The Hanover Insurance Company v. Sutherland et al

Filing 45

OPINION AND ORDER granting in part 32 Joint Motion to Stay; granting in part 32 Motion to Dismiss; STAYING ALL PROCEEDINGS; Dismissing the remainder of the suit without prejudice due to a lack of subject matter jurisdiction on ripeness grounds, and terminating as moot 35 Motion to Compel, 37 Motion to Compel; 30 Motion for Protective Order. Signed by District Judge Robert H. Cleland. (LWag)

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UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
______________________________________________________________________
THE HANOVER INSURANCE COMPANY,
v.

Plaintiff,

Case No. 22-cv-11414

DAVID P. SUTHERLAND, et al,
Defendants.
________________________________/
OPINION AND ORDER GRANTING IN PART JOINT MOTION FOR PARTIAL
VOLUNTARY DISMISSAL AND TO STAY ALL PROCEEDINGS
AND DISMISSING CASE FOR LACK OF SUBJECT MATTER JURISDICTION
Four motions are currently pending before the court in this professional liability
insurance coverage dispute. (ECF Nos. 30, 32, 35, & 37.) Foremost, in the court’s view,
is Plaintiff The Hanover Insurance Company’s (“Hanover”) and Defendants David P.
Sutherland, Wakefield, Sutherland & Lubera, PCL, and the Law Offices of David P.
Sutherland PLC’s (“the Sutherland Defendants”) Joint Motion for Partial Voluntary
Dismissal and to Stay All Proceedings. (ECF No. 32.) 1 Due to Defendant Plante Moran
Trust’s (“PMT”) opposition (ECF No. 36), under Federal Rule of Civil Procedure
41(a)(2), Hanover and the Sutherland Defendants seek an order from the court that
partially dismisses with prejudice Counts I, II, and III and fully dismisses with prejudice
Count IV. (ECF No. 32, PageID.381–82.) They further seek a stay in all proceedings,

The three other motions are all discovery related. While one was filed before the joint
motion, the court is exercising its discretion to consider the joint motion first. Brenneman
v. MedCentral Health Sys., 366 F.3d 412, 429–30 (6th Cir. 2004); Kennedy v. City of
Cleveland, 797 F.2d 297, 305 (6th Cir.1986) (recognizing the discretion of “the trial
judge who is charged with the responsibility ... [of] managing his docket and [e]nsuring
an expeditious processing of the litigation”).

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pending resolution of an underlying state probate court matter. (Id.) The joint motion has
been fully briefed. The court finds oral argument to be unnecessary. E.D. Mich. LR
7.1(f)(2). For reasons explained below, the court will grant the joint motion to the extent
that it seeks partial dismissal of Counts I, II, and III and full dismissal of Count IV.
However, in lieu of granting a stay, the court will dismiss the remaining partial counts on
subject matter jurisdiction grounds.
I. BACKGROUND 2
To contextualize this federal lawsuit, preceding and ongoing state litigation must
be discussed. On or about February 1, 2021, the Gretchen C. Valade Irrevocable Living
Trust u/a/d January 15, 2009 (“the Trust”) filed suit in Oakland County Circuit Court
against Defendant David P. Sutherland (“Sutherland”) and others, alleging that
Sutherland abused his various positions as the Trust’s advisor, legal counsel, and
trustee by diverting Trust funds for personal use. (ECF No. 1-3.) Sutherland tendered
the action to Hanover for coverage under a professional liability policy issued to
Defendant Wakefield, Sutherland & Lubera, PCL. (ECF No. 1, PageID.14.) Hanover
agreed to defend Sutherland while reserving its right to recoupment upon a later
determination of no coverage. (Id.) After a transfer of venue to Wayne County, however,
the case was ultimately dismissed on jurisdictional grounds. (Id. at PageID.10.) In
response, on or about March 23, 2022, PMT filed suit on behalf of the Trust in Wayne
County Probate Court against the Sutherland Defendants and related entities, making
largely the same allegations as the dismissed circuit court action. (ECF No. 36,

