Order of St. Benedict, The v. St. Paul Mercury Insurance Company et al

Filing 24

ORDER denying 15 Motion to Remand to State Court (Written Opinion) Signed by Senior Judge David S. Doty on 4/24/2017. (DLO)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 17cv781(DSD/KMM)
The Order of St. Benedict,
Plaintiff,
v.

ORDER

St. Paul Mercury Insurance
Company, et al.,
Defendants.
Robert T. Stich, Esq., Stacey L. Sever, Esq. and Stich Angell
Kreidler Dodge & Unke, P.A., 250 2nd Avenue South, Suite 120,
Minneapolis, MN 55401, counsel for plaintiff.
Lance D. Meyer, Esq. and O’Meara Leer Wagner & Kohl, PA, 7401
Metro Blvd., Suite 600, Minneapolis, MN 55439, counsel for
defendants.

This matter is before the court pursuant to the court’s sua
sponte order to show cause and the motion for remand by plaintiff
The Order of St. Benedict (Order).

Based on a review of the file,

record, and proceedings herein, and for the following reasons, the
court denies the motion to remand and dismisses the case.

BACKGROUND
This insurance coverage dispute arises out of an underlying
claim by Doe 312 that Father Tim Gillespie, a member of the Order,
sexually abused him between 1989 and 1990.

Doe 312 alleges that

the defendants in the underlying case are liable for Gillespie’s
conduct

under

theories

of

nuisance,

negligence,

negligent

supervision, and negligent retention.

Defendant St. Paul Mercury

Insurance Company (St. Paul) insured the Order under Policy No.
CK06304393 from July 1, 1990, to July 1, 1991.

Compl. ¶ 9.

The

policy provides commercial general liability coverage and umbrella
liability coverage.

Id. ¶¶ 10-16.

On February 22, 2017, the Order commenced this lawsuit against
St. Paul, The Church of St. Joseph, Doe 312, and Diocese of St.
Cloud in Stearns County, Minnesota.

The Order seeks a declaration

that St. Paul has a duty to defend and indemnify it in the
underlying case.

The complaint does not assert any actual claims

against The Church of St. Joseph, Doe 312, or Diocese of St. Cloud,
nor does it seek relief against those defendants.

On March 15,

2017, St. Paul removed the case to this court asserting, in part,
that The Church of St. Joseph, Doe 312, and Diocese of St. Cloud
are improperly named as defendants and should be realigned as
plaintiffs, thereby creating diversity jurisdiction. ECF No. 1, at
3-4.
Because this case appeared to be substantially similar to St.
Paul Mercury Insurance Company v. The Order of St. Benedict, No.
15-cv-2617 (DSD/KMM), in which the court recently granted summary
judgment to St. Paul, the court ordered plaintiff to show cause
why:

(1) The Church of St. Joseph, Doe 312, and Diocese of St.

Cloud are properly joined as defendants in this matter, and (2) the
case should not be dismissed based on the doctrines of res judicata

2

or collateral estoppel or based on the court’s reasoning in the
order dismissing the prior related case.1

In responding to the

court’s order, the Order moved to remand the case to Stearns County
for lack of diversity jurisdiction.

DISCUSSION
I.

Motion to Remand
A claim may be removed to federal court “only if it could have

been brought in federal court originally.”
R.R. Co., 80 F.3d 257, 260 (8th Cir. 1996).

Peters v. Union Pac.
The removing party, as

the party invoking jurisdiction, bears the burden of establishing
by a preponderance of evidence that federal jurisdiction existed at
the time of removal.

See Pullman Co. v. Jenkins, 305 U.S. 534,

537-38 (1939); Missouri ex rel. Pemiscot Cty. v. W. Sur. Co., 51
F.3d 170, 173 (8th Cir. 1995). Jurisdiction under 28 U.S.C. § 1332
requires complete diversity of citizenship and a minimum amount in
controversy

in

excess

of

$75,000.

