Nationwide Mutual Insurance Company et al v. Harris Medical Associates, LLC et al
Filing
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MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that plaintiffs motion to dismiss the counterclaim of St. Louis Heart Center, Inc. is GRANTED. Doc. 25 An order of partial dismissal will accompany this Memorandum and Order. Signed by District Judge Charles A. Shaw on 10/7/2013. (RAK)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
NATIONWIDE MUTUAL INSURANCE
COMPANY, et al.,
Plaintiffs,
v.
HARRIS MEDICAL ASSOCIATES, LLC,
et al.,
Defendants.
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No. 4:13-CV-7 CAS
MEMORANDUM AND ORDER
This declaratory judgment matter is before the Court on plaintiffs’ motion to dismiss the
counterclaim of defendant St. Louis Heart Center, Inc.’s (“St. Louis Heart”) for failure to state a
claim upon which relief can be granted under Rule 12(b)(6), Federal Rules of Civil Procedure. St.
Louis Heart opposes the motion and it is fully briefed. For the following reasons, the motion will
be granted.
Background
Plaintiffs Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance
Company and Nationwide Property and Casualty Insurance Company (collectively “Nationwide”)
filed this action seeking a declaration that they have no duty to defend their insured, defendant
Harris Medical Associates, LLC (“Harris”), for claims asserted against it in underlying litigation
filed by St. Louis Heart. See St. Louis Heart Center, Inc. v. Harris Medical Center, Inc., No.
4:12-CV-1555 JCH (E.D. Mo.).1 The underlying litigation is a putative class action and is based on
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The Court takes judicial notice of the file in the underlying litigation.
Harris’s alleged transmission of six unsolicited fax advertisements to St. Louis Heart in 2011. Two
claims remain in the underlying case: (1) violations of the Telephone Consumer Protection Act
(“TCPA”), and (2) conversion under Missouri common law. Nationwide is defending Harris in the
underlying litigation under a reservation of rights, and the parties are currently engaged in settlement
negotiations.2
Nationwide moves to dismiss St. Louis Heart’s counterclaim for failure to state a claim upon
which relief can be granted, asserting that St. Louis Heart as a mere claimant in this declaratory
judgment action lacks standing to assert affirmative relief.
Legal Standard
The purpose of a motion to dismiss for failure to state a claim is to test the legal sufficiency
of the counterclaim. To survive a motion to dismiss pursuant to Rule 12(b)(6) for failure to state
a claim upon which relief can be granted, a counterclaim “must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949 (2009) (discussing motion to dismiss complaint and quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A party need not provide specific facts in support of its
allegations, Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam), but “must include sufficient
factual information to provide the ‘grounds’ on which the claim rests, and to raise a right to relief
above a speculative level.” Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008)
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Under the Amended Case Management Order in Case No. 4:12-CV-1555 JCH, St. Louis
Heart’s class certification motion was due September 30, 2013. On that date, St. Louis Heart filed
a consent motion to stay briefing on the motion for class certification for a period of forty-five days,
until November 15, 2013, “to give the parties an opportunity to reach an individual settlement in this
matter.” Consent Mot. at 1 (Doc. 43). The motion was granted by docket text order of October 1,
2013 (Doc. 44).
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(citing Twombly, 550 U.S. at 555 & n.3). This obligation requires a party to plead “more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”
Twombly, 550 U.S. at 555. A counterclaim “must contain either direct or inferential allegations
respecting all the material elements necessary to sustain recovery under some viable legal theory.”
Id. at 562 (quoted case omitted). This standard “simply calls for enough fact to raise a reasonable
expectation that discovery will reveal evidence of [the claim or element].” Id. at 556.
On a motion to dismiss, the Court accepts as true all of the factual allegations contained in
the counterclaim, even if it appears that “actual proof of those facts is improbable,” id. at 556, and
reviews the counterclaim to determine whether its allegations show that the pleader is entitled to
relief. Twombly, 550 U.S. at 555-56; Fed. R. Civ. P. 8(a)(2). The principle that a court must accept
as true all of the allegations contained in a counterclaim is inapplicable to legal conclusions,
however. See Iqbal, 129 S. Ct. at 1949-50 (stating “[t]hreadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not suffice”).