This section should only be construed as providing context. Given the procedural
posture of the case, these facts are largely taken from Hanover’s Complaint with the
understanding that they do not serve as formal findings of fact. (ECF No. 1.)
2
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PageID.598.) In April of 2022, Sutherland tendered the probate litigation to Hanover for
coverage with Hanover agreeing to defend, again subject to its right to recoupment.
(ECF No. 1, PageID.14.) Collectively, this state litigation forms Sutherland’s “claim”
under the policy with Hanover. (Id. at PageID.2.)
On June 23, 2022, with the probate litigation pending, Hanover filed a Complaint
for Declaratory Relief and Money Judgment with this court, seeking a judicial
determination and declaration with respect to the parties’ rights and obligations under
Defendant Wakefield, Sutherland & Lubera, PCL’s professional liability policy. (ECF No.
1, PageID.2.) Aimed particularly at defining the parameters of Hanover’s duties to
defend and indemnify Sutherland in the state litigation, the pleading consists of the
following four claims: Count I, For a Declaration that the Lawsuits Do Not Fall Within the
Policy’s Insuring Agreement Because They Constitute a Single Claim First Made
Against an Insured Prior to the Policy Period; Count II, For a Declaration that the
Lawsuits Do Not Fall Within the Policy’s Insuring Agreement Because the Prior
Knowledge Condition Is Not Satisfied; Count III, For a Declaration that Coverage for the
Lawsuits Is Further Barred by Virtue of the Controlled Entity Exclusion; and Count IV,
For a Declaration of Hanover’s Right to Recoup Amounts Advanced and Money
Judgment. (ECF No. 1.)
Thereafter, proceedings progressed without issue through October of 2022.
However, on November 11, 2022, the Sutherland Defendants and related non-parties
filed a motion for protective order against discovery requests and subpoenas issued to
them by PMT. (ECF No. 30.) With that motion pending, on November 30, 2022, the
Sutherland Defendants finalized a settlement agreement with Hanover regarding the
availability of coverage for the state litigation under the policy, which would result in
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partial dismissal of Counts I, II, and III as to all Defendants to the extent that they relate
to Hanover’s duty to defend and full dismissal with prejudice of Count IV as to all
Defendants. (ECF No. 32-2, PageID.398–99.) Yet they were unable to obtain consent
from PMT for a stipulated dismissal. (ECF No. 32-3, PageID.400.) Accordingly, on
December 5, 2022, Hanover and the Sutherland Defendants filed their joint motion for
partial voluntary dismissal and stay. (ECF No. 32.) On December 19, 2022, PMT filed its
response (ECF No. 36) to which Hanover and the Sutherland Defendants jointly replied
on January 3, 2023 (ECF No. 41). In the interim, discovery issues persisted, resulting in
various filings by the parties, including two discovery-related motions by PMT. (See
