CX Reinsurance Company Limited v. Kirson

Filing 180

MEMORANDUM OPINION AND ORDER granting 166 Motion to Dismiss; Plaintiff CXRe's 17 Amended Complaint is dismissed with prejudice with the costs of this action to be assessed by the Clerk of this Court against the Plaintiff subject to the cond itions stated in this Order; directing that pursuant to paragraph eight of 172 the Court's 6/11/2018 Protective Order, Intervenor Johnson return to CXRe's counsel, by 6/18/2018 at 12:00 p.m., all of the documents that CXRe produced subjec t to 160 the Court's 5/10/2018 Discovery Order; directing that Intervenor Johnson notify the Clerk's Office, by 6/18/2018 at 12:00 p.m., that 174 his Opposition Memorandum was filed in error; directing that Intervenor Johnson re-file hi s Opposition Memorandum, redacting footnote three on page eleven, and filing that footnote under seal and directing that the Clerk of this Court to close this case. Signed by Judge Roger W Titus on 6/15/2018. (Titus, Roger) Modified on 6/15/2018 (aos, Deputy Clerk). Modified on 6/15/2018 (kns, Deputy Clerk).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CX REINSURANCE
COMPANY LIMITED,
Plaintiff
v.
DEVON S. JOHNSON,
Intervenor

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* Case No. RWT-15-cv-3132
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MEMORANDUM OPINION AND ORDER
Plaintiff CX Reinsurance Company Limited (“CXRe”) filed a complaint seeking
rescission and other relief as to three commercial general liability policies issued to Defendant
Benjamin L. Kirson (“Kirson”)—a defendant who was previously dismissed from this case with
prejudice. See ECF Nos. 1, 17, 81. Intervenor Devon S. Johnson (“Johnson”), having previously
won a substantial state judgment against Kirson for injuries sustained from lead paint exposure,
was permitted to intervene in order to protect his interests by demonstrating that CXRe’s policies
remain effective. See ECF Nos. 19, 38.
CXRe and Johnson previously filed cross-motions for summary judgment, which were
fully briefed, see ECF Nos. 79, 121, 124, 130, 161, 162, and argued before this Court at a
hearing on May 10, 2018, see ECF Nos. 159, 160. Subsequent to that motions hearing, CXRe
moved on June 4, 2018 to voluntarily dismiss this action with prejudice pursuant to
Rule 41(a)(2). See ECF No. 166. In a letter dated June 6, 2018, Johnson informed the Court of
his intent to oppose the dismissal of this case. See ECF No. 167 (arguing that (1) Johnson had
not been paid-in-full, (2) CXRe’s proposed dismissal was merely a broad-scale litigation tactic to
avoid newly granted discovery disclosures and an adverse judgment by the Court, and

(3) counsel may seek to introduce additional intervenors from a consortium of lead paint
victims).
In a letter dated June 8, 2018, CXRe informed the Court that it was willing to stipulate,
among others, that (1) “it will not raise rescission as a basis for refusing to defend an action filed
by another lead claimant against Kirson,” (2) “it will not raise rescission as a defense in any
coverage or direct action by or between any lead claimant and CXRe with respect to a Kirsonowned property,” and (3) Johnson’s acceptance of any payment at this stage would not serve as
waiver of any of his rights or constitute an “accord and satisfaction.” See ECF No. 169. On
June 12, 2018, Johnson formally opposed CXRe’s Motion to Dismiss.

See ECF No. 174

(elaborating earlier arguments, and arguing that Johnson would seek attorney’s fees after a
judicial decision on the merits).
Once an opposing party has filed an answer or motion for summary judgment, and unless
all parties consent to dismissal, “an action may be dismissed at the plaintiff’s request only by
court order, on terms that the court considers proper.”

Fed. R. Civ. P. 41(a)(2) (emphasis

added). The Court has broad equitable discretion as to whether to grant a plaintiff’s motion for
dismissal under Rule 41(a)(2), and may do so unless another party “will be unfairly prejudiced.”
See, e.g., Davis v. USX Corp., 819 F.2d 1270, 1273 (4th Cir. 1987) (“In considering a motion for
voluntary dismissal, the district court must focus primarily on protecting the interests of the
defendant.”).

Courts review a variety of factors—typically, case-specific in nature—when

determining whether a party would suffer legal prejudice. See Gross v. Spies, 133 F.3d 914 (4th
Cir. 1998); e.g., Flath v. Bombardier, Inc., 217 F.3d 838 (4th Cir. 2000) (reviewing an “opposing
party’s effort and expense in preparing for trial,” the plaintiff’s excessive delay and “lack of
diligence,” the plaintiff’s “explanation of the need for dismissal,” and “the present stage of the

