National Fire Insurance Company of Hartford et al v. City of Willoughby, Ohio

Filing 19

Opinion and Order. Defendant's Motion to Dismiss (Related doc # 10 ) is denied. Judge Christopher A. Boyko on 3/6/2018. (H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

NATIONAL FIRE INSURANCE
OF HARTFORD, ET AL.,

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Plaintiffs,
Vs.
CITY OF WILLOUGHBY.
Defendant.

CASE NO.1:17CV1392

JUDGE CHRISTOPHER A. BOYKO

OPINION AND ORDER

CHRISTOPHER A. BOYKO, J:
On June 30, 2017, Plaintiffs' National Fire Insurance Company of Hartford ("National
Fire"), National Fire Insurance Company of Hartford, successor by merger to
Transcontinental Insurance Company ("Transcontinental"), and Valley Forge Insurance
Company ("Valley Forge") (collectively, the "Companies") filed a Complaint for Declaratory
Judgement. (ECF DKT #1). On August 29, 2017, Defendant ( the "City") filed its
Memorandum in Support of Motion of Defendant to Dismiss, or alternatively, Decline
Jurisdiction Over This Action (ECF DKT #10-1). On September 28, 2017, Plaintiffs filed
their Memorandum in Opposition to Defendant's Motion to Dismiss (ECF DKT #13). On
October 12, 2017, Defendant filed a Reply Brief to Dismiss, or, Alternatively, to Decline
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Jurisdiction over this Action (ECF DKT #18). For the reasons stated below, the Court denies
Defendant's Motion to Dismiss.
Facts
National Fire issued Commercial General Liability Policy Number C1062922063 to
the City for the period of January 1, 2001, to January 1, 2003. (ECF DKT #1, at 3-4). Valley
Forge issued Commercial General Liability Policy Number C1062922063 to the City for the
period of May 1, 2004, to May 1, 2005. (ECF DKT #1, at 4). Transcontinental issued policy
number C1062922063 to the City for the period of May 1, 2004, to May 1, 2005. (ECF DKT
#1, at 4). The cause of action giving rise to this lawsuit ("Underlying Action") is that the City
"discharge[d] . . . pollutants into the waters of the United States in the [City] of Willoughby . .
. without authorization by the United States Department of Army." (ECF DKT #1, at 5).
Further, the allegation is that from August 2001 to December 2004, the City "discharged
dredged or fill material from point sources into waters of the United States without a permit
under the CWA [Clean Water Act]." (ECF DKT #1, at 6). On July 8, 2011, the City sought
indemnification from the Companies, but the Companies disclaimed coverage on the grounds
of the Pollution Exclusion. (ECF DKT #1, at 8).
According to Defendant, "[a]t least one of these absent umbrella carriers is domiciled
in the Commonwealth of Pennsylvania – the same state of incorporation as plaintiff Valley
Forge – thus precluding the exercise of diversity jurisdiction pursuant to 28 U.S.C. §
1332(a)." (ECF DKT # 10, at 2). The Umbrella Insurer, Philadelphia, is domiciled in
Pennsylvania, as is Plaintiff Valley Forge. (ECF DKT 10-1, at 7).

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Law and Analysis
I.

Standard for Rule 12(b)(7).
"When reviewing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(7), the Sixth

Circuit applies a three-part test." Morando v. Pyrotek, Inc., No. 1:12CV1264, 2013 WL
949515, at *2 (N.D. Ohio Mar. 11, 2013). First, "determine whether a person is necessary to
the action and should be joined if possible." Keweenaw Bay Indian Cmty. v. State, 11 F.3d
1341, 1345 (6th Cir. 1993). This is determined through Rule 19 of the Federal Rules of Civil
Procedure stating:
(a) Persons to be Joined if Feasible. A person who is subject to service of
process and whose joinder will not deprive the court of jurisdiction over the
subject matter of the action shall be joined as a party in the action if (1) in the
person's absence complete relief cannot be accorded among those already
parties, or (2) the person claims an interest relating to the subject matter of the
action and is so situated that the disposition of the action in the person's
absence may (i) as a practical matter impair or impede the person's ability to
protect that interest or (ii) leave the parties subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations by reason of
the claimed interest.