ECF Nos. 34, 35, 37, 40, 42, & 43.)
On January 3, 2023, the court convened the parties for a status conference.
Following discussions regarding the pending motions, the court resolved to issue a
written order. As perhaps foreshadowed at the status conference, the court is chiefly
concerned with the joint motion for voluntary dismissal and stay. This opinion reflects
that focus, purposely leaving the merits of the three discovery motions unaddressed.
II. STANDARD
A. Voluntary Dismissal Under Rule 41(a)(2)
When all parties who have appeared in a suit will not stipulate to a dismissal,
under Federal Rule of Civil Procedure 41(a)(2), “an action may be dismissed at the
plaintiff’s request only by court order, on terms that the court considers proper.” The
purpose of Rule 41(a)(2) is to protect the nonmovant from unfair treatment, that is, plain
legal prejudice. Bridgeport Music, Inc. v. Universal-MCA Music Pub., Inc., 583 F.3d 948,
953 (6th Cir. 2009). In determining whether such prejudice would result, courts typically
consider “the defendant’s effort and expense of preparation for trial, excessive delay
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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.” Grover by Grover v. Eli Lilly and Co., 33
F.3d 716, 718 (6th Cir. 1994). To offset the prejudice a defendant may suffer from a
dismissal without prejudice, the court may condition a Rule 41(a)(2) dismissal on
whatever terms it deems necessary. Bridgeport Music, Inc., 583 F.3d at 954. Where, as
here, the voluntary dismissal sought is with prejudice, it is generally considered an
abuse of discretion for the court to deny the request, unless exceptional circumstances
warrant an award. Degussa Admixtures, Inc. v. Burnett, 471 F. Supp. 2d 848, 851–53
(W.D. Mich. 2007), aff’d, 277 Fed. Appx. 530 (6th Cir. 2008).
B. Ripeness
The U.S. Constitution limits the jurisdiction of federal courts to “Cases” and
“Controversies.” U.S. Const. art. III, § 2. Federal courts cannot issue advisory
opinions. Safety Specialty Ins. Co. v. Genessee Cnty. Bd. of Comm’rs, 53 F.4th 1014,
1020 (6th Cir. 2022). Article III’s case-or-controversy requirement allows federal courts
to resolve concrete disputes but prohibits them from passing “judgments on theoretical
disputes that may or may not materialize.” Saginaw County v. STAT Emergency Med.
Servs., Inc., 946 F.3d 951, 954 (6th Cir. 2020) (citing Steel Co. v. Citizens for a Better
Env’t, 523 U.S. 83, 101–03 (1998)). “The Supreme Court has delineated these limits
with a number of justiciability doctrines, including standing and ripeness.” Safety
Specialty Ins. Co., 53 F.4th at 1020 (citing Nat’l Rifle Ass’n of Am. v. Magaw, 132 F.3d
272, 279–80 (6th Cir. 1997)). A claim is not ripe if it turns on “contingent future events
that may not occur as anticipated, or indeed may not occur at all.” Trump v. New York,
––– U.S. ––––, 141 S. Ct. 530, 535 (2020) (quoting Texas v. United States, 523 U.S.
5