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litigation”). Furthermore, a “district court [may] impose conditions on voluntary dismissal to
obviate any prejudice to the defendants.” See Davis, 819 F.2d at 1273.
This is a case in which an insurer sought to rescind policies on the basis of material
misrepresentations by the insured. Johnson—a claimant against the insured—has a legitimate
interest in preserving the policies. However, CXRe seeks to dismiss this case with prejudice and
has asserted a willingness to refrain from seeking rescission of the three policies at issue in this
litigation—both as a defense in future actions with respect to Kirson-owned properties and as a
claim in any future direct suits. See ECF No. 169 at 3. The Court finds that dismissal with
prejudice that incorporates the proposed stipulations as conditions of approval of the order of
dismissal is appropriate, and thus will adopt and include them in the terms and conditions of the
Rule 41(a)(2) dismissal.
Johnson urges the Court to deny dismissal on the basis that there is a dispute as to the
amount of money CXRe must pay Johnson under the policies (i.e. an apportionment of the state
court judgment against Kirson). See ECF No. 174 at 20–23. However, this litigation only
pertains to the rescission of the insurance policies, not the amount of money owed under them.
Therefore, Johnson will not be prejudiced by dismissal of this case because it does not impact the
underlying tort litigation, and it does not inhibit him from enforcing his state court judgment.
Johnson also urges the Court that “a dismissal at this late stage in the litigation would
prejudice Johnson and other lead paint victims and would allow CXRe to circumvent an
expected adverse result on summary judgment.” See ECF No. 174 at 13–20. Due to the late
stage of this litigation and the considerable expense expended by the parties, an unconditional
dismissal arguably might prejudice Johnson. However, CXRe’s proposed stipulations would
obviate any and all prejudice to Johnson related to the dismissal of this lawsuit. Indeed, CXRe’s

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stipulations are a complete “white flag of surrender” by CXRe on its rescission claims and would
represent a resounding victory for Johnson from which no prejudice could result.
Johnson is the only intervenor in this litigation. While his counsel has indicated that
additional parties may seek intervention, see ECF No. 167 at 4–5, any motion to intervene at this
stage would obviously be untimely. However, even if any other lead paint victim from a Kirsonowned property (between 1997 and 2000) were to come forward, his or her interests against
rescission of the policies will be completely protected by CXRe’s proposed stipulation if
incorporated into the Court’s order of dismissal. See ECF No. 169 at 3 (“[CXRe] will not raise
rescission as a basis for refusing to defend an action filed by another lead claimant against
Kirson . . . [and] will not raise rescission as a defense in any coverage or direct action by or
between any lead claimant and CX Re with respect to a Kirson-owned property.”) (emphasis
added).
Johnson’s counsel also avers that “while Mr. Johnson is the only intervenor in this action
and his motion to intervene was not filed on behalf of a class, he has been serving informally in a
representative capacity and a dismissal of this case without a substantive ruling will adversely
affect third parties.” ECF No. 174 at 18. The conditions in this Court’s order of dismissal
concerning rescission fully protect any other lead paint victims of Kirson-owned properties. To
be sure, the Court is sympathetic to all lead-paint victims, but regardless of whether Johnson’s
legal fees are being paid by a consortium of victims or a special interest group, his counsel has a
duty of loyalty to the client of record in this litigation—Johnson. Today’s ruling preserves the
policies at Kirson-owned properties against any rescission claims, thus freeing Johnson to
enforce his judgment under the policies at issue.

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Accordingly, it is, this 15th day of June, 2018, by the United States District Court for the
District of Maryland,
ORDERED, that Plaintiff CXRe’s Motion to Dismiss [ECF No. 166] is hereby
GRANTED; and it is further
ORDERED, that Plaintiff CXRe’s Amended Complaint [ECF No. 17] is hereby
DISMISSED WITH PREJUDICE with the costs of this action to be assessed by the Clerk of
this Court against the Plaintiff, subject, however, to the following conditions:
1. Plaintiff CXRe is hereby PROHIBITED from raising the rescission of the general
liability policy covering Kirson-owned properties from August 1, 1997 to
August 1, 1998 (Policy No. CNAGL1114-97) as a defense or affirmative claim in any
future litigation;
2. Plaintiff CXRe is hereby PROHIBITED from raising the rescission of the general
liability policy covering Kirson-owned properties from August 1, 1998 to
August 1, 1999 (Policy No. CNAGL1241-98) as a defense or affirmative claim in any
future litigation;
3. Plaintiff CXRe is hereby PROHIBITED from raising the rescission of the general
liability policy covering Kirson-owned properties from August 1, 1999 to
August 1, 2000 (Policy No. CNAGL1322-99) as a defense or affirmative claim in any
future litigation;
4. This dismissal is with prejudice and acts as an adjudication on the merits adverse to
Plaintiff CXRe—CXRe is PRECLUDED from bringing or defending any claim that
was or could have been brought by it in this action;
and it is further

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ORDERED, that pursuant to paragraph eight of the Court’s June 11, 2018 Protective
Order [ECF No. 172], Intervenor Johnson is hereby DIRECTED to return to CXRe’s counsel,
by June 18, 2018 at 12:00 p.m., all of the documents that CXRe produced subject to the Court’s
May 10, 2018 Discovery Order [ECF No. 160], and it is further
ORDERED, that because footnote three of Intervenor Johnson’s Opposition
Memorandum [ECF No. 174] refers to information obtained from protected material under
paragraph six of the Court’s June 11, 2018 Protective Order [ECF No. 172], Intervenor Johnson
is hereby DIRECTED to notify the Clerk’s office, by June 18, 2018 at 12:00 p.m., that his
Opposition Memorandum [ECF No. 174] was filed in error, and that the Clerk’s office should
mark it accordingly, and it is further
ORDERED, that Intervenor Johnson is hereby DIRECTED to re-file his Opposition
Memorandum, redacting footnote three on page eleven, and filing that footnote under seal, and it
is further
ORDERED, that the Clerk of this Court is hereby directed to CLOSE this case and to
terminate all open motions.

/s/
ROGER W. TITUS
UNITED STATES DISTRICT JUDGE

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