"If the court finds that the absent person or entity falls within either one of these
provisions, the party is thus one to be joined if feasible." Id. However, "[i]f the court
determines that the person or entity does not fall within one of these provisions, joinder, as
well as further analysis, is unnecessary.” Local 670, United Rubber, Cork, Linoleum &
Plastic Workers of Am., AFL-CIO v. Int'l Union, United Rubber, Cork, Linoleum & Plastic
Workers of Am., AFL-CIO, 822 F.2d 613, 618 (6th Cir. 1987). Steps two and three deal with
personal jurisdiction and indispensability. Keweenaw, 11 F.3d at 1145. "If personal
jurisdiction is present, the party shall be joined; however, in the absence of personal

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jurisdiction (or if venue as to the joined party is improper), the party cannot properly be
brought before the court." Local 670, 822 F.2d at 618. Without personal jurisdiction, the
court proceeds to the third factor, which examines the factors set forth in Rule 19(b) "to
determine whether the court may proceed without the absent party or, to the contrary, must
dismiss the case due to the indispensability of that party." Id. The factors determining
indispensability are:
first, to what extent a judgment rendered in the person's absence might be
prejudicial to [the person] or to those already parties; second, the extent to
which, by protective provisions in the judgment, by the shaping of relief, or
other measures, the prejudice can be lessened or avoided; third, whether a
judgment rendered in the person's absence will be adequate; fourth, whether
the plaintiff will have an adequate remedy if the action is dismissed for
nonjoinder.
Keweenaw, 11 F.3d at 1346 (quoting Local 670, 822 F.2d at 618). The Sixth Circuit has
noted that "[i]deally, all [the] parties would be before the court. Yet Rule 19 calls for a
pragmatic approach; simply because some forms of relief might not be available due to the
absence of certain parties, the entire suit should not be dismissed if meaningful relief can still
be accorded." Local 670, 822 F.2d at 618 (quoting Smith v. United Brotherhood of Carpenters
and Joiners of America, 685 F.2d 164, 166 (6th Cir.1982)).
II.

Procedural Requirements to Assert a 12(b)(7) Motion.
“To sufficiently assert a 12(b)(7) motion, the movant must identify the name of the

party, the location of the party, the reason the party is necessary and whether the court has
jurisdiction over the party.” Meta v. Target Corp., 74 F. Supp. 3d 858, 866 (N.D. Ohio 2015)
(quoting Jam Tire, Inc. v. Harbin, 3:14CV00489, 2014 WL 4388286, at *4 (N.D.Ohio Sept.
5, 2014)). “Moreover, under Rule 12(b)(7), [defendant] has the burden to show the nature of

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the unprotected interests of the absent individuals or organizations and the possibility that the
court will be disadvantaged by their absence.” Meta, 74 F. Supp. 3d at 866 (quoting
CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE &
PROCEDURE VOL. 5A, § 1359 (3d. Ed., West 1997)).
Defendant has not provided any of the procedural requirements in any of its briefs and
has not shown the absent party’s interests, and whether the parties will be disadvantaged by
having the Umbrella Insurers absent. Therefore, Defendant has not sufficiently asserted its
12(b)(7) motion.
III.

Joinder that Destroys Subject Matter Jurisdiction.
When a party would destroy subject matter jurisdiction, the Court will weigh a

balancing test to determine where in “‘equity and good conscience’ the action can proceed
without the party.” Joseph v. Teitelbaum, No. 1:10 CV 00931, 2010 WL 11565404, at *4
(N.D. Ohio May 24, 2010). In Teitelbaum, plaintiffs brought suit against the trustee of a
testamentary trust for breach of fiduciary duties. Id. at *1. The trustee sought to include a
beneficiary as a “necessary and indispensable” party pursuant to Rule 12(b)(7). Id. The
Court noted that “[t]he Supreme Court has described necessary parties generally as those
persons having an interest in the action who should be made parties so that the court may
‘finally determine the entire controversy, and do complete justice, by adjusting all the rights
involved in it.’” Id. at *2 (quoting CP Nat. Corp. v. Bonneville Power Admin., 928 F.2d 905,
912 (9th Cir. 1991) (quoting Shields v. Barrow, 58 U.S. 130, 139 (1854)). The Court found
that joinder of the party was necessary but would result in destroying subject matter
jurisdiction. Id. at *3. In determining if joinder was appropriate, even when subject matter

