Liberty Insurance Corporation v. Advanced Services Heating & Cooling, Inc. et al
Filing
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OPINION AND ORDER denying 24 Defendants' Motion to Dismiss. Signed by Magistrate Judge Norah McCann King on 10/1/2013. (er1)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
LIBERTY INSURANCE CORPORATION,
Plaintiff,
vs.
Civil Action 2:13-cv-241
Magistrate Judge King
ADVANCED SERVICES HEATING &
COOLING, INC., et al.,
Defendants.
OPINION AND ORDER
This is a diversity action in which plaintiff Liberty Insurance
Corporation (“Liberty” or “plaintiff”) seeks recovery for amounts paid
to its insured in connection with losses allegedly caused by
defendants’ negligence in the installation and servicing of a heater
in the insured’s premises.
Specifically, the Complaint, Doc. No. 1,
alleges that defendants’ negligence caused a fire at the home of
plaintiff’s insured, Brian and Amanda Blakeman (the “Blakemans”), that
resulted in damages “in excess of $243,823.65, representing the fair
and reasonable value of real property damage, emergency expenses and
alternative living expenses.”
Id. at ¶¶ 3, 17, 21, 24.
Liberty
allegedly reimbursed the Blakemans for their loss pursuant to
Liberty’s insurance policy and became “subrogated to the rights of the
Blakemans to the extent of [the] payments made.”
Id. at ¶ 18.
This matter is now before the Court, with the consent of the
parties pursuant to 28 U.S.C. § 636(c), for consideration of
defendants Advanced Services Heating & Cooling, Inc., and Blankenship
Heating & Cooling’s (collectively “defendants”) Joint Motion to
Dismiss for Lack of Diversity Jurisdiction (“Motion to Dismiss”), Doc.
No. 24, plaintiff’s response, Doc. No. 27, and Memorandum of Law in
Support of its Opposition to Defendants’ Joint Motion to Dismiss
(“Plaintiff’s Memo in Opposition”), Doc. No. 28, and Defendants’
Reply, Doc. No. 29.
Defendants take the position that the Court lacks subject matter
jurisdiction because the Blakemans are necessary parties, but whose
joinder would destroy diversity jurisdiction.
Motion to Dismiss, pp.
1, 3-4. The specifics of defendants’ argument are not, however,
entirely clear.
Defendants appear to argue that the Blakemans are
real parties in interest and necessary to this action because Liberty
paid the Blakemans for only a portion of their loss, i.e., the loss
less the $500 deductible. See id. at 4-8.
Joinder is not feasible,
defendants argue, because defendants and the Blakemans, who would be
joined as plaintiffs, are all citizens of Ohio.
Id. at pp. 3-4.
For its part, Liberty insists that it is the only real party in
interest because it “paid the Blakemans for the entire loss that they
sustained as a result of the fire, less a $500 deductible.”
Plaintiff’s Memo in Opposition, p. 3.
Plaintiff also refers to a July
2013 Subrogation Receipt and Agreement, attached to Plaintiff’s Memo
in Opposition as Doc. No. 28-1, that purportedly transfers all of the
Blakemans’ “rights to recover any damages sustained as a result of the
fire to Liberty.”
Plaintiff’s Memo in Opposition, pp. 3-4.
As an initial matter, the parties have not articulated the
standard of review that applies to the Motion to Dismiss.
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A motion to
dismiss for lack of diversity jurisdiction would ordinarily be
governed by Fed. R. Civ. P. 12(b)(1).
However, defendants apparently
concede that the Court currently has subject matter jurisdiction under
28 U.S.C. § 1332 because the current parties are of diverse
citizenship, Motion to Dismiss, p. 6, and defendants “agree[] that the
amount in controversy is sufficient to invoke diversity jurisdiction.”
Id. at 3.
The Court therefore agrees that it is vested with subject
matter jurisdiction under 28 U.S.C. § 1332.
The Motion to Dismiss is more appropriately considered under Rule
12(b)(7) because it appears to seek dismissal of the Complaint for
failure to join a party under Fed. R. Civ. P. 19.
“Assessing whether
joinder is proper under Rule 19 is a three-step process.”
Glancy v.
Taubman Ctrs., Inc., 373 F.3d 656, 666 (6th Cir. 2004) (citations
omitted).
“First, the court must determine whether the person or
entity is a necessary party under Rule 19(a).”
