Landry et al v. Covington Specialty Insurance Company, et al

Filing 61

ORDER AND REASONS: IT IS ORDERED that the 39 , 40 motions for summary judgment are GRANTED, dismissing claims against moving defendants with prejudice, as set forth in document. IT IS FURTHER ORDERED that plaintiffs' 50 motion to dismiss without prejudice is DISMISSED as moot. Signed by Judge Ivan L.R. Lemelle on 03/11/2019. (am)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DONNIE LANDRY, ET AL.

CIVIL ACTION

VERSUS

NO. 18-2362

COVINGTON SPECIALTY
INSURANCE COMPANY, ET AL.

SECTION "B"(3)

ORDER AND REASONS
Defendants Covington Specialty Insurance Company and RSUI
Group, and defendant Houston Specialty Insurance Company filed the
instant two motions for summary judgment. Rec. Docs. 39, 40.
Plaintiffs timely filed a response in opposition to both motions
as well as a motion for voluntary dismissal. Rec. Docs. 44, 50.
Defendants filed reply memoranda. Rec. Docs. 52, 54, 59. For the
reasons discussed below,
IT IS ORDERED that the motions for summary judgment are
GRANTED,

dismissing

claims

against

moving

defendants

with

prejudice.
IT IS FURTHER ORDERED that plaintiffs’ motion to dismiss
without prejudice is DISMISSED as moot.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This case arises out of a contract executed between JoAnna
Landry and Robert Dinger, as representative of R&N Pool Service,
Inc d/b/a Dinger pools, for the construction of a custom swimming
pool, hot tub, deck, and outdoor patio at plaintiffs’ home in
Houma, Louisiana. Rec. Doc. 1-2 at 3. Plaintiffs claim that Mr.
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Dinger and R&N Pool Services performed the work specified under
the contract in an improper, negligent, and unworkmanlike manner
and seek compensation for physical damage to their property and
past

and

future

mental

and

emotional

suffering.

Id.

at

6.

Plaintiffs filed suit in Louisiana state court in January 2018
directly against defendant insurance companies, “[d]ue to the
insured’s bankruptcy discharge.”

Rec. Doc. 1-2 at 2 (citing La.

Rev. Stat. § 22:1269).
Defendant insurance companies Covington Specialty Insurance
Group (“Covington”), Houston Specialty Insurance Group (“HSIC”),
and RSUI Group Inc. (“RSUI”) removed the case to federal court on
the basis of diversity jurisdiction in March 2018, stating that no
defendant is a citizen of Louisiana. Rec. Doc. 1. Plaintiffs moved
to remand, arguing that the defendants assume their insured’s
Louisiana citizenship

under

Louisiana’s

Direct

Action

Statute

(“DAS”), and therefore diversity of citizenship did not exist.
Rec. Doc. 9. Defendants argued that they do not assume Mr. Dinger
and R&N’s Louisiana citizenship because plaintiffs’ claims sound
in contract and not in tort, meaning that Louisiana’s Direct Action
Statute (“DAS”) does not apply. Rec. Docs. 11, 15. This Court
agreed with defendants and denied plaintiffs’ motion to remand,
finding that defendants did not take on the Louisiana citizenship
of the insured because “[p]laintiffs’ claims sound only in contract

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and Louisiana’s direct action statute is inapplicable.” Rec. Doc.
35 at 5.
Plaintiffs sought to file an amended complaint adding three
non-diverse defendants to the lawsuit: R&N Pool Service, Inc, R&N
Dinger, Inc, and Vincent Watson, Sr. Rec. Doc. 19. Plaintiff
asserted that they had mistakenly believed that Mr. Dinger’s two
businesses, R&N Pool Service, Inc. and R&N Dinger, Inc., had been
discharged in bankruptcy as well as Mr. Dinger personally. Id. at
2. The Magistrate Judge denied plaintiffs’ motion, finding that
failing to identify a party was not a mistake of law, plaintiff
was dilatory in seeking to amend, and plaintiffs would not be
prejudiced

by

denial

because

claims

against

the

non-diverse

parties filed in state court may be prescribed. Rec. Doc. 36 at 6.
Defendants filed the instant motions for summary judgment,
arguing that plaintiffs have no viable claims remaining because
this