“Complete

diversity

of

citizenship exists where no defendant holds citizenship in the same
state where any plaintiff holds citizenship.”

OnePoint Sols., LLC

v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007).

1

In the previous case, the court held that the same policy
excluded coverage for sexual abuse. St. Paul Mercury Ins. Co. v.
The Order of St. Benedict, No. 15-2617, 2017 WL 780572, at *3-5 (D.
Minn. Feb. 28, 2017). The Order nevertheless seeks coverage for
similar alleged conduct in this case.
3

The Order argues that the court lacks jurisdiction over this
case because it is a Minnesota citizen as are defendants Diocese of
St. Cloud, The Church of St. Joseph, and Doe 312.2
concedes

that

complete

diversity

is

lacking

as

the

St. Paul
case

is

currently captioned but argues that the absent defendants should be
realigned as plaintiffs because their interests match those of the
Order.3
In determining whether to realign the parties, the Eighth
Circuit

applies

the

“actual

and

substantial

conflict”

test.

Alliance Energy Servs., LLC v. Kinder Morgan Cochin LLC, 80 F.
Supp.

3d

963,

972–73

(D.

Minn.

2015)

(quoting

Universal

Underwriters Ins. Co. v. Wagner, 367 F.2d 866, 870–71 (8th Cir.
1966)).

Under that test the court must decide whether there is

“any actual and substantial conflict existing between the parties
as aligned.”

Id. (internal quotation marks omitted). If such

conflict exists, the court should not realign the parties.

Id.

2

None of these defendants has made an appearance in this
matter and it is unclear whether they will do so. In fact, Doe 312
answered the complaint in Stearns County by requesting dismissal
because the complaint asserts no legal claims against him. Meyer
Decl. Ex. B. The court therefore will refer to these defendants as
the “absent defendants.”
3

St. Paul appears to concede that the absent defendants are
properly joined in this case under Minn. Stat. § 555.11, which has
been construed more broadly than Fed. R. Civ. P. 19. Unbank Co.,
LLP v. Merwin Drug Co., 677 N.W.2d 105, 108 (Minn. Ct. App. 2004).
In this respect, this case differs from the previous case in which
the court held that the absent parties were not required parties
under Rule 19. St. Paul Mercury Ins. Co., 2017 WL 780572, at *2.
4

In the insurance coverage context, this court has held that it is
appropriate to realign the injured party to the side of the insured
given their shared interest in the outcome of the coverage case.
Interlachen Props., LLC v. State Auto Ins. Co., 136 F. Supp. 3d
1061, 1071 (D. Minn. 2015); see also Garcia v. Century Surety Co.,
No. 14-3196, 2015 WL 1598069, at *2 (D. Colo. Apr. 7, 2015)
(collecting cases and holding that “[f]ederal courts routinely
realign the parties to place the injured third party on the same
side of the caption as the tortfeasing insured, as against the
insurer”); Home Ins. Co. of Ill. v. Adco Oil Co., 154 F.3d 739, 741
(7th Cir. 1998) (“[T]he normal alignment of parties in a suit
seeking a declaratory judgment of non-coverage is Insurer versus
Insured and Injured Party.”).
Here, despite the Order’s resistance to realignment, its own
words establish the propriety of doing so:
Doe 312, the Diocese of St. Cloud and the Church of St.
Joseph
each
have
a
financial
interest
in
any
determination of St. Paul’s coverage for the Order ....
Doe 312 has a financial stake in securing coverage to
satisfy any verdict or settlement. Similarly, ... the
Diocese and the Church face joint and several liability
with the Order ... which ... would allow Doe 312 to
reallocate to them any amount he could not collect from
the Order. Thus, each has direct interest in ensuring
that the Order has the financial wherewithal to satisfy
its own share of any settlement or judgment.
Pl.’s Mem. at 6.

Indeed, the Order’s interests and those of the

absent parties are fully aligned given that they would all benefit
from

a

determination

that

the

policies

5

cover

the

underlying

conduct.