Discussion
St. Louis Heart’s counterclaim seeks a declaration that the insurance policies Nationwide
issued to Harris require Nationwide to defend and indemnify Harris for the claims made by St. Louis
Heart in the underlying litigation, individually and on behalf of the putative class. Nationwide
moves to dismiss, asserting that St. Louis Heart is a party to this declaratory judgment action solely
in its status as a tort claimant against Nationwide’s insured, and as a mere claimant can participate
in this action but does not have standing to assert affirmative relief against Nationwide.
Nationwide cites Wolfe v. Gilmour Manufacturing Co., 143 F.3d 1122, 1126 (8th Cir. 1998),
for the proposition that in a diversity case, a federal court will not address a party’s claims unless
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the party meets the “case or controversy” requirements of Article III of the Constitution and also has
standing to sue under the relevant state law. In diversity cases, the choice of law rules of the forum
state determine which state’s substantive law applies. Klaxon Co. v. Stentor Elec. Mfg. Co., 313
U.S. 487 (1941). Missouri is the forum state. “Missouri courts apply the most significant
relationship test as set forth in Restatement (Second) of Conflict of Laws Section 188 when
resolving choice of law issues.” Sturgeon v. Allied Professionals Ins. Co., 344 S.W.3d 205, 211
(Mo. Ct. App. 2011) (cited cases omitted). Nationwide states that under Missouri law, the coverage
obligations will likely be determined under Georgia law as the place where the insured, Harris, is
located and the policies were issued, citing Sturgeon, id. (“in an action between parties to an
insurance contract, the principal location of the insured risk is given greater weight than any other
single contact in determining the state of applicable law.”).
Nationwide asserts that under case law of both Missouri and Georgia, mere claimants who
do not have a judgment against an insured have no rights to assert against the insurer, citing
Grisamore v. State Farm Mutual Automobile Insurance Co., 306 S.W.3d 570, 574 (Mo. Ct. App.
2010) (“The general rule is that an injured party cannot proceed in a direct action against an
insurance company providing liability coverage for an insured who allegedly caused the harm
sustained by the claimant.” (quoted case omitted)); and Commercial Union Insurance Co. v. Bradley
Co., 367 S.E.2d 820, 822 (Ga. Ct. App. 1988) (“the general rule is that a party who alleges he has
been damaged is not entitled to bring a direct action against the liability insurer of the party who
allegedly caused the damage.”).
Nationwide argues that because St. Louis Heart is a mere claimant in this action, seeking to
establish the liability of Nationwide’s insured in the underlying litigation, it lacks standing to assert
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a counterclaim against Nationwide. Nationwide notes that although St. Louis Heart lacks standing
to assert its counterclaim, this does not mean it cannot litigate Nationwide’s obligations to Harris,
as it was joined in this action as a party defendant for that purpose.
St. Louis Heart responds that it was joined as a necessary party in this action and, having
been made a party, under Rule 19(a) it must bring its own action for declaratory judgment as a
compulsory counterclaim under Rule 13(a), Fed. R. Civ. P. St. Louis Heart asserts that under these
circumstances, it has standing to seek its own declaration that insurance coverage is available with
respect to the underlying litigation, and that if it does not assert its compulsory counterclaim, it
would be barred.
St. Louis Heart further responds that it has Article III standing and that whether a plaintiff
in federal court has standing to maintain an action is a question of federal rather than state law,
citing Miller v. Redwood Toxicology Laboratory, Inc., 688 F.3d 928, 933 (8th Cir. 2012). St. Louis
Heart states it is well established that an insurance coverage declaratory judgment action presents
a ripe controversy under Article III, and that the Supreme Court in Maryland Casualty Co. v. Pacific
Coal & Oil Co., 312 U.S. 270 (1941), “held that a tort claimant presented a proper action under
Article III to seek declaratory judgment in federal court that the tortfeasor’s insurer owned the
insured tortfeasor a duty to indemnify, even though the underlying suit had not yet been reduced to
judgment.” Br. in Opp’n to Pls.’ Mot. to Dismiss Countercl. at 11-12 (Doc. 50).3
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Later in its opposition memorandum, St. Louis Heart states that Maryland Casualty is
“[b]oth apposite and controlling here” because “the United States Supreme Court held that a tort
claimant, like St. Louis here, had Article III standing to seek a declaration that the tortfeasor’s
insurer owed the insured tortfeasor a duty to indemnify, even though the underlying suit had not yet
been reduced to judgment.” Br. in Opp’n to Pls.’ Mot. to Dismiss Countercl. at 17 (Doc. 50).