Court

previous

ruled

that

their

claims

sound

solely

in

contract, which is not a basis for proceeding against an insurer
pursuant to the Louisiana Direct Action Statute, and there is a
lack of privity between plaintiff and defendants. 1 Rec. Docs. 39,
40. Plaintiffs timely filed a response in opposition requesting

Defendants Covington Specialty Insurance Company and RSUI Group filed a
joint motion for summary judgment (Rec. Doc. 39) and defendant Houston
Specialty Insurance Group filed a separate motion for summary judgment (Rec.
Doc. 40). Because the arguments substantially overlap, and plaintiffs filed a
single response in opposition to both motions (Rec. Doc. 44), the motions are
considered together in this Order and Reasons.

1

3

that the Court abstain from exercising its jurisdiction because of
a parallel state court proceeding against both the insured and the
defendant-insurers and arguing in the alternative that defendants’
motion

for

summary

judgment

should

be

denied.

Rec.

Doc.

44.

Plaintiffs additionally state that they have filed a motion for
voluntary dismissal without prejudice in conjunction with their
opposition to the instant motions due to their pending lawsuit in
Louisiana state court. Rec. Doc. 50. In their replies, defendants
argue that the requirements for abstention have not been met and
that plaintiffs’ motion for voluntary dismissal is not appropriate
at this late stage of the proceedings. Rec. Docs. 52, 54.
Defendants

argue

that

plaintiffs

have

no

viable

claims

because their claims sound solely in contract, which is not a basis
for proceeding against an insurer pursuant to the Louisiana Direct
Action Statue. Rec. Doc. 39-1 at 1. Defendants further argue that
because there is no privity between plaintiffs and defendants,
plaintiffs have no claim for breach of contract. Rec. Doc. 40-1 at
4. Defendants assert that this Court previously recognized that
the

plaintiffs’

petition

affirmatively

establishes

that

the

underlying cause of action for their claim against defendants is
premised on the insured’s breach of contract. Rec. Doc. 39-1 at 5.
However, plaintiffs’ cause of action against defendants is under
Louisiana’s

Direct

Action

Statute

(“DAS”),

which

grants

a

procedural right of action against an insurer where the plaintiff
4

has

a

substantive

cause

of

action

against

the

insured.

Id.

Defendants state that the DAS does not authorize direct action
against insurers based solely on a breach of contract, but rather
gives a special right of action specifically to injured tort
victims. Id. at 5-6. Given this Court’s previous finding that
plaintiffs’ claims sound solely in contract, and the lack of
privity between plaintiffs and defendants, defendants argue that
plaintiffs have no viable claim against them. Rec. Doc. 40-1 at 6.
Plaintiffs advise the Court that they have filed a new state
court lawsuit against both the insured and the defendant insurance
companies,

based

on

their

recent

discovery

of

the

insured’s

regained solvency and resumption of business activity. Rec. Doc.
44 at 1. Plaintiffs therefore request that the Court abstain from
exercising its jurisdiction in this matter due to the parallel
pending state court proceeding under the Supreme Court’s doctrine
of Colorado River Abstention. Id. Alternatively, plaintiffs assert
that they have filed a motion for voluntary dismissal without
prejudice pursuant to Fed. R. Civ. P. 41(a)(2), which they request
this Court grant along with a denial of the instant motions. Id.
at 2. Finally, defendants argue that the instant motions for
summary judgment should be denied because they are premature due
to outstanding discovery requests, and because plaintiffs have
viable claims under the direct-action statute which have not yet
been prescribed. Id.
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Defendants argue that abstention is not warranted because
this case is not parallel to the newly filed state court case and
no exceptional circumstances are present. Rec. Doc. 54 at 2-3.
Defendants assert that there is not an identity of parties as the
state court case names the insured as a defendant while the present
case does not. Id. at 2. Defendants note that the supposedly
duplicative

litigation

is

of

plaintiffs’

own

making

because

plaintiffs mistakenly assumed the R&N entities were insolvent and
therefore failed to include them as defendants in their original
complaint in this case as required under the DAS. Rec. Doc. 52 at
6.

