Wausau Underwriters Insurance Company v. Reliable Transportation Specialists, Inc. et al

Filing 173

ORDER granting with conditions plaintiff's Motion to Dismiss Complaint for Declaratory Judgment without prejudice and dismissing Burt Holt 154 Signed by District Judge George Caram Steeh. (MBea)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
WAUSAU UNDERWRITERS
INSURANCE COMPANY,
Plaintiff,

CASE NO. 15-12954

vs.

HON. GEORGE CARAM STEEH

RELIABLE TRANSPORTATION
SPECIALISTS, INC., AMARILD
USHE and BURT HOLT,
Defendants.
and
RELIABLE TRANSPORTATION
SPECIALISTS, INC. and AMARILD
USHE,
Counter-Plaintiffs,
vs.
WAUSAU UNDERWRITERS
INSURANCE COMPANY,
Counter-Defendant.
______________________________/
ORDER GRANTING WITH CONDITIONS PLAINTIFF’S MOTION
TO DISMISS COMPLAINT FOR DECLARATORY JUDGMENT
WITHOUT PREJUDICE [DOC. 154] AND DISMISSING BURT HOLT
This case stems from an underlying lawsuit (the AHolt Litigation@) filed
by Burt Holt against Reliable Transportation Specialists (“Reliable”),
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Amarild Ushe, and Containerport Group Inc., related to injuries sustained
by Holt when he was struck by a tractor trailer operated by Ushe. The Holt
Litigation proceeded to trial and Holt obtained a verdict against defendants
Reliable and Ushe in the amount of $8,735,142.35.1 Defendants took the
position that Wausau Underwriters Insurance Company (AWausau@) is
responsible to pay the entire amount of the judgment against them,
including the part of the judgment that exceeds Wausau’s $1,000,000 limit
of insurance under the Policy issued to Reliable, due to Wausau’s bad faith
failure to settle within policy limits.
In the Fall of 2017, Wausau, Reliable, Ushe and Holt reached an
agreement pursuant to which: (1) Wausau paid its $1,000,000 policy limit
plus supplementary payments owed pursuant to policy terms; (2) the
application for leave to appeal to the Michigan Supreme Court would be
withdrawn; and (3) Holt agreed to forego further collection on the judgment
against Reliable and Ushe until the action pending before this court is
resolved, including all appeals. Wausau paid Holt $1,545,462.55 on behalf
of Reliable and Ushe. A partial satisfaction of judgment as to Reliable and
Ushe was entered by the trial court on November 29, 2017.

