CX Reinsurance Company Limited v. Kirson
Filing
195
MEMORANDUM OPINION AND ORDER denying {191] Motion to Alter or Amend Judgment and to Modify Court's Order. Signed by Judge Roger W Titus on 8/3/2018. (jf3s, 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.
After cross-motions for summary judgment had been fully briefed and argued, see
ECF Nos. 79, 121, 124, 130, 159, 160, 161, 162, but before a final ruling had been made by the
Court, CXRe moved on June 4, 2018 to voluntarily dismiss this action with prejudice pursuant to
Rule 41(a)(2), see ECF No. 166. On June 12, 2018, Johnson formally opposed CXRe’s Motion
to Dismiss. See ECF No. 174. On June 15, 2018, the Court dismissed the instant action, while
imposing as conditions of dismissal that CXRe was prohibited from raising the rescission of its
three general liability policies covering Kirson-owned properties as a defense or affirmative
claim in any future litigation. See ECF No. 180.
Subsequently, on July 27, 2018, Johnson moved the Court to alter or amend its judgment
[ECF No. 180] to incorporate an additional condition of dismissal, see ECF No. 191-1 at 11–12,
and to alter or amend an earlier Memorandum Opinion from November 13, 2017 [ECF No. 94]
to remove any resolution on Johnson’s status as a third-party beneficiary to Kirson’s insurance
contract, see ECF No. 191-1 at 12–15. On July 27, 2018, CXRe responded in opposition to
Johnson’s Motion. See ECF No. 192.
With regard to Johnson’s first request, the origin of the Court’s conditions of dismissal
were from a letter dated June 8, 2018, in which “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
Kirson-owned 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. 180
at 2 (quoting ECF No. 169). The Court deemed the first two proposed stipulations as pertinent
and incorporated them into the dismissal order to prevent any prejudice to Johnson.
The Court’s exclusion of the “accord and satisfaction” language was not an “oversight”
as Johnson now contends, see ECF No. 191-1 at 12, but rather, a fair and adequate resolution to a
case exclusively involving an insurer seeking to rescind policies on the basis of material
misrepresentations by the insured—and nothing else. See ECF No. 180 at 3. (“[T]his litigation
only pertains to the rescission of the insurance policies, not the amount of money owed under
them.”). Whether Johnson now regrets declining CXRe’s original proposal is of no concern, and
the Court sees no reason why it should revise the dismissal order in this case.
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With regard to Johnson’s second request, the Court likewise sees no reason to change
course. Johnson fears that CXRe will use this Court’s prior determinations1 to preclude him
from raising third-party beneficiary claims in the future. See ECF No. 191-1 at 1–2. In asserting
this position, Johnson argues that Judge Bredar’s recent opinion in Leader disavows his decision
in Levitas—an opinion that Johnson proffers was the basis for this Court’s finding that he was
not a third-party beneficiary to Kirson’s insurance contract. See id. at 12–15 (opining that Judge
Bredar’s opinion qualifies as “an intervening change in controlling law” as required for a motion
brought under Rule 59(e)). The Court simply disagrees that any single opinion within this
district is “an intervening change in controlling law” with regard to Maryland contract law.
Furthermore, Johnson’s fears with regard to claim preclusion are all for naught. While
the Court has definitively viewed Johnson as “a claimant against the insured” with “a legitimate
interest in preserving the policies,” see ECF No. 180 at 3, the Court has never made a final
determination as to whether Johnson is a third-party beneficiary. Denial of the temporary
restraining order was not a fundamental ruling on Johnson’s theory of liability, it merely
adjudged Johnson’s likelihood of success in preventing rescission of the insurance policies at
issue—a success Johnson achieved nevertheless. See ECF No. 46.
Furthermore, res judicata only precludes claims that were brought or could have been
brought in the first lawsuit. See generally Bouchat v. Bon-Ton Dep’t Stores, Inc., 506 F.3d 315,
326–27 (4th Cir. 2007).
This theory of claim preclusion requires a “common nucleus of
operative facts,” which essentially means a nexus to the facts from which the cause of action
arises. See id. at 327–29. While denial of Johnson’s Motion to Amend his Answer did prevent
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See ECF No. 46 at 2–3 (denying a Temporary Restraining Order partially on the basis that Johnson failed to
“establish[] that he is an intended third-party beneficiary of the insurance contract”); ECF No. 94 at 3 (rejecting as
futile and prejudicial Johnson’s Motion to Amend his Answer to add a counterclaim for declaratory judgment that he
is a third-party beneficiary to Kirson’s insurance contract).
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him from adding a counterclaim seeking declaratory judgment as a third-party beneficiary, see
ECF No. 94, that counterclaim had as much relevance to the disposition of this case as one
seeking declaratory judgment that Johnson’s name was, in fact, Johnson. As this Court has
repeatedly maintained, “[t]his is a case in which an insurer sought to rescind policies on the basis
of material misrepresentations by the insured.” See, e.g., ECF No. 180 at 3. Whether Kirson lied
in his insurance application and whether and when CXRe discovered those lies is the nucleus of
facts for this case. Indeed, Johnson served as an intervenor, but whether he was merely an
interested party or a contractual third party beneficiary was never fully adjudged and certainly
was not within the aforementioned factual nucleus.
Therefore, although the Court finds no
reason to amend its earlier opinions, it also does not believe that Johnson is precluded from
raising this or any other alternative theories of liability in the future.
Accordingly, it is, this 3rd day of August, 2018, by the United States District Court for
the District of Maryland,
ORDERED, that Intervenor Johnson’s Motion to Alter or Amend Judgment and to
Modify Court’s Orders [ECF No. 191] is hereby DENIED.
/s/
ROGER W. TITUS
UNITED STATES DISTRICT JUDGE
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