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296, 300 (1998)); see Bigelow v. Mich. Dep’t of Nat. Res., 970 F.2d 154, 157 (6th Cir.
1992). “Ripeness separates those matters that are premature because the injury is
speculative and may never occur from those that are appropriate for the court’s
review.” Magaw, 132 F.3d at 280. Courts consider several factors when deciding
whether the issues presented are ripe for review. United Steelworkers of America, Local
2116 v. Cyclops Corp., 860 F.2d 189, 194 (6th Cir. 1988). First, particular attention is
paid to the likelihood that the harm alleged by the advocating party will ever come to
pass. Id. Second is whether the factual record is developed enough for a fair
adjudication on the merits of the parties’ claims. Id. at 195. Third is the hardship that
refusing to consider a plaintiff’s prospective claims would impose upon the parties. Id.
III. DISCUSSION
The joint motion makes two general requests: (1) partial and full dismissals of
certain counts in Hanover’s complaint, and (2) a subsequent stay in these proceedings
due to ripeness considerations. They are legally distinct, requiring separate analyses.
The court will therefore evaluate each in turn.
A. Request for Voluntary Dismissal
With respect to the voluntary dismissals, Hanover and the Sutherland
Defendants specifically seek partial dismissal with prejudice as to all Defendants of
Counts I, II, and III, to the extent that they concern Hanover’s duty to defend the
Sutherland Defendants in the state litigation, and total dismissal with prejudice as to all
Defendants of Count IV. They contend that their request is appropriate because, in light
of the settlement agreement reached between them, there is no longer an active dispute
regarding the scope of Hanover’s defense obligations in connection with the state
litigation or its claim for recoupment. (ECF No. 32, PageID.388.) In response, PMT
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largely focuses on how it would be prejudiced by entry of a stay in these proceedings
while taking umbrage generally with not being included in fashioning the settlement
agreement despite having a substantial interest in litigating the coverage issue between
Hanover and the Sutherland Defendants. (ECF No. 36, PageID.601–03.) Should the
court be inclined to grant a dismissal, however, PMT requests—in a footnote without
citation to any legal authority—that any dismissal be conditioned on Hanover paying
PMT the costs and attorney fees it accrued in taking discovery in this matter. (Id. at
PageID.603.)
The court finds the partial dismissal of Counts I, II, and III and the total dismissal
of Count IV appropriate. PMT fails to articulate how it suffers any plain legal prejudice
from these dismissals. It further provides no legal authority supporting an award of costs
and attorney fees under these circumstances, insufficiently making the request in a
footnote. (ECF No. 36, PageID.603.) There is no dispute that PMT has an interest as an
alleged injured third party in adjudicating the coverage rights of the Sutherland
Defendants vis-à-vis Hanover. See Maryland Casualty Co. v. Pacific Coal & Oil Co., 312
U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941). However, that interest in no way
affords PMT the right to settle a contract dispute to which it is not a party. As Hanover
and the Sutherland Defendants point out, under Michigan law, an insurer’s duty to
defend and duty to indemnify are separate and distinct. See Am. Bumper & Mfg. Co. v.
Hartford Fire Ins. Co., 452 Mich. 440, 450–51, 550 N.W.2d 475, 481 (1996); Dochod v.
Cent. Mut. Ins. Co., 81 Mich. App. 63, 67, 264 N.W.2d 122, 123–24 (1978). To the
extent that PMT has an interest in ensuring Hanover defends the Sutherland
Defendants, that concern is assuaged by the fact that Hanover has agreed to defend,
albeit up to a certain monetary cap. (ECF No. 32-2, PageID.398–99.)
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Moreover, the issue of Hanover’s duty to indemnify, which is the true source of
PMT’s interest, remains intact. Though it addresses Hanover’s indemnification
obligations and the Sutherland Defendants’ ability to pursue indemnification, being
solely between Hanover and the Sutherland Defendants, the settlement agreement
does not function as an adjudication on the merits of whether Hanover will be obligated
to indemnify should PMT, upon success in the probate litigation, pursue it. 3 Thus, given
that the dismissals are sought with prejudice and further concern claims that do not
affect PMT’s rights or interests, there is no plain legal prejudice to PMT. Additionally, the
mere fact that PMT expended resources in defending this action does not constitute
exceptional circumstances warranting a cost and fee award. See Degussa Admixtures,
Inc., 471 F. Supp. 2d at 852–53. As such, the joint motion will be granted to the extent
that it seeks partial dismissals of Counts I, II, and III and total dismissal of Count IV with
prejudice as to all Defendants.
B. Request for Stay
The only issue remaining in the case is Hanover’s duty to indemnify. The parties
dispute whether this issue is ripe for judicial adjudication. Hanover and the Sutherland
Defendants argue that any dispute over indemnity coverage is premature because it
rests on the contingent future event of PMT successfully litigating the underlying state
probate action. (ECF No. 32, PageID.389–91.) Accordingly, these parties seek a stay of
these proceedings until the probate litigation is resolved, relying on the unpublished,
persuasive authority of Evanston Ins. Co. v. Bioport Corp., No. 1:06-CV-904, 2007 WL

