Loan Ass’n, 957 F.2d 775, 777–78 (10th Cir.
1992) (“The granting of leave for a defendant to prosecute a third party proceeding under Rule 14 rests in
the sound discretion of the trial court.”); U. S. Fid. & Guar. Co., v. Perkins, 388 F.2d 771, 773 (10th Cir.
1968) (“Whether third-party defendants may be brought in and retained in the action is ordinarily a matter
addressed to the sound discretion of the trial judge.”).
8

United of Omaha Life Ins. Co. v. Reed, 649 F. Supp. 837, 841 (D. Kan. 1986).

4

defendant cannot simply be a related claim or one that arises against the same general
background, but must be based upon the plaintiff’s claim against the original defendant.9 “A
defendant may not contend that another person is liable directly to the plaintiff. Rather, the rule
allows a defendant to bring in parties if liability may be passed on to the impleaded third
party.”10
Even if the requirements of Rule 14 are met, numerous cases recognize that a court still has
discretion to grant or deny a Rule 14 motion.11 In exercising its discretion, a court should construe
the rule liberally to effectuate its intended purpose of adjudicating the rights of all persons
concerned in the controversy in one proceeding and preventing the necessity of trying several
related claims in different lawsuits.12 Some factors courts have considered when exercising this
discretion include:
(1) the benefits of a single action versus prejudice to the other party and confusion;
(2) the timeliness of the request and prejudice to the plaintiff in delay; (3) whether
the main case would unnecessarily expand in scope; (4) whether impleading new
parties would unduly delay or complicate the trial; and (5) whether the third-party
plaintiff's motion states sufficient grounds for the court to evaluate the propriety of
third-party complaints.13

9

Id.

10

Admin. Comm. of Wal-Mart Assocs. Health & Welfare Plan v. Willard, 216 F.R.D. 511, 513
(D. Kan. 2003) (citing In re Dep't of Energy Stripper Well Exemption Litig., 752 F. Supp. 1534, 1536 (D.
Kan. 1990)).
11

Cessna Fin. Corp. v. Tri-Cty. Builders Corp., No. 14-1124-JTM-TJJ, 2014 WL 7148840, at *1
(D. Kan. Dec. 15, 2014); Digital Ally, Inc. v. Z3 Tech., LLC, No. 09-2292-KGS, 2011 WL 723039, at *4
(D. Kan. Feb. 23, 2011) (citing Farmers & Merchants Mut. Fire Ins. Co. v. Pulliam, 481 F.2d 670, 673
(10th Cir. 1973); First Nat’l Bank of Nocona, 957 F.2d at 777).
12

See United States v. Acord, 209 F.2d 709, 712 (10th Cir. 1954) (“The purpose of Rule 14 [is]
to accomplish in one proceeding the adjudication of the rights of all persons concerned in the controversy
and to prevent the necessity of trying several related claims in different lawsuits. The rule should be
liberally construed to effectuate its intended purposes.”).
13

Digital Ally, 2011 WL 723039, at *4 (citing Willard, 216 F.R.D. at 514).

5

In a case with similar facts, United of Omaha Life Ins. Co. v. Reed,14 the insurer brought a
declaratory judgment action with regard to its liability for claims under a health insurance policy.
The insured defendant filed a third-party complaint against the plaintiff’s insurance agent, based
upon alleged representations the agent made to defendant regarding coverage.15 On a motion to
dismiss the third-party complaint, the court found the third-party complaint was proper because it
sought to hold the agent responsible for any liability that the insured defendant would incur if the
court declared there was no coverage under the insurance policy.16 It noted that any decision about
whether there was coverage would require evidence concerning the agent’s representations.17
In support of its motion, Defendant argues that one fact raised by Plaintiff in support of its
position there is no coverage is that Defendant failed to notify Plaintiff that the outside monitoring
of the fire alarm system had been discontinued. Defendant maintains that notice was given to a
representative of Plaintiff, as well as to the third-party insurance agency and its agent
representative, Porter-Spears and Bundy Insurance Agency, Inc. and Sarah Porter. Defendant
contends it is necessary to add the insurance agency and agent as parties to this case based on the
theory that these third parties should have provided proper notice to Plaintiff and failed to do so.
The Court finds that Defendant has pled sufficient facts in its motion and proposed thirdparty petition to show that it seeks to hold the insurance agency and agent responsible for any
liability that Defendant will incur if the Court declares there is no coverage under the Policy. Only
if Plaintiff is successful on its claims against Defendant—by obtaining a declaratory judgment that
there is no insurance coverage under the Policy—will the proposed third-party defendant be liable
14

649 F. Supp. at 841.

15

Id.

16

Id.

17

Id.

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to Defendant for all or part of Plaintiff’s claims against it. Any decision about whether there is
insurance coverage under the Policy for Defendant’s loss resulting from the July 26, 2016 fire will
require evidence concerning whether Defendant notified the third-party insurance agency and
agent that the fire alarm system monitoring had been discontinued. It would also be wastefully
duplicative to require Defendant to assert its claims against the insurance agency and agent in a
separate action if the Court finds no coverage under the Policy.
Finally, the Court finds the other Rule 14 factors weigh in favor of granting the motion.
Specifically, Defendant’s proposed claims against the proposed third-party defendants would not
expand the scope of the main case or unduly delay or complicate the case. Defendant’s proposed
third-party claims are based upon facts that are relevant to Plaintiff’s underlying declaratory
judgment action against Defendant. Although Defendant’s present motion was not filed by the
May 31, 2017 Scheduling Order deadline for filing motions for leave to amend the pleadings or
add parties, it was filed shortly after the deadline and early in the case. The Court also finds that the
benefits of a single action outweigh the risk of any prejudice or confusion to Plaintiff. Defendant is
therefore granted leave to file its Amended Answer and Third-Party Petition against third-party
defendants Porter-Spears and Bundy Insurance Agency, Inc. and Sarah Porter pursuant to Fed. R.
Civ. P. 14.
IT IS THEREFORE ORDERED that the Supplemental Motion for Leave to File
Amended Answer and Third-Party Petition of Defendant Keim Properties, LLC (ECF No. 27) is
GRANTED. Defendant Keim is hereby granted leave to file its Amended Answer and Third-Party
Petition in the form attached to its motion and shall electronically file it forthwith. Defendant Keim

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shall serv Summons on a Thirdve
s
-Party Comp
plaint18 and its filed Am
mended Answ and
wer
Third-Pa Petition upon newly added thirdarty
u
-party defend
dants Porter-Spears and Bundy Insur
rance
Agency, Inc. and Sar Porter on or before July 25, 2017
rah
n
J
7.
IT IS FURTH
T
HER ORDE
ERED that th second M
he
Motion for Le
eave to File A
Amended An
nswer
and Cros
ss-Claim of Defendant Keim Propert
D
K
ties, LLC (E
ECF No. 25) is DENIED.
IT IS SO ORD
T
DERED.
Dated June 27 2017, at Kansas City, Kansas.
D
7,
K

Teresa J James
J.
U. S. Ma
agistrate Jud
dge

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This form is available on the Court’s website at:
s
n
w
http://www.uscourts.go
ov/forms/noti
ice-lawsuit-su
ummons-subp
poena/summo
ons-third-party
y-complaint.

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