St. Louis Heart’s description of Maryland Casualty’s holding, which is central to its
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Nationwide replies that the core question is whether a claimant can assert a substantive cause
of action against the insurer of the party against whom liability is asserted. Nationwide asserts that
under the laws of both Missouri and Georgia, no action by a claimant lies against the insurer at least
until there is a judgment to enforce. Nationwide also states that St. Louis Heart does not cite a
single case holding that a claimant in its position can pursue declaratory relief against the insurer
of the party it has sued. Nationwide concludes, “Without a cause of action, no claim can be asserted
regardless of federal standing or jurisdictional concerns,” and that Rule 13 is merely procedural.
Reply at 3.
Although Nationwide’s motion to dismiss is based on Rule 12(b)(6), it argues that St. Louis
Heart lacks standing to seek a declaratory judgment against it. The Eighth Circuit has explained that
a “standing argument implicates Rule 12(b)(1)” rather than Rule 12(b)(6), Faibisch v. University
of Minnesota, 304 F.3d 797, 801 (8th Cir. 2002), because “if a [party] lacks standing to sue, the
district court has no subject-matter jurisdiction” over its claims. ABF Freight System, Inc. v.
International Bhd. of Teamsters, 645 F.3d 954, 958 (8th Cir. 2011). As a result, the claims of a party
argument, is inaccurate. Maryland Casualty was a declaratory judgment action by an insurance
company that named as defendants its insured and a tort claimant. No judgment had yet been
entered in favor of the tort claimant against the insured. The tort claimant successfully argued in
the district court that the insurance company did not state a cause of action against him, and the
Sixth Circuit affirmed. On review, the Supreme Court concluded the insurance company’s
allegations were sufficient to entitle it to the declaratory relief sought in its complaint, including
against the tort claimant, and held “that there is an actual controversy between [the insurance
company] and the [tort claimant], and hence, that [the insurance company’s] complaint states a cause
of action against the [tort claimant].” 312 U.S. at 274. The Supreme Court did not hold that the tort
claimant had standing to seek a declaration that the “insurer owed the insured tortfeasor a duty to
indemnify,” as St. Louis Heart asserts. The Court acknowledges that the court in Lott v. Scottsdale
Insurance Co., 811 F.Supp.2d 1224, 1231 (E.D. Va. 2011), describes the Maryland Casualty
decision in the same manner as does St. Louis Heart, but the Court believes that characterization of
the case is incorrect and declines to adopt it.
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that lacks standing are properly dismissed under Rule 12(b)(1). Cook v. ACS State & Local
Solutions, Inc., 756 F.Supp.2d 1104, 1106 (W.D. Mo. 2010), aff’d, 663 F.3d 989 (8th Cir. 2011).
The Court therefore construes Nationwide’s motion as a motion under Rule 12(b)(1).
Under Rule 12(b)(1), a motion may challenge a claim on its face or on the factual
truthfulness of its assertions. Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993). When a party
makes a facial challenge, as Nationwide does, “all of the factual allegations concerning jurisdiction
are presumed to be true and the motion is successful if the [party] fails to allege an element
necessary for subject matter jurisdiction.” Id. & n.1 (citation omitted). The Court therefore accepts
the factual allegations of St. Louis Heart’s counterclaim as true for purposes of this motion.