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jurisdiction was destroyed, the Court considered at least four factors: “(1) the availability of a
forum for plaintiff; (2) defendant's interest in avoiding a multiplicity of suits; (3) the
protection of the absent non-party's interests; and (4) public interest in the efficient settlement
of disputes.” Id. at *4 (quoting Hinsdale v. Farmers Nat. Bank and Trust Co., 93 F.R.D. 662,
665 (N.D. Ohio 1982)). The balancing test is an inquiry that is both “practical . . . and fact
specific and is designed to avoid the harsh results of rigid application.” Id. (quoting Makah
Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir. 1990). The Court mentioned that “these
factors are not exclusive, and the weight to be accorded each of the factors will vary with
different factual circumstances.” Id.
Under the first of the Teitelbaum factors, the Court favored dismissal because the
beneficiary may prejudice the trustee by exposing him to “double or inconsistent obligations.”
Id. The second and third factors weighed in favor of dismissal because “[t]he Court [could]
conceive of no way to fashion a meaningful judgment on the Plaintiffs' claims that [would]
not affect [the beneficiary’s] interests.” Id. The fourth factor also weighed in favor of
dismissal because the action could be brought in state court. Id. Also, the Court highlighted
that the state court would be a more appropriate forum because the state court would be more
familiar with state trust law, and judicial efficiency would be promoted because the potential
for inconsistent judgments would be eliminated as it would be adjudicated in one forum. Id.
at *5. Thus, the Court dismissed the complaint for non-joinder. Id.
Unlike in Teitelbaum, the City has failed to meet its burden for a 12(b)(7) by merely
pointing to the need for Umbrella Insurers to be added because “the Umbrella Insurers will be
bound by this Court’s judgment without having the opportunity to participate in this action to

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protect their interests.” (ECF DKT #10-1, at 15). It is irrelevant because in balancing the
four factors, all four factors weigh in favor of Plaintiffs. First, unlike in Teitelbaum, Umbrella
Insurers only have an interest in litigation after a decision is made in the instant case, thus
there would not be a risk, as in Teitelbaum, of inconsistent results in state court. Moreover,
there were multiple beneficiaries in Teitelbaum and the risk of inconsistent obligations was
evident. In the instant matter, Umbrella Insurers, if joined, would be preemptively getting
involved. Their presence in the instant matter is not required. Under the second and third
factors, the Court may grant full relief without Umbrella Insurers being joined, and unlike
Teitelbaum, the Court would not have to worry about providing recovery to all beneficiaries
with an equivalence. The Court can easily provide a “meaningful judgment” without having
Umbrella Insurers present, simply because once a judgment is made, then the Umbrella
Insurers can bring their own lawsuit against the City if so desired. Under the fourth factor,
the action can be properly adjudicated in federal court because it is a simple contractual issue.
Unlike in Teitelbaum, this does not require some particularized or esoteric issue of state law,
which would be best handled by the state court, but rather a banal issue of contract law that
federal courts are perfectly capable adjudicating. Additionally, duplicative litigation will not
disrupt judicial efficiency because this is a contract issue regarding the two parties. If the
Umbrella Insurers sued the City, that would be an entirely separate contractual issue between
those parties. Thus, there would be no risk of inconsistent results. Even, arguendo, if the
Court were to concede that the Umbrella Insurers were necessary and indispensable parties,
the motion still would be denied. As discussed above, Defendant failed to meet its procedural
requirements-- not providing the name of the party, its location, or the reason why that party

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was necessary. Therefore, the Court denies Defendant’s Motion to Dismiss.
Conclusion
For the foregoing reasons, the Court finds that the Umbrella Insurers are not necessary
and indispensable parties to this action and denies Defendant’s Motion to Dismiss.
IT IS SO ORDERED.

s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: March 6, 2018

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