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The total verdict was $22,616,669. After necessary reductions were made, the total
award against Reliable and Ushe was $8,735,142.35 and the total award against
Containerport Group Inc. was $6,919,164.13.
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The present litigation arises out of plaintiff Wausau’s declaratory
judgment complaint seeking a declaration from this court that it is
responsible for no more than the policy limit under the commercial
insurance policy issued to Reliable and that defendants are precluded from
asserting any claim for bad faith with respect to the Holt Litigation. Wausau
initiated its declaratory judgment action against Reliable, Ushe and Holt
while the underlying verdict was being appealed by Reliable and Ushe.
Reliable and Ushe filed counterclaims for breach of contract and tort,
alleging that Wausau acted in bad faith against its insured by refusing to
negotiate a settlement of the Holt Litigation within the policy limits. The tort
count has been dismissed, leaving the breach of contract / duty of good
faith and fair dealing claim asserted against Wausau. The matter is
presently before the court on Wausau’s motion to dismiss its complaint for
declaratory judgment without prejudice pursuant to Fed. R. Civ. Proc.
41(a)(2). The court is familiar with the case and has read the pleadings
filed by both sides. The court does not believe that it would benefit from
oral argument in this matter and is therefore deciding the motions on the
briefs.
Wausau explains that it initiated this declaratory judgment action
against Reliable, Ushe and Holt because Reliable made claims after trial
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that Wausau was responsible for the entire judgment while it was unclear
whether the judgment would survive post-judgment motions and appeal.
Now that the Holt Litigation has been resolved, Wausau argues that
Reliable’s and Ushe’s counterclaims control and there is no useful purpose
for the declaratory judgment complaint. Wausau contends that the
declaratory judgment complaint is moot and redundant. Wausau seeks
dismissal without prejudice because it does not want to waive any of its
defenses or legal arguments in opposition to the counterclaims, though it
states that it will not re-assert the claim.
Wausau argues that given the parties’ agreement that Holt will forego
collection until this action is fully resolved, and given that it is clear the
judgment will stand, the counterclaims are sufficient to control the parties’
dispute. The only issue remaining is whether Wausau is liable to pay the
remaining portion of the judgment against Reliable and Ushe outside of
Wausau’s policy obligations due to its alleged bad faith failure to settle.
Wausau contends that in order to present the claims at issue in an orderly
manner at trial, and in an effort to “clean up” the pleadings, it seeks
dismissal of the declaratory judgment complaint without prejudice.
Federal Rule of Civil Procedure 41(a) provides that “an action may be
dismissed at the plaintiff’s request only by court order, on terms that the
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court considers proper.” The decision whether to grant a motion for
voluntary dismissal without prejudice “is within the sound discretion of the
district court.” Arvai v. Allstate Indem. Co., No. 14-10954, 2015 WL
13021803, at *1 (E.D. Mich. Feb 18, 2015) (quoting Grover by Grover v. Eli
Lilly & Co., 33 F.3d 716, 718 (6th Cir. 1994)). “The primary purpose of the
rule in interposing the requirement of court approval is to protect the nonmovant from unfair treatment.” Id. “In determining whether a defendant will
suffer plain legal prejudice, a court should consider such factors as the
defendant’s effort and expense of preparation for trial, excessive delay and
lack of diligence on the part of the plaintiff in prosecuting the action,
insufficient explanation for the need to take a dismissal, and whether a
motion for summary judgment has been filed by the defendant.” Id.
By filing its declaratory judgment complaint three years ago, Wausau
undertook the burden of proving that it did not act in bad faith in failing to
settle the Holt Litigation within policy limits. Wausau explains that it named
Holt as a defendant to protect Reliable from immediate collection efforts
while the underlying case was on appeal. Wausau then attempted to
preclude Holt from participating in the declaratory judgment action, seeking
to exclude him from the discovery process and seeking to limit his use of
any evidence obtained during discovery.
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Wausau has consistently taken the position that did not assert any
affirmative cause of action against Holt, so Holt controlled the extent to
which he participated in the declaratory litigation. Each time Wausau made
this argument to support excluding Holt from participating in discovery, it
lost. Still, Wausau continues to argue that Holt’s interest in the outcome of
this case is fully aligned with and protected by Reliable and Ushe, and
therefore Holt will suffer no prejudice if Wausau’s declaratory judgment
action is dismissed.
Discovery in this case has been extensive, including 21 depositions,
as well as written discovery and voluminous document exchanges. Holt
avers that he has expended hundreds of attorney hours defending himself
against Wausau’s declaratory judgment action.
After the underlying Holt Litigation was resolved, Wausau waited
eight months to file its motion to dismiss its complaint under Rule 41(a)(2).
During that time, there have been numerous motions, hearings and
conferences that required defendants’ participation. In just that period, the
parties took the depositions of Ven Johnson, Tom Schulte, Rick Joslin,
Michael Parise, Judge Kathleen MacDonald, Terry Lynch, Kraig Lhotak,
Kevin Lhotak, Justin Cherfoli, Charles Weik, Mike Batalucco and Amarild
Ushe. In addition, Wausau filed its motion for summary judgment, to which
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defendants had to respond. Wausau has not provided any explanation as
to why it waited eight months to file its motion to dismiss.
Defendants accuse Wausau of engaging in an about-face of its initial
trial strategy. As defendants view the new strategy, Wausau would rather
be the defendant than the plaintiff. Wausau does not want the jury to see
that it elected to sue Mr. Holt and its insureds. Wausau does not wish to
bear the burden of proving its case. The court does not view Wausau’s
motives quite so nefariously.
The “useful purpose” of a declaratory judgment action is as a method
of clarifying the legal duties of the plaintiff for the future as opposed to past
harm. AmSouth Bank v. Dale, 386 F.3d 763, 786 (6th Cir. 2004). When a
party sues for a declaration of nonliability, “courts will [typically] decline to
hear the action in favor of a subsequently-filed coercive action by the
‘natural plaintiff.’” Id. (citing 10B Wright, Miller & Mary Kay Kane § 2765 at
638 (3d ed.1998)). While Wausau’s declaratory action was appropriate
when originally filed, once the damages claim was settled its useful
purpose no longer existed. The issue of Wausau’s bad faith failure to settle
is best addressed by the counterclaim filed by Reliable and Ushe, in which
they seek to require Wausau to pay the balance of the judgment against
them.
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Where a court grants voluntary dismissal pursuant to Fed. R. Civ.
Proc. 41(a)(2), “dismissal may be conditioned on whatever terms the
district court deems necessary to offset the prejudice the defendant may
suffer from a dismissal without prejudice.” Bridgeport Music, Inc. v.
Universal-MCA Music Publishing, Inc., 583 F.3d 948, 954 (2009). The
court is aware that Wausau’s filing of its declaratory judgment complaint in
this court required defendants to expend a great deal of effort and expense
engaging in discovery and litigation of the case. Holt requests that if the
case is dismissed, Wausau be ordered to pay the entirety of the defense
Holt should never had to present. The court agrees that conditioning
Wausau’s dismissal on the payment of Holt’s attorney’s fees incurred in
defending against the declaratory judgment action will offset any prejudice
Holt would otherwise suffer.
Reliable and Ushe request that they be allowed to call witnesses
listed and identified by Holt in this action, including expert witness Jeffrey
Posner. Wausau does not object to this last request, regarding the use of
Holt’s witness lists and Rule 26 expert witness and expert report as a
condition of dismissal. Now, therefore,
IT IS HEREBY ORDERED that plaintiff Wausau’s motion to dismiss
complaint for declaratory judgment without prejudice is GRANTED with the
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following conditions.
IT IS HEREBY FURTHER ORDERED that Wausau pay Holt’s
attorney’s fees incurred in defending against the declaratory judgment
action.
IT IS HEREBY FURTHER ORDERED that Reliable and Ushe may
use Holt’s witness lists and Rule 26 expert witness and expert report.
IT IS HEREBY FURTHER ORDERED that defendant Burt Holt is
DISMISSED as a party to the action.
SO ORDERED.
Dated: October 17, 2018
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
October 17, 2018, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk

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