The Eighth Circuit has held that in a diversity case, a federal court may not address a party’s
claims unless the party establishes standing to sue under both Article III of the United States
Constitution and the relevant state law. Wolfe, 143 F.3d at 1126; see also Evanston Ins. Co v. Harris
Medical Assocs., LLC, 2013 WL 4505298, at *2 (E.D. Mo. July 10, 2013) (citing Wolfe and holding
that St. Louis Heart lacked standing to assert a counterclaim similar to that filed in this case). The
Miller v. Redwood Toxicology case does not hold that state law is irrelevant to the standing inquiry
in a diversity case, as St. Louis Heart appears to suggest, but rather articulates the separate
proposition that “[s]tate courts may afford litigants standing to appear where federal courts would
not, but whether they do so has no bearing on the parties’ Article III standing in federal court.” 688
F.3d at 934 (quoted case omitted).
Assuming, without deciding, that St. Louis Heart has Article III standing, the dispositive
issue is whether St. Louis Heart has standing under state law to assert a counterclaim against
Nationwide seeking a declaration that Nationwide owes a duty to defend and indemnify Harris in
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the underlying litigation, where it has not yet obtained a judgment against Harris. See Wolfe, 143
F.3d at 1126.
Under Missouri law, a party has standing to obtain a declaration of rights, status and legal
relationship under any contract only if it is a party to the contract or a third party beneficiary thereof.
Evanston Ins., 2013 WL 4505298, at **2-3 (quoting Carden v. Missouri Intergovernmental Risk
Mgmt. Ass’n, 258 S.W.3d 547, 558 (Mo. Ct. App. 2008)). It is undisputed that St. Louis Heart is
not a party to the insurance contract and has not obtained a judgment against the insured, nor does
it have a written agreement with Harris and Nationwide establishing Harris’s liability. See Carden,
258 S.W.3d at 558. Further, St. Louis Heart has not established that it is a third party beneficiary
of the insurance contract between Nationwide and Harris. See Desmond v. American Ins. Co., 786
S.W.2d 144, 145 (Mo. Ct. App. 1989) (“Traditionally, Missouri courts have held that a claimant is
not a third party beneficiary under a contract of liability insurance between the alleged tortfeasor and
the insurer,” citing State Farm Mut. Auto. Ins. Co. v. Allen, 744 S.W.2d 782, 785 (Mo. 1988) (en
banc)). St. Louis Heart thus lacks standing to pursue its counterclaim against Nationwide under
Missouri law.
Similarly, under Georgia law, the general rule is that “a party who alleges he has been
damaged is not entitled to bring a direct action against the liability insurer of the party who allegedly
caused the damage.” Commercial Union, 367 S.E.2d at 822. Exceptions exist where the damaged
party has a judgment against the insured, liability has been otherwise fixed, or a provision in the
policy or a specific statute permits such an action to be brought. Hartford Ins. Co. v. Henderson &
Son, Inc., 371 S.E.2d 401, 402 (Ga. Ct. App. 1988) (citing Seaboard Coast Line R. Co. v. Freight
Delivery Service, Inc., 210 S.E.2d 42, 45 (Ga. Ct. App. 1974)). None of the exceptions to the
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general rule apply here, so St. Louis Heart also lacks standing to pursue its counterclaim against
Nationwide under Georgia law.
St. Louis Heart’s assertion that it must assert a compulsory counterclaim under Rule 13(a)
because it is a necessary party under Rule 19 is without merit. St. Louis Heart must first possess a
viable claim, whether compulsory or permissive, before Rule 13(a) comes into play. See Evanston
Ins., 2013 WL 4505298, at *3 n.3. Because St. Louis Heart lacks standing under both Missouri and
Georgia law to assert its counterclaim, it does not have a viable claim.
Conclusion
For the foregoing reasons, Nationwide’s motion to dismiss the counterclaim of St. Louis
Heart Center, Inc., construed as a motion to dismiss under Rule 12(b)(1), Fed. R. Civ. P., will be
granted, as St. Louis Heart lacks standing to pursue its counterclaim against Nationwide in this
matter.
Accordingly,
IT IS HEREBY ORDERED that plaintiffs’ motion to dismiss the counterclaim of St. Louis
Heart Center, Inc. is GRANTED. [Doc. 25]
An order of partial dismissal will accompany this Memorandum and Order.
__________________________________
CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE
Dated this 7th day of October, 2013.
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