Additionally, the only issue before the Court in the present

case is whether plaintiffs have a viable contract claim against
defendants, whereas the state court proceedings are also premised
on tortious and negligent conduct of the insured. Id. at 3.
Therefore, defendants assert that the state court proceeding is
not a parallel action to this federal proceeding and Colorado River
abstention is not appropriate. Id. Furthermore, defendants argue
that the factors relevant to determining whether the ‘exceptional
circumstances’ exist weigh in favor of denying abstention. Id. at
3-4.

Defendants

also

argue

that

the

instant

motions

are

not

premature as outstanding discovery requests are not pertinent and
would not alter the result. Rec. Doc. 54 at 5. Finally, defendants
assert

that

voluntary

dismissal

pursuant

to

Fed.

R.

Civ.

P.

41(a)(2) is not warranted at this stage, given that this case was
6

filed

nearly

a

year

ago

and

substantial

motion

practice

has

occurred. Rec. Doc. 52 at 9. Defendants argue that a ruling on the
instant summary judgment motions is appropriate. Id.
LAW AND ANALYSIS
Summary

judgment

is

appropriate

when

“the

pleadings,

depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law.” Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56(c)). A genuine
issue of material fact exists if the evidence would allow a
reasonable jury to return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When
the movant bears the burden of proof, it must “demonstrate the
absence of a genuine issue of material fact” using competent
summary judgment evidence. Celotex, 477 U.S. at 323. But “where
the non-movant bears the burden of proof at trial, the movant may
merely point to an absence of evidence.” Lindsey v. Sears Roebuck
& Co., 16 F.3d 616, 618 (5th Cir. 1994). When the movant meets its
burden, the burden shifts to the non-movant, who must show by
“competent summary judgment evidence” that there is a genuine issue
of material fact. See Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986). All reasonable inferences
must be drawn in favor of the nonmovant, but “a party cannot defeat
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summary

judgment

with

conclusory

allegations,

unsubstantiated

assertions, or only a scintilla of evidence.” See Sec. & Exch.
Comm'n v. Arcturus Corp., 912 F.3d 786, 792 (5th Cir. 2019).
Plaintiffs have no viable claims against defendants because
their claims sound solely in contract and there is a lack of
privity between plaintiffs and defendants. This Court previously
found

that

“[p]laintiffs’

claims

sound

only

in

contract

and

Louisiana’s direct action statute is inapplicable. Rec. Doc. 35 at
5. We held that the negligent acts and omissions alleged in
plaintiffs’ complaint “all relate to Dinger’s construction of the
pool, which was governed by the contract between [p]laintiffs and
Dinger.” Id. Although we recognized that “the violation of a
contract can potentially give rise to claims in contract and in
tort,” we ultimately held that “the alleged duties that were
breached are both explicitly and implicitly set forth in the
contract between the parties and there are no general tort duties
alleged which do not arise as a result of the existence of the
contract.” Id. at 6. (internal quotations omitted). The Court sees
no basis for revising this holding, and plaintiffs have offered no
arguments

other

than

to

assert

that

the

defendant

insurance

companies “are liable for damages resulting from the specified
tortious and negligent conduct of the insured.” Rec. Doc. 44 at
10. As the Court previously held, plaintiffs’ claims all arise
because of their contract with Mr. Dinger and therefore do not
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sound in tort. Rec. Doc. 35 at 5.

Therefore, the Court maintains

its prior holding that the Direct Action Statute, which only
applies tort victims, is inapplicable to plaintiffs’ claims. See
Rec. Doc. 35 at 5; Holland Am. Ins. Co. v. Succession of Roy, 777
F.2d 992, 994-995 (5th Cir.1985) (holding that “the Louisiana
Direct Action Statute applies only to torts and not to contract
disputes”) (internal citation omitted). Since plaintiffs cannot
proceed against defendants under the Direct Action Statute on their
contractual claims, plaintiffs have no viable basis for their
claims against defendants. There is no genuine dispute as to the
fact

that

a

contract

did

not

exist

between

plaintiffs

and

defendants. Neither party alleges that such a contract existed.
The contract that formed the basis for the underlying dispute in
this

case

was

between

plaintiffs

and

Robert

Dinger,

as

representative of R&N Pool Services, Inc. Rec. Doc. 1-2 at 11-12.
Plaintiffs never entered into a contract with defendants and do
not

allege

that

they

were

directly

insured

by

the

defendant

insurance companies. Therefore, there is a lack of privity between
the parties. Without a contract, plaintiffs have no basis for a
breach of contract claim against defendants. Because there is no
genuine dispute of material fact and plaintiffs have no basis to
proceed against defendants on a breach of contract claims, summary
judgment in favor of defendants is warranted.