Synthes Corp. Ltd., 498 U.S. 5, 8 (1990)).
Id. (citing Temple v.
“Second, if the person or
entity is a necessary party, the court must then decide if joinder of
that person or entity will deprive the court of subject matter
jurisdiction.”
Id. (citing W. Md. Ry. Co. v. Harbor Ins. Co., 910
F.2d 960, 961 (D.C. Cir. 1990)).
“Third, if joinder is not feasible
because it will eliminate the court's ability to hear the case, the
court must analyze the Rule 19(b) factors to determine whether the
court should ‘in equity and good conscience’ dismiss the case because
the absentee is indispensable.”
at 961).
Id. (quoting W. Md. Ry. Co., 910 F.2d
“Thus, a person or entity is only indispensable, within the
meaning of Rule 19, if (1) it is necessary, (2) its joinder cannot be
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effected, and (3) the court determines that it will dismiss the
pending case rather than proceed in the case without the absentee.”
Id. (citations and quotations omitted).
See also Laethem Equip. Co.
v. Deere & Co., 485 F. App’x 39, 43-44 (6th Cir. 2012); Am. Express
Travel Related Servs., Co., v. Bank One-Dearborn, N.A., 195 F. App’x
458, 460 (6th Cir. 2006); Hooper v. Wolfe, 396 F.3d 744, 747 (6th Cir.
2005).
A party is necessary under Rule 19 if
(A) in that person’s absence, the court
complete relief among existing parties; or
cannot
accord
(B) that person claims an interest relating to the subject
of the action and is so situated that disposing of the
action in the person's absence may:
(i) as a practical matter impair or impede the person's
ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk
of incurring double, multiple, or otherwise inconsistent
obligations because of the interest.
Fed. R. Civ. P. 19(a).
See also Hooper, 396 F.3d at 748 (quoting Fed.
R. Civ. 19(a)).
In the case presently before the Court, defendants do not argue
that the Court cannot accord complete relief among existing parties in
the absence of the Blackmans, nor do they argue that the Blackmans’
absence will impair or impede defendants’ ability to protect any
interest related to this action, or that the Blackmans’ absence will
subject any party to a substantial risk of incurring multiple or
inconsistent obligations.
Instead, defendants argue that the
Blackmans must be joined as plaintiffs because they possess a claim
against defendants by reason of their $500 deductible which cannot,
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defendants argue, be split from Liberty’s claim.
Motion, pp. 5-7.
See Defendants’
Paying a deductible, defendants argue, rendered the
Blakemans “the only real parties in interest when the Complaint was
filed.”
6.
Defendants’ Reply, p. 3.
See also Motion to Dismiss, pp. 5-
Defendants’ argument is not well taken.
Rule 17(a) of the Federal Rules of Civil Procedure provides that
“[a]n action must be prosecuted in the name of the real party in
interest.”1
Fed. R. Civ. P. 17(a)(1).
“Under the rule, the real party
in interest is the person who is entitled to enforce the right
asserted under the governing substantive law.”
Certain Interested
Underwriters at Lloyd’s, 26 F.3d at 42-43 (citations omitted).
“The
real party in interest analysis turns upon whether the substantive law
creating the right being sued upon affords the party bringing the suit
a substantive right to relief.”
Id. at 43 (citations omitted).
The
case presently before the Court is a diversity action, so the
governing substantive law of Ohio applies.
See Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
Ohio law permits an insurer
who pays an insured’s claim of loss cause by another’s wrongdoing to
assert its subrogation rights against the alleged wrongdoer and
recover damages caused by the wrongdoer’s negligence.
See e.g., Smith
v. Travelers Ins. Co., 50 Ohio St.2d 43, 45-46 (1977) (indicating that
a subrogee is a real party in interest and has the right to maintain
an action in its name); Ohio Cent. R.R. Sys. v. Mason Law Firm Co.,
L.P.A., 915 N.E.2d 397, 404-05 (Ohio Ct. App. 2009) (indicating that
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“Rule 17(a) is not jurisdictional and relates only to the proper parties
and the capacity to sue.” Certain Interested Underwriters at Lloyd’s v.
Layne, 26 F.3d 39, 42 n.1 (6th Cir. 1994).