Furthermore, to the extent that it suggests that the terms of the settlement agreement
regarding Hanover’s right to approve any settlement in the probate action are improper,
PMT provides no legal support that it is entitled to enjoy settlement negotiations with the
Sutherland Defendants free from Hanover’s caveats.
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2077755 (W.D. Mich. July 17, 2007). (Id. at PageID.391.) PMT counters that the
coverage dispute is ripe, arguing that nothing has substantively changed in the six
intervening months since Hanover filed suit, wherein it asserted the ripeness of the
coverage dispute. (ECF No. 36, PageID.603.) PMT further contends that the contingent
nature of Hanover’s liability on PMT’s success in the probate litigation does not
automatically render its adjudication unripe because there is a significant likelihood that
liability will ultimately be incurred. (Id. at PageID.604–07.) PMT also asserts that a
coverage determination would be helpful in progressing the probate litigation while
criticizing any stay as being prejudicial due to the significant costs it has incurred thus
far and the effective mooting of its pending discovery motions. (Id. at PageID.607–08,
603–04.)
The court finds the issue of Hanover’s duty to indemnify not ripe for
adjudication. In assessing the likelihood that PMT will be successful at the probate level
against the Sutherland Defendants and entitled to damages for actions covered by the
policy with Hanover, the court is woefully ill-equipped to even begin making a
determination. While the court has been afforded general details regarding the probate
litigation, it has no information or evidence related to Sutherland’s alleged misconduct at
its disposal. And rightfully so, as that is the very subject of the probate litigation. No
rulings have been made in that case which would suggest PMT is more likely to
succeed than not.
For largely these same reasons, the factual record in this case is not developed
enough for a fair adjudication on the merits. To appropriately assess whether Hanover
has to indemnify the Sutherland Defendants, this court would need to know chiefly if
Sutherland’s alleged misconduct is covered under the policy, which would necessarily
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require an exploration of the conduct itself—again, the central subject of the ongoing
probate litigation. The court is not interested in adjudicating facts that are already before
another court and finds that any disposition in this case would be an inappropriate
“gratuitous interference with the orderly and comprehensive disposition of a state court
litigation.” Brillhart v. Excess Ins. Co., 316 U.S. 491, 495 (1942); see Grand Trunk
Western R. Co. v. Consolidated Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984).
Finally, PMT has not articulated a viable hardship that it would suffer if Hanover’s
duty to indemnify was not resolved. Rather, PMT merely expresses how knowing the
outcome could usefully inform its litigation strategy in the probate case. The majority of
PMT’s perceived prejudice is related to how the entry of a stay would affect discovery in
this case. Yet, PMT’s discovery concerns, which prematurely assume its success in
pending motions seeking sanctions, do not outweigh the court’s need for further factual
development to deal with the indemnification issue presented. See Nat’l Park Hosp.
Ass’n v. Dep’t of Interior, 538 U.S. 803, 808–12 (2003).
As such, the court concludes that the specific issue of Hanover’s duty to
indemnify is not ripe. However, the court does not find a stay to be the appropriate
course of action at this juncture. In deciding that the existing issues in this case are not
ripe for adjudication, the court has effectively determined that it no longer has subject
matter jurisdiction in this case. Thus, the remainder of the complaint must be dismissed
without prejudice in its entirety. Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006).
IV. CONCLUSION
For the foregoing reasons, the court deems partial dismissal of Counts I, II, and
III and total dismissal of Count IV with prejudice as to all Defendants appropriate. It
further finds the remaining portions of Counts I, II, and III currently unripe for
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adjudication. Given the court’s lack of subject matter due to ripeness concerns, a stay is
inappropriate, and the remainder of the action must be dismissed. By the same stroke,
the parties’ pending discovery motions will be terminated as moot. Accordingly,
IT IS ORDERED that The Hanover Insurance Company’s and Defendants David
P. Sutherland, Wakefield, Sutherland & Lubera, PCL, and the Law Offices of David P.
Sutherland PLC’s Joint Motion for Partial Voluntary Dismissal and to Stay All
Proceedings (ECF No. 32) is GRANTED IN PART. Counts I, II, and III are partially
dismissed with prejudice as to all Defendants, as far as they concern Hanover’s duty to
defend, and Count IV is wholly dismissed with prejudice as to all Defendants.
IT IS FURTHER ORDERED that, due to a lack of subject matter jurisdiction on
ripeness grounds, the remainder of the suit is DISMISSED without prejudice and the
parties’ pending discovery motions (ECF Nos. 30, 35, & 37) TERMINATED AS MOOT.

s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE

Dated: January 17, 2023

/

I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, January 17, 2023, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]
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