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Additionally, plaintiffs request that this Court abstain from
exercising jurisdiction in this matter under the Supreme Court’s
doctrine of Colorado River abstention, because of a new parallel
state court proceeding against defendants and the insured. Rec.
Doc. 44 at 5. Under the doctrine of Colorado River abstention, a
court may choose to abstain from exercising jurisdiction, awaiting
the conclusion of state-court proceedings in a parallel case. See
Stewart v. W. Heritage Ins. Co., 438 F.3d 488, 491 (5th Cir. 2006).
“A Colorado River abstention analysis begins with a heavy thumb on
the scale in favor of exercising federal jurisdiction, and that
presumption

is

overcome

only

by

‘exceptional

circumstances’.”

Aptim Corp. v. McCall, 888 F.3d 129, 135 (5th Cir. 2018). Before
the Court analyzes whether exceptional circumstances warranting
abstention

are

present,

the

Court

must

make

the

preliminary

determination that a parallel state court proceeding exists.
To determine whether a parallel action exists, a court looks
“both to the named parties and to the substance of the claims
asserted

to

determine

whether

the

state

proceeding

would

be

dispositive of a concurrent federal proceeding.” Air Evac EMS,
Inc. v. Texas, Dep't of Ins., Div. of Workers' Comp., 851 F.3d
507, 520 (5th Cir. 2017) (internal quotations omitted). The newly
initiated state court proceedings are not a parallel action to the
pending case before this Court. Although not determinative, it is
relevant

that

the

two

cases

involve
10

different

parties.

Id.

Plaintiffs state in their response that they have filed a state
court lawsuit “against both the insured and the Defendant-insurers
herein.” Rec. Doc. 44 at 1. Because only the insurance companies
are defendants in the present case, there is not an identity of
parties between the state court proceeding and this federal case.
Additionally, the state proceedings would not be dispositive of
this federal proceeding. As defendants note, the only issue before
the Court in the instant matter is whether plaintiffs have a viable
contract

claim

against

the

defendants.

Rec.

Doc.

54

at

3.

Plaintiffs’ potential breach of contract claims against Robert
Dinger or R&N Pool Services are not the subject of this case, nor
are tort claims against defendants. Rather, the Court is only
considering

plaintiffs’

potential

contract

claims

against

the

defendant insurance companies. Therefore, the two proceedings are
not parallel and Colardo River abstention does not apply.
A. Plaintiffs’ Motion for Dismissal Without Prejudice
Dismissal without prejudice is not appropriate at this stage
of

the

proceedings,

and

further

discovery

will

not

aid

in

resolution of the instant motions for summary judgment. The Fifth
Circuit has held that “[w]hen a plaintiff fails to seek dismissal
until a late stage of trial, after the defendant has exerted
significant time and effort, then a court may, in its discretion,
refuse to grant a voluntary dismissal. Davis v. Huskipower Outdoor
Equip. Corp., 936 F.2d 193, 199 (5th Cir. 1991). This case has
11

been ongoing in federal court for nearly a year. Plaintiffs waited
to seek voluntary dismissal without prejudice until two rulings
adverse to their positions had been issued and two summary judgment
motions had been filed. Plaintiffs assert that this is due to the
state court proceeding. However, as discussed above, the state
court proceeding is not relevant to the Court’s resolution of this
case. Therefore, voluntary dismissal without prejudice at this
late stage of the proceedings is not appropriate.
New Orleans, Louisiana, this 11th day of March 2019.

___________________________________
SENIOR UNITED STATES DISTRICT JUDGE

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