The Order seeks insurance coverage in order to avoid

having to satisfy a potential judgment in the underlying case. And
the absent parties would undoubtedly prefer to have insurance
proceeds readily available should the Order be found liable.
The

Order

argues

that

realignment

is

nevertheless

inappropriate because the relevant parties’ interests diverge in
the underlying litigation.

That argument is unpersuasive.

In

assessing realignment, the court considers the case before it, not
the claims and defenses raised in the underlying suit. See Garcia,
2015 WL 1598069, at *2 (rejecting the argument that adverse
interests in the underlying negligence action precluded realignment
because in declaratory judgment actions against insurers, “[t]he
question is whether [the insured and injured party] have adverse
interests as to this coverage action”).
will realign the parties.

As a result, the court

Diocese of St. Cloud, The Church of St.

Joseph, and Doe 312 are now plaintiffs in this action.
II.

Collateral Estoppel
The remaining issue is whether this case should be dismissed

on the grounds of collateral estoppel.4

The doctrine of collateral

estoppel bars the re-litigation of an issue that was “distinctly
contested and directly determined” in an earlier adjudication.
Hauschildt v. Beckingham, 686 N.W.2d 829, 837 (Minn. 2004).

4

The

The parties agree that the doctrine of res judicata does
not apply.
6

issue must have been “necessary and essential to the resulting
judgment” in the earlier action.

Id.

The Order concedes that it is estopped from re-litigating the
issues decided in the previous case. It argues, however, that this
case is distinct because it involves the issue of whether the
mental-illness exception applies to Gillespie’s alleged conduct.5
See B.M.B. v. State Farm Fire & Cas. Co., 664 N.W.2d 817, 826
(Minn. 2003) (holding that the intent to injure inferred when a
person sexually abuses a minor may be rebutted by evidence that the
abuse was “unintentional because of mental illness”).

If the

exception applies, Gillespie may be deemed a “protected person”
under the policy and there may be coverage for his conduct.
There are two problems with the Order’s position.
this

context,

the

mental-illness

exception

is

First, in

similar

to

an

affirmative defense on which the Order bears the burden of proof.
See RAM Mut. Inc. Co. v. EMC Prop. & Cas. Co., No. A14-197, 2014 WL
4176131, at *5 (Minn. Ct. App. Aug. 25, 2014) (“Although an insurer
generally bears the burden of proving that a policy exclusion
applies to bar coverage, the burden is modified in the context of
a mental illness claim against application of an intentional-act
exclusion.

In that context, the law establishes a rebuttable

presumption of sanity that benefits the insurer, and the party

5

The Order also argued in its papers that Gillespie may not
be a member of the Order, but, at the hearing, counsel for the
Order conceded the issue.
7

asserting mental illness must rebut the presumption.”).

Yet the

Order has failed to plead that the mental-illness exception may
apply. “Generally, failure to plead an affirmative defense results
in a waiver of that defense.”

First Union Nat’l Bank v. Pictet

Overseas Trust Corp., 477 F.3d 616, 622 (8th Cir. 2007).
Second, it appears that the Order has long had access to the
information needed to assert the mental-illness exception.

It

maintains files, which include medical records, on its members,
including Gillespie. Meyer Decl. Exs. D-E. Further, it could have
requested additional information about Gillespie in the underlying
litigation, which has been ongoing for over a year.

Because the

Order apparently did not do so and because it is the only issue
that distinguishes this case from the previous one, the court will
dismiss the case based on the doctrine of collateral estoppel. The
court does so without prejudice, however, to allow the Order to
raise the issue in a new action if it can do so consistent with
Fed. R. Civ. P. 11.

8

CONCLUSION
Accordingly, IT IS HEREBY ORDERED that:
1.

Defendants Diocese of St. Cloud, The Church of St.

Joseph, and Doe 312 are realigned as plaintiffs in this action;
2.

The motion to remand [ECF No. 15] is denied; and

3.

The case is dismissed without prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: April 24, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court

9