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an insurer who becomes subrogated to an insured’s rights by paying for
an entire loss less the deductible is the sole real party in interest
with respect to the amounts it paid pursuant to its contract with the
insured); Motorists Mut. Ins. Co. v. Hall, No. 04AP-1256, 2005 WL
1785126, at *2 (Ohio Ct. App. July 28, 2005) (discussing equitable and
contractual subrogation rights); Ward v. Tea, No. 88AP-1147, 1989 WL
65410, at *2 (Ohio Ct. App. June 13, 1989) (“̔Where, by virtue of a
prior contract of indemnity and subrogation, an insurer pays its
insured for property damage sustained and becomes thereby subrogated
to the rights of its insured to the amount of such payment, such
insurer may prosecute a separate action against the party causing such
injury to the extent of the amount paid under such contract.’”)
(quoting Hoosier Cas. Co. v. Davis, 172 Ohio St. 5 (1961)); United
States Fid. & Guar. Co. v. Buckeye Union Ins. Co., No. L-85-377, 1986
WL 11418, at *2 (Ohio Ct. App. Sept. 30, 1986) (“Ohio case law
recognizes that a subrogee insurance company may recover the
subrogated amount from a tortfeasor who settles the claim of a party
injured by his act and executes a release with full awareness of the
fact that the claim has been subrogated.”) (citations omitted); 59
Ohio Jur. 3d Insurance § 1279 (“A subrogated insurance company is
entitled to sue in its own name for that part of a claim for damages
arising out of an accident which has been assigned to it under a
subrogation agreement.”). Defendants’ arguments to the contrary
notwithstanding, Liberty is a real party in interest because it is
entitled to enforce its subrogation rights under Ohio law.
Defendants apparently recognize this principal by arguing,
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presumably in the alternative, that both Liberty and the Blakemans are
real parties in interest.
See Motion to Dismiss, p. 7 (arguing that
an insured who paid a deductible and the insurer who paid the
remainder of the insured’s loss are “both required to be joined as
party plaintiff[s] or defendant[s] because they both had a real party
in interest”). Defendants’ argument that the Blakemans must therefore
be joined in this action is without merit.
Even assuming, arguendo,
that the Blakemans are real parties in interest and qualify as
necessary parties under Rule 19(a), and that joinder is not feasible
because their joinder would destroy diversity jurisdiction, the Court
must still “determine whether, in equity and good conscience, the
action should proceed among the existing parties or should be
dismissed.”
Fed. R. Civ. P. 19(b).
This analysis requires a
pragmatic, fact-intensive assessment. See, e.g., Provident Tradesmens
Bank & Trust Co. v. Patterson, 390 U.S. 102, 118-120 (1968). Rule
19(b) expressly requires consideration of the following factors:
(1) the extent to which a judgment rendered in the person's
absence might prejudice that person or the existing
parties;
(2) the extent to which any prejudice could be lessened or
avoided by:
(A) protective provisions in the judgment;
(B) shaping the relief; or
(C) other measures;
(3) whether a judgment rendered in the person's absence
would be adequate; and
(4) whether the plaintiff would have an adequate remedy if
the action were dismissed for nonjoinder.
Fed. R. Civ. P. 19(b).
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This Court concludes that, in equity and good conscience, the
case can proceed even in the Blakemans’ absence.
As discussed supra,
Liberty is subrogated to the rights of the Blakemans to the extent
that it reimbursed the Blakemans for losses covered by Liberty’s
insurance policy.
See Hall, 2005 WL 1785126 at *2.
To the extent
that the Complaint asserts a claim based on the Blakemans’ deductible,
Liberty cannot recover to that extent absent proof of ownership of the
claim. Notably, defendants do not argue that the Blakemans or any
party will be prejudiced, or that a judgment rendered by this Court in
the Blakemans’ absence will be inadequate. Moreover, as noted supra,
the Blakemans have now executed a subrogation receipt and agreement
transferring to Liberty all rights to recover any damages sustained as
a result of the March 25, 2011 fire at their residence.
Receipt and Agreement, Doc. No. 28-1.
Subrogation
This agreement effectively
eliminates any possibility of prejudice to the Blakemans or to the
parties to this action.
Accordingly, to the extent that defendants’
Motion to Dismiss seeks dismissal under Rule 12(b)(7) for failure to
join a party under Rule 19, it is without merit.
For the foregoing reasons, defendants’ Motion to Dismiss, Doc.
No. 24, is DENIED.
October 1, 2013
s/Norah McCann King_______
Norah McCann King
United States Magistrate Judge
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